48% Increase in JORC Inferred Coal Resource to 2.0 Billion tonnes

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1 ASX / Media Announcement 2 April 2013 Level 9, 301 Coronation Drive, Milton QLD 4064 Australia PO Box 2118, Toowong DC QLD 4066 Australia phone + 61 (0) fax + 61 (0) Carbon Energy Limited ABN Carbon Energy (Operations) Pty Ltd ABN % Increase in JORC Inferred Coal Resource to 2.0 Billion tonnes Carbon Energy has (ASX: CNX, OTCQX: CNXAY) today announced a 48% increase in its JORC Inferred Coal Resource to 2.0 Billion tonnes with its wholly-owned Surat Basin tenements. See Annexure A for the Executive Summary of the Competent Person statement. This statement continues the modelling of existing Carbon Energy tenements in the Surat Basin from public file drill-hole information and has been developed by an independent third party mining professional services company GeoConsult. The newly defined resource relates to tonnage increases at EPC 867 (excluding MDL 374), EPC 869, and EPC 1132 in the Macalister Seam. See Coal Tenure Location Map below. There is significant potential for further definition of resources in other Walloon Coal Measure seams in these same leases, subject to obtaining further coal quality data within these seams. See Walloon Stratigraphy below. Carbon Energy previously announced on 22 November 2012 the finalisation of a Conceptual Study on conventional coal mining at its Surat Basin tenements that identified at least three longwall mining areas each with the potential of mining 5 million product tonnes per annum of thermal coal. Coal quality within Carbon Energy s resources is expected to be consistent with the published coal qualities of the Macalister Seam at the Wilkie Creek and Kogan operating coal mines. These mines produce an export thermal coal product of around 11% ash, 9% moisture and Gross Calorific Value of 6,200 kcal/kg. Carbon Energy is seeking the monetisation of our large 100% owned thermal coal Resource. As previously noted, Carbon Energy plans to utilise the funds generated to further develop its core business of providing underground coal gasification technology and services. Acting CEO Morné Engelbrecht said The continuing increase in our JORC Resource using publicly available information at our wholly owned tenements demonstrates the world-class potential of the Surat Basin. The Basin s thick and laterally continuous seams appear suitable for the development of a number of longwall coal mines, including the potential to mine other Walloon seams beneath this resource. ENDS

2 For and on behalf of the Board Morné Engelbrecht Acting Chief Executive Officer For more information please contact Andrew Crook on or refer to our website at Figure 1 Carbon Energy Surat Basin Coal Tenure Map 2

3 Figure 2 Stratigraphy of the coal measures in the Walloon Sub-Group 3

4 Annexure A Executive Summary Competent Person statement: 4

5 Geological and Modelling Report Surat Project, Dalby (EPC867, EPC869, EPC1132 & MDL374) Carbon Energy Limited Surat Project, Dalby (EPC867, EPC869, EPC1132 and MDL374) Geological and Modelling Report Resource Estimation Date: March 2013 Principle Geologist: Warwick Smyth Modelling Geologist: Adrian Buck Page 1 of Ross St, Newstead, QLD 4006 Phone: (07) Fax: (07)

