ASX Announcement‌‌

30 October 2015

Level 9, 301 Coronation Drive, Milton QLD 4064 Australia

PO Box 2118, Toowong DC QLD 4066 Australia

phone + 61 (0) 7 3156 7777

fax + 61 (0) 7 3156 7776

www.carbonenergy.com.au

Carbon Energy Limited ABN 56 057 552 137

Carbon Energy (Operations) Pty Ltd ABN 61 105 176 967

Carbon Energy Notice of 2015 Annual General Meeting

Carbon Energy's 2015 Annual General Meeting will be held on Monday, 30 November 2015, 9.30am (Brisbane Time) at:

HopgoodGanim Lawyers Level 7, Waterfront Place 1 Eagle Street, Brisbane.

The Notice of Meeting, Explanatory Memorandum, Independent Expert's Report and Voting Form is being mailed to shareholders today. A copy of these documents follows this announcement and they can be viewed on the Carbon Energy website at www.carbonenergy.com.au

The Carbon Energy 2015 Annual Report will also be mailed today to shareholders who have elected to receive a printed copy of this document. A copy of this document was lodged with the ASX on 31 July 2015 and is available on the Carbon Energy website at www.carbonenergy.com.au.

ENDS

For and on behalf of the Board

Catherine Costello

Chief Financial Officer & Company Secretary

About Carbon Energy

Carbon Energy (ASX: CNX) is building a gas business, utilising its unique keyseam Underground Coal Gasification (UCG) technology.

The Company is committed to providing industrial gas users with an affordable and secure source of high quality feedstock, as gas prices remain strong, through increased demand across our key markets.

Carbon Energy has completed the only successful, complete lifecycle, commercial scale underground gasification trial having undergone intense, independent environmental scrutiny.

This highly controlled, proven technology enables access to gas resources that were previously considered too deep or uneconomic to reach.

keyseam maximises resource efficiency while minimising surface disturbance and preserving regional groundwater use. Originally developed by Australia's leading research and scientific body, the Commonwealth Scientific and Industrial Research Organisation (CSIRO) it has been operationally proven through six years of field trials.

Alongside its Australian operations, Carbon Energy is working with international partners to unlock new energy resources offshore. The Company can deliver end-to- end services from initial project assessment through to commercial project development, operations, site decommissioning and rehabilitation.

Carbon Energy is headquartered in Brisbane, Australia and is listed on the Australian Securities Exchange (ASX).

keyseam® is a registered Trademark of Carbon Energy Ltd

2

www.carbonenergy.com.au

30 October 2015‌

Dear Shareholders,

Carbon Energy Limited | ABN 56 057 552 137

Level 9, 301 Coronation Drive, Milton QLD 4064 Australia PO Box 2118, Toowong DC QLD 4066 Australia

phone + 61 (0) 7 3156 7777

fax + 61 (0) 7 3156 7776

Carbon Energy (Operations) Pty Ltd

ABN 61 105 176 967

I am pleased to invite you to attend the Annual General Meeting (AGM) of Carbon Energy Ltd (Carbon Energy or the Company) to be held at:

HopgoodGanim Lawyers Level 7, Waterfront Place 1 Eagle Street, Brisbane

Monday 30 November 2015 at 9:30 am (Brisbane time).

The business to be dealt with at the meeting is set out in the attached Notice of Meeting with the Explanatory Memorandum and the Independent Expert's Report providing further detail to the proposed resolutions.

Along with the normal business of the Meeting, the Company is also seeking shareholder approval to form a Joint Venture in China. The Board sees this Joint Venture as critical to establishing Carbon Energy's presence in China, providing the Company with the opportunity to showcase its keyseam technology on a commercial scale through a fully funded structure.

As background, in September 2015, Carbon Energy undertook a transformational step in the Company's history with the signing of a Joint Venture Agreement with Beijing JinHong Investment Co., Ltd (JinHong) to develop and promote keyseam technology in China. The Joint Venture will undertake a commercial Demonstration Project in China and once proven operationally successful, sub-license the keyseam technology in China.

