Filed by e3 Filing, Computershare 1-800-973-3274 - Continental Energy Corporation

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

CONTINENTAL ENERGY CORPORATION
(Translation of registrant’s name into English)

8751 North Himes Avenue, Tampa, Florida, 33614, USA
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F [ X ] Form 40-F [ ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes [ ] No [ X ]

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ______.


Exhibit

99.1	Quarterly Report – For Fiscal Quarter Ended September 30, 2010

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		Continental Energy Corporation
		(Registrant)

Date	December 24, 2010	By	/s/ Richard L. McAdoo
			Richard L. McAdoo
			Chairman and Chief Executive Officer


SEC 1815 (04-07)	Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

EX-99.1 2 exhibit99-1.htm QUARTERLY REPORT - FOR FISCAL QUARTER ENDED SEPTEMBER 30, 2010 Exhibit 99.1

Exhibit 99.1

CONTINENTAL ENERGY CORPORATION

(An Exploration Stage Company)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

30 September 2010 and 2009

Expressed in U.S. Dollars

(Unaudited – Prepared by Management)

Reader’s Note:

These unaudited interim consolidated financial statements for the three months ended 30 September 2010 and 2009 of Continental Energy Corporation (“Continental” or the “Company”) have been prepared by management and have not been reviewed by the Company’s auditors.


Continental Energy Corporation	Statement 1
(An Exploration Stage Company)
Interim Consolidated Balance Sheets
Unaudited - Prepared by Management
Expressed in U.S. Dollars


		30 September			30 June
ASSETS		2010			2010
Current
Cash	$	40,681		$	88,843
Receivables		76,277			1,881
Prepaid expenses and deposits		10,625			9,465
		127,583			100,189
Investments (Note 7)		1			1
Resource Property Costs (Note 7)		1			1
Equipment (Note 8)		16,574			18,965
	$	144,159		$	119,156


LIABILITIES
Current
Accounts payable and accrued liabilities (Note 10c)	$	431,463		$	284,787
		431,463			284,787

SHAREHOLDERS’ EQUITY (DEFICIENCY)
Share Capital - Statement 2 (Note 9)		13,522,030			13,522,030
Contributed Surplus - Statement 2 (Note 9)		8,403,925			7,140,572
Deficit - Statement 2		(22,213,259	)		(20,828,233	)
		(287,304	)		(165,631	)
	$	144,159		$	119,156

Nature of Operations and Going Concern (Note 1)

ON BEHALF OF THE BOARD:



*"Richard L. McAdoo"*	, Director


*"Robert V. Rudman"*	, Director

- See Accompanying Notes -


Continental Energy Corporation	Statement 2
(An Exploration Stage Company)
Interim Consolidated Statements of Shareholders’ Deficiency
Unaudited - Prepared by Management
Expressed in U.S. Dollars


	Common Shares				Contributed
	Shares		Amount		Surplus		Deficit			Total
Balance - 30 June 2009	69,747,381	$	13,419,653	$	6,699,165	$	(19,552,847	)	$	565,971
Issuance of shares for:
Private placements	2,643,000		102,377		82,633		-			185,010
Financing fees - warrants	-		-		79,008		-			79,008
Financing fees - options	-		-		95,806		-			95,806
Stock-based compensation	-		-		183,960		-			183,960
Loss for the year	-		-		-		(1,275,386	)		(1,275,386	)

Balance - 30 June 2010	72,390,381		13,522,030		7,140,572		(20,828,233	)		(165,631	)
Financing fees - warrants	-		-		1,115,459		-			1,115,459
Stock-based compensation	-		-		147,894		-			147,894
Loss for the period - Statement 3	-		-		-		(1,385,026	)		(1,385,026	)
Balance - 30 September 2010	72,390,381	$	13,522,030	$	8,403,925	$	(22,213,259	)	$	(287,304	)

- See Accompanying Notes -


Continental Energy Corporation	Statement 3
(An Exploration Stage Company)
Interim Consolidated Statements of Loss and Comprehensive Loss
Unaudited - Prepared by Management
Expressed in U.S. Dollars


		For the Three			For the Three
		Months Ended			Months Ended
		30 September			30 September
		2010			2009
Expenses
Amortization	$	2,391		$	4,780
Consulting fees (Note 10b)		22,500			-
Filing fees		-			2,150
Financing fees - warrants (Note 9d)		1,115,459			-
Foreign exchange (gain) loss		(386	)		1,266
Bank charges		1,158			1,398
Investor relations		4,500			9,985
Management fees, salaries and wages (Note 10a and d)		94,569			92,408
Office expenses		35,080			28,131
Professional fees		20,935			29,134
Rent, office maintenance and utilities		9,390			14,149
Stock-based compensation (Note 9c and d )		147,894			154,294
Travel and accommodation		2,671			8,944

Loss Before the Undernoted		(1,456,161	)		(346,639	)

Other Income (Expenses)
Gain on sale of CEPL (Note 7)		71,352			-
Write-off of resource property costs (Note 7)		(217	)		(668	)

Loss and Comprehensive Loss for the Year	$	(1,385,026	)	$	(347,307	)


Loss per Share - Basic and Diluted	$	(0.02	)	$	(0.00	)

Weighted Average Number of Shares Outstanding		72,390,381			69,747,381

- See Accompanying Notes -


Continental Energy Corporation	Statement 4
(An Exploration Stage Company)
Interim Consolidated Statements of Cash Flows
Unaudited - Prepared by Management
Expressed in U.S. Dollars


		For the Three			For the Three
		Months Ended			Months Ended
		30 September			30 September
Cash Resources Provided By (Used In)		2010			2009
Operating Activities
Loss for the period	$	(1,385,026	)	$	(347,307	)
Items not affecting cash
Amortization		2,391			4,780
Financing fees - warrants		1,115,459			-
Gain on sale of CEPL		(71,352	)		-
Stock-based compensation		147,894			154,294
Write-off of resource property costs		217			668
Changes in current assets and liabilities
Receivables		(74,544	)		(3,417	)
Prepaid expenses and deposits		(1,160	)		(51,475	)
Accounts payable and accrued liabilities		111,676			10,542

		(154,445	)		(231,915	)
Investing Activities
Resource property costs		(217	)		(668	)
Proceeds from sale of CEPL		71,500			-

		71,283			(668	)
Financing Activities
Advances from related parties		35,000			-

Change in Cash		(48,162	)		(232,583	)
Cash position - Beginning of Period		88,843			591,930

Cash Position - Ending of Period	$	40,681		$	359,347


Supplementary disclosure of cash flow information:
Cash paid for interest	$	Nil		$	Nil
Cash paid for income taxes	$	Nil		$	Nil

- See Accompanying Notes -

Continental Energy Corporation

(An Exploration Stage Company)

Notes to Interim Consolidated Financial Statements

30 September 2010 and 2009

Unaudited – Prepared by Management

Expressed in U.S. Dollars


1.	Nature of Operations and Going Concern

Continental Energy Corporation (the “Company” or “Continental”) is an oil and gas exploration company engaged in the acquisition, exploration and development of oil and gas properties with the focus being on properties located in Indonesia held under production sharing contracts (“PSCs”). The Company is an exploration stage company and none of its oil and gas properties are currently generating revenue. The recovery of the Company’s investment in resource properties and attainment of profitable operations is principally dependent upon financing being arranged by the Company to continue operations, explore and develop the resource properties and the discovery, development and sale of oil and gas reserves. The outcome of these matters cannot presently be determined because they are contingent on future events.