6 Geological and Modelling Report Surat Project, Dalby (EPC867, EPC869, EPC1132 & MDL374) Executive Summary Carbon Energy (CNX) commissioned GeoConsult Pty Ltd in January 2013 to develop a geological model and conduct a Resource estimation for the Surat Project, Dalby. The Surat Project consists of EPC867, EPC869, EPC1132 and MDL374. Coal seams within the area are an underground coal gasification and underground mining target within the Jundah Coal Measures. The project area is located approximately 30km west of the township of Dalby. The Western Railway is located across the south of the Surat Project and provides access to the Port of Brisbane. EPC867 was applied for on the 28 th October 2003 and granted on the 18 th February 2005 for a period of ten years. A total of 195 sub blocks were granted. EPC869 was applied for on the 28 th October 2003 and granted on the 14 th October 2004 for a period of ten years. A total of 64 sub blocks were granted. EPC1132 was applied for on the 1 st February 2007 and granted on the 21 st June 2014 for a period of seven years. A total of 23 sub blocks were granted. The regional geology of the Surat Project includes the southern part of the Permian Triassic Bowen Basin where it is overlain by Jurassic sediments of the Surat Basin. The Middle Jurassic sediments consist of units of the Injune Creek Group. Principal amongst these is the Walloon Sub Group which consists, in stratigraphic ascending order, of the Taroom Coal Measures, the Tangalooma Sandstone and the Juandah Coal Measures. These coal measures typically contain many thin coal seams (less than 2m). Locally these seams merge to form thick coal packages. The drillhole data for the project comprised 882 holes and includes rock type and lithological descriptions, sample intervals and seam correlations. A total of 348 holes constrain the stratigraphic model. In early 2012 Renate Sliwa assembled and correlated the Carbon Energy drillhole dataset in a Kingdom Database. The Kingdom dataset formed the basis of the July and September 2012 Resource Estimations conducted by Moultrie Database and Modelling using Minex Software. Renate Sliwa continued the project in January 2013, refining the seam coding in Kingdom and included recent open file drilling. GeoConsult then continued work on the dataset to a Vulcan resource model. Wireline geophysics (LAS) for 100+ holes has been compiled into a basic LAS database for the generation of cross sections. Wireline density and gamma logs were extensively reviewed at the coal seam Page 2 of Ross St, Newstead, QLD 4006 Phone: (07) Fax: (07)

7 Geological and Modelling Report Surat Project, Dalby (EPC867, EPC869, EPC1132 & MDL374) identification and correlations stages of the project by Moultrie Database and Modelling and Renate Sliwa. The majority of coal seam correlations were completed by Renate Sliwa using the Kingdom software package. The Walloon Sub Group coals are perhydrous and high in vitrinite and liptinite. Air dried analyses for the Wandoan deposit washed coal derived from Geology of Australian Coal Basins are: IM 10.7%, Ash 8.8%, VM 43.8% (proximate), Hydrogen 6.1% (ultimates), SE 26.5 MJ/kg, Sulphur 0.28% and Rv max Raw coal quality analyses for 39 holes have been compiled into a basic CQ database and modelled. Coal resource estimation has been carried out over the Surat Project Area in accordance with the JORC Code The JORC Table 1, specifying the status of the geological data, status of the geological database and model, resource limits, limitations and estimation procedures is attached to the modelling report in Appendix A. Inferred Resources were based on points of observation less than 4km apart and not exceeding 1km past the last data point, constrained by a minimum seam thickness of 2m (in aggregate of plys), a maximum stone parting thickness of 0.5m and a maximum raw ash of 50%. 2,272Mt of Inferred Resources were established in the Surat Project over 2 coal seams (MAU and MAM). The results of the resource estimation are summarised in the table below. Estimate Polygon Seam Project Inferred Resource POLY_MAU_INF_01 MAU MDL374 Inferred Resource POLY_MAM_INF_01 MAM MDL374 Thickness (m) 3.3 ( ) 3.8 ( ) Depth (m) 187 ( ) 205 ( ) Raw Ash (%ad) 29.7 ( ) 27.4 ( ) IM (%ad) 7.1 ( ) 5.9 ( ) Area (km2) Volume (km3) Tonnage (Mt) MDL374 TOTAL 243 Inferred Resource POLY_MAU_INF_02 MAU EPC867 Inferred Resource POLY_MAM_INF_02 MAM EPC ( ) 3.9 ( ) 234 ( ) 301 ( ) 29.0 ( ) 29.2 ( ) 8.6 ( ) 7.5 ( ) EPC867 TOTAL 1448 Inferred Resource POLY_MAM_INF_03 MAM EPC ( ) 337 ( ) 25.9 ( ) 4.9 ( ) EPC869 TOTAL 449 Inferred Resource POLY_MAM_INF_04 MAM EPC1132 Inferred Resource POLY_MAM_INF_05 MAM EPC1132 Inferred Resource POLY_MAM_INF_06 MAM EPC ( ) 4.4 ( ) 7.0 ( ) 271 ( ) 259 ( ) 259 ( ) 26.1 ( ) 25.4 ( ) 24.7 ( ) 7.5 ( ) 5.3 ( ) 3.8 ( ) EPC1132 TOTAL 132 PROJECT TOTAL 2,272 Table Coal Resource Estimation *Nb. Inferred Resource are conceptual in nature. Constraints on the Inferred Resources are as follows: Points of observation less than 4km apart and not exceeding 1km past the last data point. Minimum seam thickness of 2m (in aggregate of plys) Maximum stone parting thickness of 0.5m Maximum raw ash of 50%. Drill holes classed as valid points of observations were defined as holes where; o The entire coal seam was cored or, the drillhole contained slimline geophysics, o Drillhole seam intersection has reasonable stratigraphic correlation. Page 3 of Ross St, Newstead, QLD 4006 Phone: (07) Fax: (07)

