Replacement Appendix 3B

Name of entity

Carbon Energy Limited

ABN

56 057 552 137

1

+Class of +securities issued or to be issued

Ordinary fully paid shares Rights Issue Shortfall

2

Number of +securities issued or to be issued (if known) or maximum number which may be issued

Rights Issue Shortfall:

30,769,232 ordinary fully paid shares

3

Principal terms of the

+securities (e.g. if options, exercise price and expiry date; if partly paid +securities, the amount outstanding and due dates for payment; if

+convertible securities, the conversion price and dates for conversion)

Rights issue shortfall: Ordinary fully paid shares issued pursuant to shortfall from Rights Issue.

4

Do the +securities rank equally in all respects from the +issue date with an existing +class of quoted +securities?

If the additional +securities do not rank equally, please state:

• the date from which they do

• the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment

• the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment

The new shares will rank pari passu with existing shares on issue.

5

Issue price or consideration

$0.013 per share

6

Purpose of the issue

(If issued as consideration for the acquisition of assets, clearly identify those assets)

• pursuing International and Australian business development opportunities;

• progressing the activities of the work plan for the Company's mineral development licence (MDL374), that include the continuation of the Company's ground water monitoring program under its Environmental Authority which form part of its Rehabilitation Plan for the trial site near Dalby, in South East Queensland;

• meeting general working capital requirements; and

• paying offer costs.

6a

Is the entity an +eligible entity that has obtained security holder approval under rule 7.1A?

If Yes, complete sections 6b - 6h in relation to the +securities the subject of this Appendix 3B, and comply with section 6i

Yes

6b

The date the security holder resolution under rule 7.1A was passed

30 November 2015

6c

Number of +securities issued without security holder approval under rule 7.1

Nil

6d

Number of +securities issued with security holder approval under rule 7.1A

Nil

6e

Number of +securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting)

Nil

6f

Number of +securities issued under an exception in rule 7.2

30,769,232 Ordinary fully paid shares

6g

If +securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3? Include the

+issue date and both values. Include the source of the VWAP calculation.

Not applicable

6h

If +securities were issued under rule 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements

Not applicable

6i

Calculate the entity's remaining issue capacity under rule 7.1 and rule 7.1A - complete Annexure 1 and release to ASX Market Announcements

415,672,310

7

+Issue dates

Note: The issue date may be prescribed by ASX (refer to the definition of issue date in rule 19.12). For example, the issue date for a pro rata entitlement issue must comply with the applicable timetable in Appendix 7A.

Cross reference: item 33 of Appendix 3B.

4 July 2016