These interim 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. Several adverse conditions cast doubt on the validity of this assumption. The Company has incurred operating losses over the past several fiscal years, has no source of operating cash flow, and no assurances that sufficient funding, including adequate financing, will be available to conduct further exploration and development of its oil and gas projects.

The Company’s ability to continue as a going concern is dependent upon its ability to obtain the financing necessary to acquire, explore and develop future oil and gas projects as well as funding ongoing administration expenses by issuance of share capital or through joint ventures, and to realize future profitable production or proceeds from the disposition of oil and gas interests acquired. Management intends to obtain additional funding by borrowing from directors and officers and issuing private placements. There can be no assurance that management’s future financing actions will be successful. Factors that could affect the availability of financing include the Company’s performance, the state of international debt and equity markets, investor perceptions and expectations and the global financial and energy markets. Management is not able to assess the likelihood or timing of improvements in the equity markets for raising capital for future a cquisitions or expenditures. These uncertainties represent a liquidity risk and may impact the Company’s ability to continue as a going concern in the future.

If the going concern assumption were not appropriate for these financial statements, then adjustments would be necessary to the carrying values of assets, liabilities, the reported income and expenses and the balance sheet classifications used and such adjustments could be material.


2.	Significant Accounting Policies

Basis of Presentation

These financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) and follow the same accounting policies and methods of their application as the most recent annual financial statements. These interim consolidated financial statements should be read in conjunction with the audited financial statements of the Company as at 30 June 2010. All amounts in these financial statements are expressed in United States dollars (“U.S. dollar”).

Continental Energy Corporation

(An Exploration Stage Company)

Notes to Interim Consolidated Financial Statements

30 September 2010 and 2009

Unaudited – Prepared by Management

Expressed in U.S. Dollars

Consolidation

These consolidated financial statements include the accounts of the Company, its one subsidiary and one joint venture company as follows:

TXX Energy Corporation (“TXX”) – 100% owned, incorporated in the state of Texas on 16 January 2006, for the purpose of pursuing oil and gas exploration and production opportunities in the United States (currently inactive).
CG Xploration Inc. (“CGX”) – 50% owned joint venture incorporated in the state of Delaware on 18 November 2005. The Company owns 50% of CGX and GeoPetro Resources Company (“GeoPetro”) of San Francisco owns 50%. CGX is operated for the purposes of identifying and developing new oil and gas PSC property acquisitions on behalf of the Company and GeoPetro within a geographically defined area of mutual interest in Indonesia (Note 7). CGX has been accounted for on the proportionate consolidation method whereby the Company’s proportionate share of assets, liabilities, revenues, costs and expenditures relating to CGX have been recorded in these financial statements.

All intercompany transactions are eliminated upon consolidation.


3.	Change in Accounting Policy

Business Combinations – Section 1582

In January 2009, the CICA issued Handbook Section 1582, “Business Combinations” (“CICA 1582”), CICA 1582 requires that all assets and liabilities of an acquired business will be recorded at fair value at acquisition. Obligations for contingent considerations and contingencies will also be recorded at fair value at the acquisition date. The standard also states that acquisition-related costs will be expensed as incurred and that restructuring charges will be expensed in the periods after the acquisition date. The Section applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period on or after 1 January 2011. The Company adopted this policy effective 1 July 2010. The adoption has not had an impact on the Company’s financial position, earnings or cash flows.

Consolidations and Non-controlling interest – Sections 1601 and 1602

In January 2009, the CICA issued Handbook Section 1601, “Consolidations” (“CICA 1601”), and Section 1602, “Non-controlling Interests” (“CICA 1602”). CICA 1601 establishes standards for the preparation of consolidated financial statements. CICA 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. These standards apply to interim and annual consolidated financial statements relating to fiscal years beginning on or after 1 January 2011. The Company adopted this policy effective 1 July 2010. The adoption has not had an impact on the Company’s financial position, earnings or cash flows.

Continental Energy Corporation

(An Exploration Stage Company)

Notes to Interim Consolidated Financial Statements

30 September 2010 and 2009

Unaudited – Prepared by Management

Expressed in U.S. Dollars

4.	New Accounting Pronouncements Not Yet Adopted

International Financial Reporting Standards (“IFRS”)

In 2006, the Canadian Accounting Standards Board (“AcSB”) published a new strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected five year transitional period. In February 2008 the AcSB announced that 2011 is the changeover date for publicly-listed companies to use IFRS, replacing Canadian GAAP. This date is for interim and annual financial statements relating to fiscal years beginning on or after 1 January 2011. The Company’s transition date of 1 July 2011 will require the restatement for comparative purposes of amounts reported by the Company for the year ended 30 June 2011. The Company is currently assessing the financial reporting impact of the transition to IFRS and the changeover date.


5.	Financial Instruments

Fair value

The Company’s financial instruments consist of cash, accounts receivable and accounts payable. Cash is carried at fair value using a level 1 fair value measurement. The carrying value of the receivables and accounts payable approximates their fair value because of the short-term nature of these instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, price or credit risks arising from its financial instruments.

Management of financial risk

The Company’s financial instruments are exposed to certain financial risks, including currency risk, credit risk, liquidity risk, interest rate risk and price risk.

Currency risk

The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company operates in Canada and Indonesia and a portion of its expenses are incurred in Canadian dollars and Indonesian Rupiah. A significant change in the currency exchange rates between the Canadian dollar relative to the US dollar and the Indonesian Rupiah to the US dollar could have an effect on the Company’s results of operations, financial position or cash flows. The Company has not hedged its exposure to currency fluctuations. At 30 September 2010, the Company is exposed to currency risk through the following assets and liabilities denominated in Canadian dollars, Singapore dollars and Indonesian Rupiah:


	30 September 2010
	Canadian		Indonesian
	Dollars		Rupiah
	$
Cash and cash equivalents	3,843		13,193,811
Receivables	2,160		-
Accounts payable and accrued liabilities	(40,381	)	(124,104,709	)

Based on the above net exposures as at 30 September 2010, and assuming that all other variables remain constant, a 10% depreciation or appreciation of the US dollar against the Canadian dollar would result in a decrease/increase of $3,341 in the Company’s net earnings. Likewise, a 10% depreciation or appreciation of the US dollar against the Indonesian Rupiah would result in a decrease/increase of $1,269 in the Company’s net earnings.

Continental Energy Corporation

(An Exploration Stage Company)

Notes to Interim Consolidated Financial Statements

30 September 2010 and 2009

Unaudited – Prepared by Management

Expressed in U.S. Dollars

Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations.