8 Geological and Modelling Report Surat Project, Dalby (EPC867, EPC869, EPC1132 & MDL374) The information in this statement that relates to in situ coal resources potential is based on information compiled by GeoConsult Pty Ltd and Adrian Buck and reviewed by Warwick Smyth, who is a member of the Australasian Institute of Mining and Metallurgy (CP) Geology; and the Australian Institute of Geoscientists. Warwick Smyth is a qualified geologist (BSc Geol, Grad Dip AF&I, MAusIMM (CP), MGSA, MAIG), and a Principal Consultant for GeoConsult Pty. Ltd. and has over 20 years experience which is relevant to the style of mineralisation, the type of deposit under consideration and to the activity which has been undertaken to qualify as a Competent Person as defined by the 2012 edition of the Australian Code for Reporting of Coal Resources. Warwick Smyth of GeoConsult Pty Ltd has no material interest or entitlement, direct or indirect, in the securities of Carbon Energy or the Projects. GeoConsult has been commissioned to provide geological services to Carbon Energy since late Fees for the preparation of this report are on a time and materials basis. Warwick Smyth and GeoConsult Pty Ltd consent to the use of this statement and references to it and extracts from it, in the form and context in which they are included. Apart from the above, neither the whole nor any part of the statement document, nor references thereto, may be included in, or with, or attached to any document, circular, resolution, letter or statement without the prior written consent of Warwick Smyth or GeoConsult Pty Ltd. Dated this 2 nd day of April, 2013 Signature of Qualified Person Page 4 of Ross St, Newstead, QLD 4006 Phone: (07) Fax: (07)

9 About Carbon Energy Carbon Energy specialises in underground coal gasification (UCG). Our proprietary keyseam technology is the key to unlocking new energy sources, transforming stranded, deep or otherwise uneconomic coal resources into high-value fuels with lower carbon emissions. Carbon Energy delivers end-to-end UCG services from initial project assessment through to commercial project development, operations, site decommissioning and rehabilitation. Carbon Energy achieved Proof of Concept of its keyseam technology following 10 years of research by Australia s premier scientific research agency, the Commonwealth Scientific and Industrial Research organisation (CSIRO), 5 years of in-field trials and over $100 million investment in technology development. By successfully proving our keyseam technology, we have earned a reputation for delivering consistent, high quality product gas which can be used for many purposes including power generation, fertilisers and production of pipeline quality gas. keyseam maximises resource efficiency, whilst minimising surface disturbance and preserving groundwater quality. Carbon Energy also has previously announced the following assets: 2.0 Billion tonnes 1 of coal JORC Inferred Resource in southeast Queensland s Surat Basin; 743PJ 2 of Certified 2P syngas reserves in southeast Queensland s Surat Basin; and, 910 Million tonnes 3 of coal JORC Inferred Resource at its Bridger, Wyoming USA farm-in area. The Company is headquartered in Brisbane, Australia, listed on the Australian securities Exchange (ASX) as CNX and is quoted on the OTCQX International Exchange as CNXAY in the United States. Carbon Energy has UCG projects in Australia, China, Chile, Turkey and the United States. 1 See CNX ASX/Media Announcement 2 April CNX is not aware of any new information that would materially affect the Resources stated. 2 See CNX ASX/Media Announcement 8 December CNX is not aware of any new information that would materially affect the Reserves stated. 3 See ASX/Media Announcement 23 January CNX is not aware of any new information that would materially affect the Resources stated. 5