On 27 September 2015, Carbon Energy announced it had entered into binding Agreements with JinHong to form a joint venture in China and initially transfer a non-exclusive right to license keyseam technology in China to the Joint Venture. Upon successful commissioning of a commercial Demonstration Project the Company will issue an exclusive right to sub-license to the Joint Venture in consideration for a 30% entitlement to the dividend distributions (Transaction).

The Joint Venture Agreement was signed in conjunction with a $2 million placement to the Company's largest shareholder, Kam Lung Investment Development Company Ltd (Kam Lung). Kam Lung and JinHong are ultimately controlled by Mr Zhuang.

The Transaction is conditional on the Company obtaining the approval of its shareholders which is the subject of Resolution 6 in the attached Notice of Meeting. The accompanying Explanatory Memorandum provides further details in relation to the Transaction.

The Joint Venture with JinHong introduces to Carbon Energy a well funded strategic partner with extensive China operating experience. Under the Joint Venture, JinHong is committed to providing US$30 million in capital required to commission a commercial Demonstration Project in China and obtain the relevant Central Government endorsement for the use of the technology

in China. This amount will be equity funded by JinHong and is estimated to be sufficient to complete a commercial Demonstration Project of this nature in China. While Carbon Energy considered alternative funding and project partner proposals there is no assurance that such partners and the capital needed would have been available to Carbon Energy on commercially acceptable terms.

In return for making the contractual capital commitments, JinHong will be entitled to a 70% interest and Carbon Energy will be entitled to a 30% interest in dividends distributed. A Board will be formed upon all the relevant approvals being obtained and the Joint Venture being registered by the Chinese Government. Provided the commercial Demonstration Project is commissioned successfully, the Joint Venture will be entitled to an exclusive right to sub-license keyseam technology in China. Until successful commissioning of the commercial Demonstration Project, Carbon Energy can continue to license the keyseam technology in China and has the option to license the technology through the Joint Venture and receive 90% of the sub-license fees. The Company will also grant a non-exclusive license to the Joint Venture to use keyseam technology in order to develop and operate the commercial Demonstration Project once all the relevant approvals from Carbon Energy Shareholders and the Chinese Government are obtained, which is expected to be by the end of the first quarter of 2016.

To assist shareholders assess the merits or otherwise of the proposed Transaction, the subject of Resolution 6, the Board commissioned PricewaterhouseCoopers Securities Limited (PwC Securities) (Expert) to provide an independent expert's report (IER) as to whether the proposed Transaction is, in the opinion of the Expert, fair and reasonable to the non-associated Shareholders. That report accompanies the Explanatory Memorandum.

In the opinion of the Expert, the proposed Transaction is fair and reasonable to the non- associated Shareholders.

The Board believes that the best way to finance the completion of the necessary commercial Demonstration Project together with obtaining endorsement from China's Government is via the formation of the Joint Venture.

The Board is confident that Carbon Energy's Joint Venture with JinHong in China, in combination with its existing relationships and potential project pipeline in China, puts Carbon Energy in a strong position to take advantage of the direction China is taking on cleaner energy production utilising new gasification technology. Further, Carbon Energy has ongoing upside potential from its continuing efforts in Australia and other parts of the world and the commercial Demonstration Project will further establish the Company as a leader in the global market.

The Board recommends Shareholders vote in favour of Carbon Energy undertaking the proposed Transaction on the terms of the Joint Venture Agreement, the License Agreement and the Technical Services Agreement, including the grant to the Joint Venture of a non-exclusive license to use the Company's keyseam technology once the Joint Venture is approved and capitalised by JinHong, in order to develop and operate the commercial Demonstration Project, and the grant of an exclusive right to sub-license the Company's keyseam technology covering China, upon successful commissioning of a commercial Demonstration Project.

We look forward to welcoming you at Carbon Energy's AGM and moving forward in this new and exciting chapter in Carbon Energy's history.

Yours sincerely

Dr. Chris Rawlings Chairman