The Company’s cash is held by large Canadian and International financial institutions. Management believes that the credit risk concentration with respect to receivables is remote.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. Liquidity requirements are managed based on expected cash flows to ensure that there is sufficient capital in order to meet short term obligations. As at 30 September 2010, the Company had a cash balance of $40,681 (30 June 2010 - $88,843) to settle current liabilities of $431,463 (30 June 2010 - $284,787).

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The risk that the Company will realize a loss as a result of a decline in the fair value of cash is limited.

Price risk

The Company is exposed to price risk with respect to commodity prices. The Company closely monitors commodity prices to determine the appropriate course of action to be taken.


6.	Capital Management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the development of its resource properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk. As the Company is in the exploration stage, its principal source of funds is from the issuance of common shares. In the management of capital, the Company includes share capital as well as cash and receivables.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, enter into joint venture property arrangements or acquire or dispose of assets. In order to maximize ongoing development efforts, the Company does not pay out dividends.

The Company’s investment policy is to invest its cash in highly liquid short-term interest-bearing investments, selected with regards to the expected timing of expenditures from continuing operations.

The Company is not subject to any externally imposed capital requirements.

Continental Energy Corporation

(An Exploration Stage Company)

Notes to Interim Consolidated Financial Statements

30 September 2010 and 2009

Unaudited – Prepared by Management

Expressed in U.S. Dollars

7.	Resource Property Costs

Bengara-II Property

During the three months ended 30 September 2010, the Company incurred $217 in geological and geophysical interpretation and evaluation costs on the joint venture area of mutual interest surrounding the Bengara-II PSC in Indonesia. At 30 September 2010, no future benefits could be attributed to this property and consequently the capitalized cost were written off.


		30 June				Costs					30 September
		2010		Exploration &		Reimbursed by		Impairment/			2010
		Balance		Development		Joint Venturers		Abandonment			Balance
Bengara-II	$	1	$	1,469	$	-	$	(1,469	)	$	1


		30 June				Costs					30 September
		2009		Exploration &		Reimbursed by		Impairment/			2009
		Balance		Development		Joint Venturers		Abandonment			Balance
Bengara-II	$	1	$	10,988	$	-	$	(10,988	)	$	1

CGB2

By share purchase and transfer agreements 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 Continental-GeoPetro (Bengara-II) Ltd. (“CGB2”), a company incorporated in the British Virgin Islands which owned a 100% interest in the Bengara-II PSC in Indonesia.

The Company accounted for the acquisition of CGB2 using the purchase method of accounting for business combinations. On 1 January 2000, the Company farmed out 40% of its 100% interest in CGB2 and its respective underlying properties to GeoPetro.

On 29 September 2006, the Company sold 70% of its 60% interest in CGB2 to CNPC (Hong Kong) Limited (“CNPC-HK”) for a gain of $23,906 and an obligation by CNPC-HK to carry the Company's share of the costs of drilling 4 exploration wells. The Company retained an 18% shareholding of CGB2, which is recorded at $1 in these financial statements.

Tungkal Property

On 1 August 2008, the Company entered into an agreement to purchase a 30% working interest in the Tungkal PSC, located onshore in Sumatra, Indonesia. Under the agreement, the Company was to pay total consideration of $27,320,000. The Company paid a cash deposit of $1,500,000 on signature of the definitive sales and purchase agreement. In consideration for negotiating a senior credit facility, the Company made a payment of $100,000 as a financing fee in the prior year. The Company also incurred $197,660 in legal fees and other costs in relation to this transaction in the prior year.

On 9 April 2009, the agreement was terminated with $500,000 of the original deposit being refunded to the Company and $1,000,000 being forfeited as a break-up fee. As a result of the termination, all acquisition costs relating to the Tungkal property were written off in the prior year.

Continental Energy Corporation

(An Exploration Stage Company)

Notes to Interim Consolidated Financial Statements

30 September 2010 and 2009

Unaudited – Prepared by Management

Expressed in U.S. Dollars

South Bengara-II Property

On 13 November 2008, the Company acquired an interest in a new PSC in Indonesia. Pursuant to a Joint Bid Agreement (“JBA”) with Adelphi Energy Limited “(Adelphi”) and GeoPetro, ACG (South Bengara-II) Pte. Ltd. (“ACG”), signed a new PSC for the South Bengara-II block. In consideration, the Company made a payment of $100,000 as an interest free loan. The Company also incurred $10,463 in due diligence costs in relation to this transaction in the prior year.

On 22 May 2009, the agreement was terminated and CESB2 has withdrawn from participation in ACG and its new PSC. CESB2 returned its entire 24.999% stake in ACG to Adelphi and received repayment of $95,000 of the loan previously made.

All of the Company’s oil and gas interests are unproven.

CEPL

During the current year, the Company sold 100% of its shares in its inactive subsidiary Continental Energy Pte. Ltd. (“CEPL”) to Transafrica Management SARL (60%) and C&S Infrastructure LLC (40%) for consideration of $71,500 which was to be paid on or before 1 November 2010. As of 29 November 2010, payment has not been received; however ownership of the CEPL shares has been transferred. Included in the Company’s interim consolidated statements of loss and comprehensive loss are the results of operations of CEPL from the date of incorporation to 30 September 2010.

This transaction resulted in a gain of $71,352 calculated as follows based on the net book values recorded in CEPL as at 30 September 2010:


Assets	$	148
Liabilities		-

Net book value of CEPL		148
Proceeds on disposition		71,500

Gain on disposition of CEPL	$	71,352


8.	Equipment

Details are as follows:


						30 September
						2010
				Accumulated		Net Book
		Costs		Amortization		Value
Automobiles	$	35,040	$	31,305	$	3,735
Computer equipment and software		81,178		71,092		10,086
Field survey equipment		27,167		24,414		2,753
	$	143,385	$	126,811	$	16,574

Continental Energy Corporation

(An Exploration Stage Company)

Notes to Interim Consolidated Financial Statements

30 September 2010 and 2009

Unaudited – Prepared by Management

Expressed in U.S. Dollars


						30 June
						2010
				Accumulated		Net Book
		Costs		Amortization		Value
Automobiles	$	35,040	$	30,767	$	4,273
Computer equipment and software		81,178		69,636		11,542
Field survey equipment		27,167		24,017		3,150
	$	143,385	$	124,420	$	18,965


9.	Share Capital

Authorized Share Capital

The Company’s authorized share capital consists of 1,000,000,000 shares divided into 500,000,000 common shares without par value and 500,000,000 preferred shares without par value. As at 30 September 2010, there are no preferred shares issued or outstanding.

Share Capital

2011

There were no new shares issued during the three months ended 30 September 2010.

2010

During the year ended 30 June 2010, a private placement was completed for 2,643,000 units for total proceeds of $185,010. Each unit consists of one common share and one share purchase warrant with each warrant having an exercise price of $0.10 per common share for a three year term expiring on 8 March 2013. The Company allocated $102,377 to the common shares and $82,633 to the share purchase warrants based on the relative fair values.

