Icon Energy Limited Annual Report 2016

REVIEW OF OPERATIONS continued 8 ICON ENERGY ANNUAL REPORT 2016 The Gross Contingent Resource for ATP 855, initially reported by Icon on 27 March 2015 and outlined in detail in the Icon Energy Annual Report 2015, currently remains unchanged. DeGolyer and MacNaughton (D&M) , a well-respected and qualified international petroleum reserve and resource evaluation company, were engaged by Beach Energy (Operator) to undertake an update and provide a report on the Contingent Resources estimated in ATP 855. This report was an update of the report on Contingent Resources estimated in the areas around the Halifax-1 well prepared by DeGolyer and MacNaughton in 2013, results of which were announced by Icon Energy on 26 August 2013. The report prepared by the consultants estimated Contingent Resources as at 31 December 2014 to be as follows: Gross Contingent Resources 1 1C (Bcf) 2C (Bcf) 3C (Bcf) 343 1,572 5,841 Icon Energy’s interest in the above mentioned Contingent Resources is 35.1%. The Contingent Resource estimate was evaluated in accordance with the Petroleum Resources Management System (PRMS) (March 2007). D&M evaluated the well results from Halifax-1, Etty-1, Hervey-1, Redland-1 and Geoffrey-1. D&M utilised core, log and flow test data from the target intervals in these wells to determine whether a significant quantity of potentially moveable hydrocarbons had been encountered. This is a key requirement for a discovery under PRMS. The results of this work showed that the flow rates from all of these wells passed the discovery test. Gas In Place was estimated using the volumetric method and applying a statistical distribution to the parameters including recovery factor. These probabilistic estimates have been made for each target formation and these have been statistically aggregated. The key contingencies include the need for longer flow tests to confirm expected ultimate recovery with certainty, optimization of future well costs, Gas Sales Agreements and connection to production facilities. The size of the area chosen for the assignment of Contingent Resources was based on guidance from PRMS, which indicates that a low estimate (1C) of area should consist of two to three well spacings surrounding the discovery well, a best estimate (2C) of area should be two to three well spacings beyond this, and a high estimate (3C) of area should be another two to three well spacings beyond this. Well spacings vary between 80 acres and 160 acres dependent on the well type applied to address the particular resource. As a result, the 2C resources were estimated over an area of between 6,500 acres and 13,000 acres around each of the five wells tested, depending on the particular formation. The total area of the ATP 855 permit is approximately 414,000 acres. In an ASX release on 29 August 2016 Beach Energy indicated that they had reduced contingent resources associated with the Nappamerri Trough to nil reflecting their opinion that the project is unlikely to be developed commercially in the medium term. Qualified Petroleum Resource Evaluator Requirements The information in this ASX announcement relates to Contingent Resources and is based on information compiled by Mr Martin Berry, Exploration Manager and full time employee at Icon Energy Limited. The Contingent Resources referred to in this release are taken from an independent report by DeGolyer and MacNaughton, a qualified international petroleum reserve and resource evaluation company. Mr Berry is a Qualified Petroleum Reserves and Resources Evaluator, a Fellow of the Geological Society of London and a Member of the American Association of Petroleum Geologists. Mr Berry has over 35 years’ experience in the Petroleum Industry including sufficient experience that is relevant to the company's Reserves and Resources to qualify as a Reserves and Resources Evaluator as defined in the ASX Listing Rules. Mr Berry consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. REVIEW OF OPERATIONS 1. Contingent Resources are those quantities of wet gas (produced gas minus carbon dioxide) that are potentially recoverable from known accumulations but which are not considered to be commercially recoverable due to the need for additional delineation drilling, further validation of deliverability and original hydrocarbon in place (OHIP), and confirmation of prices and development costs. This is based on a statistical aggregation method using Monte Carlo simulation estimates for each formation.