Stock Options

The Company has established a share purchase option plan whereby the board of directors may, from time to time, grant options to directors, officers, employees or consultants. Options granted must be exercised within a period as determined by the Company's board of directors. Options vest on the grant date unless otherwise determined by the Company's board of directors. The aggregate number of common shares which may be reserved as outstanding Stock Options shall not exceed 20% of the total number of the Company's issued and outstanding common shares at any time, and the maximum number of options held by any one individual at any one time shall not exceed 5% of the total number of the Company's issued and outstanding common shares.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the assumptions disclosed in Note 9(e).

2011

On 29 September 2010, a total of 8,640,000 outstanding incentive stock options to directors and senior officers having an exercise price of $0.07 and terms expiring between 31 December 2010 and 2011 were amended to all have new expiry dates between 31 December 2011 and 31 December 2012.

Continental Energy Corporation

(An Exploration Stage Company)

Notes to Interim Consolidated Financial Statements

30 September 2010 and 2009

Unaudited – Prepared by Management

Expressed in U.S. Dollars

The Company calculated the incremental increase in the fair value of these amended options to be $141,591 which was charged to operations.

2010

During the year ended 30 June 2010, a total of 360,000 stock options were granted to officers of the Company having an exercise price of $0.07 per share and expiring on 31 December 2011. The Company calculated the fair value of these options to be $8,614 on the grant date which was charged to operations. The average grant date fair value of these stock options was $0.03.

During the year ended 30 June 2010, a total of 4,840,000 outstanding incentive stock options to directors and senior officers having various exercise prices between $0.15 and $0.24 and terms expiring between 31 December 2010 and 2011 were amended to all have a new exercise price of $0.07 and an expiry date of 31 December 2011.

During the year ended 30 June 2010, a total of 3,250,000 outstanding incentive stock options to employees and consultants having various exercise prices between $0.20 and $0.24 were amended to all have a new exercise price of $0.07 but no change to their original expiry dates between 31 December 2010 and 30 June 2011.

During the year ended 30 June 2010, a total of 800,000 outstanding incentive stock options to employees having various exercise prices between $0.15 and $0.24 and terms expiring 31 December 2010 were amended to all have a new exercise price of $0.07 and a new expiry date of 31 December 2011.

During the year ended 30 June 2010, a total of 1,500,000 outstanding incentive stock options to employees and consultants having an exercise price of $0.15 and terms expiring 31 December 2011 were amended to all have a new exercise price of $0.07 and a new expiry date of 31 December 2010.

The Company calculated the incremental increase in the fair value of these amended options to be $95,806 which was charged to operations.

During the year ended 30 June 2010, a total of 1,000,000 stock options were granted to an officer of the Company having an exercise price of $0.15 per share and expiring on 16 September 2012. The Company calculated the fair value of these options to be $75,219 on the grant date which was charged to operations. The average grant date fair value of these stock options was $0.08.

Continental Energy Corporation

(An Exploration Stage Company)

Notes to Interim Consolidated Financial Statements

30 September 2010 and 2009

Unaudited – Prepared by Management

Expressed in U.S. Dollars

Total outstanding and exercisable

Details of outstanding share purchase options are as follows:


			Weighted Average
	Number of		Exercise Price
	Options		per Share
Options outstanding, 30 June 2009	9,390,000		0.20
Options granted	1,360,000		0.13
Options outstanding, 30 June 2010 and 30 September 2010	10,750,000	$	0.07

As at 30 September 2010, the following share purchase options were outstanding:


	Number of	Price per
Options	shares	Share	Expiry date
	1,100,000	$0.07	31 December 2010
	400,000	$0.07	17 March 2011
	250,000	$0.07	30 June 2011
	1,160,000	$0.07	31 December 2011
	350,000	$0.07	30 June 2012
	7,490,000	$0.07	31 December 2012

Total outstanding and exercisable	10,750,000

Warrants

2011

On 29 August 2010, a total of 10,000,000 outstanding warrants having an exercise price of $0.90 and an expiry date of 29 August 2010 were repriced to have an exercise price of $0.20 and an expiry date of 29 August 2012.

The Company calculated the incremental increase in the fair value of these amended warrants to be $1,115,458 which was charged to operations.

At the end of the period, the Company was required to revalue certain warrants, with vesting provisions, which were granted to a consultant in a prior period. The incremental increase in the fair value of these revalued warrants was calculated to be $6,303 which was charged to operations.

2010

During the year ended 30 June 2010, 2,643,000 warrants were issued in conjunction with a private placement. Each warrant has an exercise price of $0.10 and an expiry date of 26 February 2013.

Continental Energy Corporation

(An Exploration Stage Company)

Notes to Interim Consolidated Financial Statements

30 September 2010 and 2009

Unaudited – Prepared by Management

Expressed in U.S. Dollars

During the year ended 30 June 2010, a total of 4,975,000 outstanding share purchase warrants originally issued in conjunction with private placements and having various exercise prices between $0.15 and $0.40 and terms expiring between 15 May 2010 and 16 September 2012 were all amended to have a new exercise price of $0.07 and a new expiry date of 31 December 2011. The Company calculated the incremental increase in the fair value of these amended warrants to be $79,008 which was charged to operations.

During the year ended 30 June 2010, a total of 1,000,000 share purchase warrants were granted to a financial and management advisory company having an exercise price of $0.15 per share and expiring on 16 September 2012. The Company calculated the fair value of these warrants to be $75,219 on the grant date which was charged to operations. The average grant date fair value of these warrants was $0.08.

During the year ended 30 June 2010, a total of 350,000 share purchase warrants were granted to an investor relations company having an exercise price of $0.09 per share and expiring on 16 September 2010. These warrants shall vest in four equal tranches of 87,500 shares and each tranche may be exercised only after 1 January 2010; 1 April 2010; 1 July 2010; and 1 October 2010 unless the contract under which they are issued is cancelled by the Company prior to the vest date. The Company has an unconditional right to terminate the agreement after six months in which case any vested warrants will remain unaffected and all unvested warrants will be cancelled. The Company calculated the fair value of these warrants to be $31,211 on the grant date. In the current period, $24,908 of this was charged to operations. The average grant date fair value of these warrants was $0.08.

During the year ended 30 June 2010, 15,000 warrants having an exercise price of $1.00 per share expired without being exercised.

Total outstanding and exercisable

Details of outstanding share purchase warrants are as follows:


				Weighted Average
	Number of			Exercise Price
	Warrants			per Share
Warrants outstanding, 30 June 2009	13,990,000		$	0.16
Warrants issued	3,993,000			0.09
Warrants expired	(15,000	)		0.07
Warrants outstanding, 30 June 2010 and 30 September 2010	17,968,000		$	0.15

Details of outstanding share purchase warrants as at 30 September 2010 are as follows:


	Number of	Price per
Warrants	Shares	Share	Expiry Date
	4,975,000	$0.07	31 December 2011
	10,000,000	$0.20	29 August 2012
	350,000	$0.09	16 September 2012
	2,643,000	$0.10	26 February 2013

	17,968,000

Continental Energy Corporation

(An Exploration Stage Company)

Notes to Interim Consolidated Financial Statements

30 September 2010 and 2009

Unaudited – Prepared by Management

Expressed in U.S. Dollars

Black-Scholes Option-Pricing Model Assumptions

The fair value of each option grant (Note 9c) is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:


	30 September	30 June
	2010	2010
Expected dividend yield	0.00%	0.00
Expected stock price volatility	262%	108%
Risk-free interest rate	1.42%	0.37%
Expected life of options (years)	2.18	1.00

The fair value of each warrant issued (Note 9d) is estimated on the grant date and date of amendment using the Black-Scholes option-pricing model with the following assumptions:


	30 September	30 June
	2010	2010
Expected dividend yield	0.00%	0.00%
Expected stock price volatility	271%	107%
Risk-free interest rate	1.28%	0.35%
Expected life of warrants (years)	2.00	3.00


10.	Related Party Transactions

All related party transactions have been disclosed elsewhere in these consolidated financial statements, except as follows:

	a)	During the three month period ending 30 September 2010, management, director and officer fees in the amount of $52,500 (2009 - $52,500) were paid or accrued to directors and officers of the Company.

	b)	During the three month period ending 30 September 2010 consulting fees in the amount of $22,500 (2009 - $nil) were paid or accrued to a firm in which an officer of the Company is a managing director.

	c)	During the three month period ending 30 September 2010 the Company received $35,000 in cash financing from a related party. This amount is included in accounts payable and accrued liabilities and is unsecured, non-interest bearing and has no specific terms for repayment.

	c)	As at 30 September 2010, $262,500 (30 June 2009 - $152,500) is payable to officers of the Company which is included in accounts payable and accrued liabilities.

The above transactions, occurring in the normal course of operations, are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Continental Energy Corporation

(An Exploration Stage Company)

Notes to Interim Consolidated Financial Statements

30 September 2010 and 2009

Unaudited – Prepared by Management

Expressed in U.S. Dollars

11.

Segmented Information


		North America			East Asia			Consolidated

Three months ended 30 September 2010
Segmented revenue	$	-		$	-		$	-
Segmented income (loss)	$	(1,322,215	)	$	(62,811	)	$	(1,385,026	)
Identifiable assets	$	90,836		$	53,323		$	144,159

Year ended 30 June 2010
Segmented revenue	$	-		$	-		$	-
Segmented income (loss)	$	(1,052,964	)	$	(222,422	)	$	(1,275,386	)
Identifiable assets	$	80,989		$	38,167		$	119,156

MANAGEMENT’S DISCUSSION & ANALYSIS
FORM 51-102F1
CONTINENTAL ENERGY CORPORATION
For the First Quarter Ended September 30, 2010 of the Fiscal Year Ending June 30, 2011

NATURE OF BUSINESS

Continental Energy Corporation (“Continental” or the “Company”) is an oil and gas exploration company engaged in the assembly of a portfolio of oil and gas exploration properties with high potential resource prospects. Continental 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 in Indonesia and geological conditions are favorable for hydrocarbon accumulation. Continental owns an 18% participating interest in an Indonesian production sharing contract area covering 901,668 acres, the Bengara-II Block. Continental is an exploration stage company and none of its oil and gas properties currently generate revenue.

Our accompanying consolidated financial statements have been prepared using accounting principles generally accepted in Canada. Our fiscal year end is June 30^th. All reported amounts are in United States dollars unless otherwise noted.

The date of this report is as of November 29, 2010.

FORWARD-LOOKING INFORMATION

This management discussion and analysis (“MD&A”) contains certain forward-looking statements and information relating to Continental that are based on the beliefs of its management as well as assumptions made by and information currently available to Continental. When used in this document, the words “anticipate”, “believe”, “estimate”, “expect” and similar expressions, as they relate to Continental or its management, are intended to identify forward-looking statements. This MD&A contains forward-looking statements relating to, among other things, regulatory compliance, the sufficiency of current working capital, and the estimated cost and availability of funding for the continued exploration and development of the Company’s oil and gas properties. Such statements reflect the current views of Continental with respect to future events and are subject to certain risks, uncertainties and assumptions. Many fact ors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Aside from factors identified in the annual MD&A, additional important factors, if any, are identified here.

HIGHLIGHTS OF THE PAST QUARTER

The “Past Quarter” ended September 30, 2010 marks the end of the First Quarter of the Company’s annual fiscal year ending June 30, 2011. Significant events having material effect on the business affairs of the Company which have occurred during the Past Quarter are summarized below:

Investment Activity
On July 7, 2010 the Company entered into a Share Sale and Transfer Agreement to sell 100% of the shares in its inactive subsidiary Continental Energy Pte. Ltd. (“CEPL”) to Transafrica Management SARL (60%) and C&S Infrastructure LLC (40%) for consideration of $71,500 which was to be paid on or before July 31, 2010. On July 31, 2010, the agreement was amended to extend the July 31, 2010 payment deadline until November 1, 2010. As of November 29, 2010 payment under the agreement has not yet been received, however ownership of the CEPL shares has been transferred. Included in the Company’s interim consolidated statements of loss and comprehensive loss are the results of operations of CEPL from the date of incorporation to September 30, 2010.

Share Purchase Warrants Activity
During the Past Quarter, the following activity involving the Company’s share purchase warrants occurred:

Exercises – No outstanding share purchase warrants were exercised.

New Issues – No new share purchase warrants were issued.

Expiry – No oustanding share purchase warrants expired.

Amendments – On August 29, 2010 the Company amended the terms of certain outstanding incentive warrants to bring them into line with the current market conditions as follows:


	•	A total of 10,000,000 warrants with an exercise price of $0.90 per share and an expiry date of August 29, 2010 were amended to have a new exercise price of $0.20 and a new expiry date of August 29, 2012.

Incentive Stock Options Activity
During the Past Quarter, the following activity involving the Company’s incentive stock options occurred:

Exercises – No outstanding incentive stock options were exercised.

New Grants – No new incentive stock options were granted.

Expiry - No outstanding incentive stock options expired.

Amendments – On September 29, 2010 the Company amended the terms of certain outstanding stock options to bring them into line with the current market conditions as follows:


	•	A total of 600,000 stock options having exercise prices of $0.07 per share and with an expiry date of December 31, 2010 were amended to have a new expiry date of December 31, 2011.

	•	A total of 350,000 stock options having exercise prices of $0.07 and with varying expiry dates were amended to have a new expiry date of June 30, 2012.

	•	A total of 7,690,000 stock options having exercise prices of $0.07 and with varying expiry dates were amended to have a new expiry date of December 31, 2012.

Shares Issues
During the Past Quarter, no new shares were issued.

SUBSEQUENT EVENTS

The “Past Quarter” ended September 30, 2010 marks the end of the First Quarter of the Company’s annual fiscal year ending June 30, 2011. Significant events possibly having a material effect on the business affairs of the Company which have occurred since the end of the Past Quarter but prior to publication of this report are summarized below:

2011 Bengara-II Block Budget Presented
Pursuant to a press release made on November 16, 2010 the Company announced that its 18% owned subsidiary Continental-GeoPetro (Bengara-II) Ltd. ("CGB2") has proposed a 2011 Bengara-II Block exploration budget to Indonesian oil and gas regulators in the total amount of US$ 89 Million. The total proposed by CGB2 included the drilling of two wells in 2011 including one appraisal well and one exploratory and/or additional appraisal well at a combined budget of US$ 53.8 Million. The total also included an amount of US$ 30.8 Million for 2D and 3D seismic acquisition, processing, and interpretation expenditures. Most of the 2011 seismic expenditure is a carry forward from the 2010 budget year for the ongoing field acquisition survey originally begun in 2010. However, the amount proposed for 2011 does include an increase in expected 2010 seismic acquisition costs to cover cost overruns expected as a result of delays to 2010 field acquisition efforts caused by surface damage claim issues. The remainder of th e proposed budget provides for technical studies intended to justify a plan of development and for administrative expenses. The budget is subject to the revision of and the approval of Indonesian oil and gas regulator BPMIGAS.

2010 Audited Annual Financial Statements Filed
On October 28, 2010 the Company filed its audited financial statements for the Fiscal Year ended June 30, 2010 with Canadian securities regulatory authorities on SEDAR in accordance with Canadian securities requirements.

2010 AGM Set
On October 8, 2010 the Company served notice of its Annual General Meeting to be held on December 12, 2010. All holders of common shares as of the record date, November 5, 2010 shall be entitled to vote at the meeting.

2010 Annual Reserves Report Posted
On November 4, 2010 the Company posted its annual reserves report at fiscal year end June 30, 2010 on SEDAR in the form referred to in item 3 of section 2.1 of Canadian National Instrument 51-101 “Standards of Disclosure for Oil and Gas Activities” (“NI 51-101”). The companion Form 51-101F2 “Report On Reserves Data By Independent Qualified Reserves Evaluator Or Auditor” to the Form 51-101F1 section of the NI 51-101 was filed concurrently and is nil because the Company is an exploration stage company and has no reserves to report on. The companion Form 51-101F3 “Report of Management and Directors on Oil And Gas Disclosure” was also filed concurrently. The full NI 51-101 report has been filed on SEDAR and is available for download at http://sedar.com/search/search_form_pc_en.htm.

Share Purchase Warrants Activity
Subsequent to the end of the Past Quarter and up to the date of this report, the following activity involving the Company’s share purchase warrants occurred:

Exercises – No outstanding share purchase warrants were exercised.

New Issues – No new share purchase warrants were issued.

Expiry – No share purchase warrants expired.

Amendments – No amendments were made to the term of any outstanding share purchase warrants.

Incentive Stock Options Activity
Subsequent to the end of the Past Quarter and up to the date of this report, the following activity involving the Company’s incentive stock options occurred:

Exercises – No outstanding incentive stock options were exercised.

New Grants – No new incentive stock options were granted.

Expiry – No outstanding incentive stock options expired.

Amendments – No amendments were made to the terms of any outstanding incentive stock options.

Shares Issues
Subsequent to the end of the Past Quarter and up to the date of this report, no new shares were issued.

SHAREHOLDING

As of the date of this report the Company had 72,390,381 common shares issued and outstanding.
As of the date of this report the Company had 10,750,000 unexercised stock options issued and outstanding.
As of the date of this report the Company had 17,968,000 unexercised warrants issued and outstanding.
As of the date of this report the Company had Nil preferred shares issued and outstanding.

RESULTS OF OPERATIONS

Financial Results for the First Quarter Ended September 30, 2010
The “Past Quarter” ended September 30, 2010 marks the end of the First Quarter of the Company’s annual fiscal year ending June 30, 2011.


•	Summary of Quarterly Results

The following table sets out selected unaudited quarterly financial information of Continental and is derived from unaudited quarterly consolidated financial statements as filed on SEDAR.


Period	Revenues	Loss from Continued Operations and Net Income (loss)	Basic Income (Loss) per Share from Continued Operations and Net Income (loss)	Fully Diluted Income per Share from Continued Operations and Net Income (loss)
1st Quarter 2011	Nil	(1,385,026)	(0.02)	(0.02)
4^thQuarter 2010	Nil	(245,489)	(0.00)	(0.00)
3^rdQuarter 2010	Nil	(409,091)	(0.01)	(0.01)
2^ndQuarter 2010	Nil	(273,499)	(0.00)	(0.00)
1^stQuarter 2010	Nil	(347,307)	(0.00)	(0.00)
4^thQuarter 2009	Nil	(264,481)	(0.00)	(0.00)
3^rdQuarter 2009	Nil	(1,638,935)	(0.02)	(0.02)
2^ndQuarter 2009	Nil	(701,874)	(0.01)	(0.01)


•	Current Working Capital Situation

As at September 30, 2010, the Company’s consolidated financial statements reflect a working capital deficit of $303,880. This represents a decrease in the working capital of $119,282 compared to the June 30, 2010 working capital deficit of $184,598. The main use of funds during the current period was the Company’s general and administrative expenditures during the period. The cash balance at September 30, 2010 was $40,681 compared with $88,843 as at June 30, 2010, a decrease of $48,162.

The Company used $154,445 for operating activities during the three months ended September 30, 2010 compared with $231,915 in the three months ended September 30, 2009.

The cash resources from investing activities were $71,283 for the three months ended September 30, 2010 compared with cash resources used in investing activites of $668 for the three months ended September 30, 2009.


•	Investments

The Company’s oil and gas property expenditures were held at a maintenance level during the Past Quarter. The Company wrote off $217 on expenditures on oil and gas properties during the three month period ended September 30, 2010, compared with $668 in the three month period ended September 30, 2009.

On November 16, 2010 the Company announced that its 18% owned subsidiary Continental-GeoPetro (Bengara-II) Ltd. ("CGB2") has proposed a 2011 Bengara-II Block exploration budget to Indonesian oil and gas regulators in the total amount of US$ 89 Million. The total proposed by CGB2 included the drilling of two wells in 2011 including one appraisal well and one exploratory and/or additional appraisal well at a combined budget of US$ 53.8 Million. The total also included an amount of US$ 30.8 Million for 2D and 3D seismic acquisition, processing, and interpretation expenditures. Most of the 2011 seismic expenditure is a carry forward from the 2010 budget year for the ongoing field acquisition survey originally begun in 2010. However, the amount proposed for 2011 does include an increase in expected 2010 seismic acquisition costs to cover cost overruns expected as a result of delays to 2010 field acquisition efforts caused by surface damage claim issues. The remain der of the proposed budget provides for technical studies intended to justify a plan of development and for administrative expenses. The budget is subject to the revision of and the approval of Indonesian oil and gas regulator BPMIGAS.

During the Past Quarter, the Company sold 100% of its shares in its inactive subsidiary CEPL to Transafrica Management SARL (60%) and C&S Infrastructure LLC (40%) for consideration of $71,500 which was to be paid on or before November 1, 2010. As of November 29, 2010, payment has not been received; however ownership of the CEPL shares has been transferred. This transaction resulted in a gain of $71,352.


•	Finance

During the Past Quarter, the Company received $35,000 in cash financing from a related party. This amount is included in accounts payable and accrued liabilities and is unsecured, non-interest bearing and has no specific terms for repayment.


•	Operations

Overall, the Company had a loss from operations during the three month period ended September 30, 2010 of $1,385,026 compared to $347,307 in the three month period ended September 30, 2009.

The significant changes to general and administrative expenses are as follows: Consulting fees increased from $Nil to $22,500 as the result of an agreement that was signed with Aspen Capital Partners in September of 2009. No expenses were recorded under the agreement during the prior year quarter. Financing fees increased from $Nil to $1,115,459 as the result of the revaluation of 10,000,000 warrants during the period. Office expenses increased from $28,131 to $35,080 as a result of increased activity in the Indonesian offices of the Company. These increases were offset by decreases in the following: Professional fees decreased from $29,134 to $20,935 as a result of lower legal fees during the current period. Rent, office maintenance and utilities decreased from $14,149 to $9,390 as a result of the closure of the former CFO’s Dallas office. Stock based compensation decreased from $154,294 to $147,894 as the only stock option activity during the current y ear was the revaluation of previously granted stock options. Travel and accommodation expenditures decreased from $8,944 to $2,671 as the Company was not working on any projects during the period that required extensive travel.

ADDITIONAL DISCLOSURE

The “Past Quarter” ended September 30, 2010 marks the end of the First Quarter of the Company’s annual fiscal year ending June 30, 2011.

Material Contracts & Commitments
During the Past Quarter, no new material contracts or commitments were undertaken and not elsewhere disclosed herein or in the unaudited and management prepared financial statements for the Past Quarter published herewith.

Related Party Transactions
During the Past Quarter, no new related party agreements, or modifications to existing agreements, of any kind were made by the Company which are not otherwise already disclosed herein or in the unaudited and management prepared financial statements for the Past Quarter published herewith.

Expenditures made by the Company to related parties during the Past Quarter and balances receivable from related parties as at Past Quarter end September 30, 2010 are as follows:


	•	During the Past Quarter, salaries and management fees in the amount of $52,500 (2009 - $52,500) were paid or accrued to directors and officers of the Company.

	•	During the Past Quarter, consulting fees in the amount of $22,500 (2009 - $Nil) were paid or accrued to a firm in which an officer of the Company is a managing director.

	•	As at the end of the Past Quarter, September 30, 2010, $227,500 (June 30, 2010 - $152,500) is payable to officers of the Company relating to outstanding salaries and management fees; and $35,000 (June 30, 2010 - $Nil) is repayable to an officer relating to cash advances made to the Company.

Investor Relations, Publicity and Promotion
During the Past Quarter, no new arrangements, or modifications to existing agreements, were made by the Company for investor relations services, publicity, promotion or advertising agreements which are not otherwise already disclosed herein.

Finder's Agreements, Financial Advice & Fund Raising
During the Past Quarter, no new arrangements, or modifications to existing agreements, were made by the Company relating to financial advice, fund raising or finder's agreements which are not otherwise already disclosed herein.

Significant Accounting Policies
The details of the Company’s accounting policies are presented in note 2 and elsewhere in the audited financial statements for the fiscal year ended June 30, 2010. The following policies are considered by management to be essential to understanding the processes and reasoning that go into the preparation of the Company’s financial statements and the uncertainties that could have a bearing on the financial results:

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.

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. Significant areas of assumptions are: impairment of resource properties, the assumptions used in calculating the fair value of options, the useful life of long-lived assets, the fair values of financial instruments, and the future tax rates used to determine future income taxes.

Change in Accounting Policies

Business Combinations – Section 1582

In January 2009, the CICA issued Handbook Section 1582, “Business Combinations” (“CICA 1582”), CICA 1582 requires that all assets and liabilities of an acquired business will be recorded at fair value at acquisition. Obligations for contingent considerations and contingencies will also be recorded at fair value at the acquisition date. The standard also states that acquisition-related costs will be expensed as incurred and that restructuring charges will be expensed in the periods after the acquisition date. The Section applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period on or after 1 January 2011. The Company adopted this policy effective July 1, 2010. The adoption has not had an impact on the Company’s financial position, earnings or cash flows.

Consolidations and Non-controlling interest – Sections 1601 and 1602

In January 2009, the CICA issued Handbook Section 1601, “Consolidations” (“CICA 1601”), and Section 1602, “Non-controlling Interests” (“CICA 1602”). CICA 1601 establishes standards for the preparation of consolidated financial statements. CICA 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. These standards apply to interim and annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011. The Company adopted this policy effective July 1, 2010. The adoption has not had an impact on the Company’s financial position, earnings or cash flows.

Recent Accounting Pronouncements Not Yet Adopted

International Financial Reporting Standards (“IFRS”)
In 2006, the Canadian Accounting Standards Board (“AcSB”) published a new strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected five year transitional period. In February 2008 the AcSB announced that 2011 is the changeover date for publicly-listed companies to use IFRS, replacing Canadian GAAP. This date is for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. For the Company, the transition date will be July 1, 2011 will require the restatement for comparative purposes of amounts reported by the Company for the year ended June 30, 2010. The Company is currently assessing the financial reporting impact of the transition to IFRS and the changeover date.

The Company has appointed a project manager to lead the conversion to IFRS. The project manager is working with other members of the finance group to develop and execute an implementation plan. An initial diagnostic review of significant IFRS differences is currently underway to identify the key areas which are likely to be impacted by accounting policy changes. After which, the Company will perform a more detailed review of the impact of IFRS on the Company’s consolidated financial statements and other areas of the Company. Any changes required to systems and controls will be identified as the project progresses.

Draft financial statements and disclosure information will be prepared for each quarter in 2011 and reporting under IFRS will commence in the first quarter of 2012. While the Company has begun assessing the adoption of IFRS, the financial reporting impact of the transition to IFRS cannot be reasonable estimated at this time.

Capital Resources
The Company has no operations that generate cash flow and its long term financial success is dependant on management’s ability to discover economically viable oil and gas deposits. The oil and gas exploration process can take many years and is subject to factors that are beyond the Company’s control.

In order to finance the Company’s exploration programs and to cover administrative and overhead expenses, the Company raises money through equity sales and from the exercise of convertible securities. Many factors influence the Company’s ability to raise funds, including the health of the resource market, the climate for oil and gas exploration investment, the Company’s track record and the experience and caliber of its management.

With a working capital deficit of $303,880 as at September 30, 2010, the Company will not have sufficient funds to meet its administrative, corporate development and exploration activities over the next twelve months. Actual funding requirements may vary from those planned due to a number of factors. The Company believes it will be able to raise the necessary capital it requires, but recognizes there will be risks involved that may be beyond its control. During the year ended June 30, 2010 the Company retained the services of a financial advisor and an investment banker who are actively sourcing capital for the Company.

Risks and Uncertainties
The Company has no history of profitable operations and its present business is at an early stage. As such, the Company is subject to many risks common to such enterprises, including under-capitalization, cash shortages and limitations with respect to personnel, financial and other resources and the lack of revenues. There is no assurance that the Company will be successful in achieving a return on shareholders' investment and the likelihood of success must be considered in light of its early stage of operations.

The Company has no source of operating cash flow and no assurance that additional funding will be available to it for further exploration and development of its projects when required. Although the Company has been successful in the past in obtaining financing through the sale of equity securities or joint ventures, there can be no assurance that the Company will be able to obtain adequate financing in the future or that the terms of such financing will be favorable. Failure to obtain such additional financing could result in the delay or indefinite postponement of further exploration and development of its properties.

Recent degradation of the market conditions for the financing of equity and/or debt for oil and gas exploration and development companies has created additional uncertainty for future financing of the acquisition or development of the Company’s projects.

The Company’s property interests are located in remote, undeveloped areas and the availability of infrastructure such as surface access, skilled labour, fuel and power at an economic cost, cannot be assured. These are integral requirements for exploration, development and production facilities on oil and gas properties. Power may need to be generated on site.

Oil and gas exploration is a speculative venture. There is no certainty that the money spent on exploration and development will result in the discovery of an economic oil or gas accumulation. There is no assurance that the Company's exploration activities will result in any discoveries of commercial accumulations of oil or gas. The long-term profitability of the Company's operations will in part be related to the success of its exploration programs, which may be affected by a number of factors that are beyond the control of the Company.

The oil and gas industry is intensely competitive in all its phases. The Company competes with many other oil and gas exploration companies who have greater financial resources and technical capacity.

The market price of energy is volatile and cannot be controlled.

The Company is very dependent upon the personal efforts and commitment of its existing management. To the extent that management's services would be unavailable for any reason, a disruption to the operations of the Company could result, and other persons would be required to manage and operate the Company.

Financial Instruments

Fair value

Management of financial risk

The Company’s financial instruments are exposed to certain financial risks, including currency risk, credit risk, liquidity risk, interest rate risk and price risk.

Currency risk

The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company operates in Canada and Indonesia and a portion of its expenses are incurred in Canadian dollars and Indonesian Rupiah. A significant change in the currency exchange rates between the Canadian dollar relative to the US dollar and the Indonesian Rupiah to the US dollar could have an effect on the Company’s results of operations, financial position or cash flows. The Company has not hedged its exposure to currency fluctuations. At September 30, 2010, the Company is exposed to currency risk through the following assets and liabilities denominated in Canadian dollars, Singapore dollars and Indonesian Rupiah:


	September 30, 2010
	Canadian	Indonesian
	Dollars	Rupiah
	$
Cash and cash equivalents	3,843	13,193,811
Receivables	2,160	-
Accounts payable and accrued liabilities	(40,381)	(124,104,709)

Based on the above net exposures as at September 30, 2010, and assuming that all other variables remain constant, a 10% depreciation or appreciation of the US dollar against the Canadian dollar would result in a decrease/increase of $3,341 in the Company’s net earnings. Likewise, a 10% depreciation or appreciation of the US dollar against the Indonesian Rupiah would result in a decrease/increase of $1,269 in the Company’s net earnings.

Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations.

The Company’s cash is held by large Canadian and international financial institutions. Management believes that the credit risk concentration with respect to receivables is remote.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. Liquidity requirements are managed based on expected cash flows to ensure that there is sufficient capital in order to meet short term obligations. As at September 30, 2010, the Company had a cash balance of $40,681 (June 30, 2010 -$88,843) to settle current liabilities of $431,463 (June 30, 2010 - $284,787).

Interest rate risk

Price risk

The Company is exposed to price risk with respect to commodity prices. The Company closely monitors commodity prices to determine the appropriate course of action to be taken.

Capital Management

The Company is not subject to any externally imposed capital requirements.

Additional Disclosure for Venture Issuers without Significant Revenue
Additional disclosure concerning Continental’s general and administrative expenses and resource property costs is provided in the Company’s Unaudited Interim Consolidated Statement of Loss and Note 7 - Resource Property Costs contained in its Interim Consolidated Financial Statements for September 30, 2010.

Approval
The Board of Directors of Continental has approved the disclosure contained in this MD&A.

Additional Information
Additional information relating to Continental is available on SEDAR at www.sedar.com.

Claims, Contingencies & Litigation
Except for any contingencies elsewhere disclosed herein, or in the unaudited and management prepared, interim financial statements for the Past Quarter published herewith, the Company knows of no material, active or pending claims or legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation that might materially adversely affect the Company or a property interest of the Company.

CONTINUOUS DISCLOSURE & FILINGS - CANADA

Additional disclosure is made on a continuous basis through periodic filings of Company financial information, significant events, including all press releases and material change reports and disclosure of new or changed circumstances regarding the Company. Unaudited quarterly financial statements are filed by the Company with the British Columbia Securities Commissions (“BCSC”) for each fiscal quarter. Shareholders and interested parties may obtain downloadable copies of mandatory filings made by the Company with Canadian securities regulators on the internet at the “SEDAR” website www.sedar.com which 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 on SEDAR in 1997. All Company fili ngs made on SEDAR during the Past Quarter and up to the date of this filing are incorporated herein by this reference.

CONTINUOUS DISCLOSURE & FILINGS - USA

The Company is also a full reporting issuer and filer of US Securities and Exchange Commission (“US-SEC”) filings. US-SEC filings include Form 20F annual reports and audited financial statements. Interim unaudited quarterly financial reports in this format together with press releases and material contracts and changes are filed under Form-6K. The Company has filed electronically on the US-SEC’s EDGAR database commencing with the Company’s Form 20F annual report and audited financial statements since its fiscal year end 2004. See website www.sec.gov/edgar/searchedgar/webusers.htm. Prior to that event the Company filed with the US-SEC in paper form. All Company filings made to US-SEC during the past fiscal year and during the Past Quarter and up to the date of this filing are incorporated herein by this reference.
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Form 52-109FV2
Certification of interim filings – OTC reporting issuer basic certificate

I, Richard L. McAdoo, Chief Executive Officer of Continental Energy Corporation, certify the following:

1.	*Review:* I have reviewed the interim financial statements and interim MD&A (together, the “interim filings”) of Continental Energy Corporation (the “issuer”) for the interim period ended September 30, 2010.

2.	*No misrepresentations:* Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3.	*Fair presentation:* Based on my knowledge, having exercised reasonable diligence, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

Date: November 29, 2010

(signed) ”Richard L. McAdoo”
Name: Richard L. McAdoo
Title: Chief Executive Officer


	NOTE TO READER

	In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this OTC reporting issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of

	i)	controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

	ii)	a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

	The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of an OTC reporting issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

Form 52-109FV2
Certification of interim filings – OTC reporting issuer basic certificate

I, Robert V. Rudman, Chief Financial Officer of Continental Energy Corporation, certify the following:

1.	*Review:* I have reviewed the interim financial statements and interim MD&A (together, the “interim filings”) of Continental Energy Corporation (the “issuer”) for the interim period ended September 30, 2010.

2.	*No misrepresentations:* Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3.	*Fair presentation:* Based on my knowledge, having exercised reasonable diligence, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

Date: November 29, 2010

(signed) “Robert V. Rudman”
Name: Robert V. Rudman
Title: Chief Financial Officer


	NOTE TO READER

	In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this OTC reporting issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of

	i)	controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

	ii)	a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

	The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of an OTC reporting issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

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