Icon Energy Limited Annual Report 2016

CHAIRMAN’S REVIEW DURING THE PAST YEAR, ICON CONTINUED ITS WORK IN PROGRESSING ITS EXISTING TENEMENTS, APPLIED FOR NEW ACREAGE AND FINISHED THE YEAR WITH A HEALTHY CASH BALANCE IN THE BANK AND NO BORROWINGS. As an explorer, Icon is planning to commence seismic operations in this current year in ATP 594 in the Cooper Basin in Queensland. Icon holds a 100% interest in this tenement and is very optimistic about the oil potential on the eastern flank of the Cooper Basin. This area is home to the Kenmore and Bodalla South oilfields, south-east of ATP 594. The town of Eromanga lies approximately 40 kilometres south of the area and the IOR oil refinery has capacity to take crude oil from new discoveries. Icon will acquire 3D seismic in the tenement as it is a proven tool which is used to identify structural prospects which are now being drilled in the Cooper Basin with high success rates. In October 2015 Icon bid on new tenements offered by the Queensland Government on the eastern flank of the Cooper Basin with excellent hydrocarbon potential. New offerings are normally made within three months of the close of tenders, but as at the time of writing, the results of the 2015 tenders have not been announced. In the Nappamerri Trough of the Cooper Basin, Icon and Beach have submitted a Later Work Program to the Department in relation to ATP 855. The six wells drilled in the tenement have discovered natural gas with a prospective recoverable gas resource estimate in excess of 28 trillion cubic feet (TCF). Icon has an interest of 35.1% in this resource. DeGolyer and MacNaughton reported a 2C contingent gas resource of 1.57 TCF to the Joint Venture surrounding the wells drilled to date. This resource requires further seismic acquisition and drilling in order to move to a proven commercial gas reserve. A natural gas pipeline connects Moomba to the Wallumbilla hub in eastern Queensland, which would assist in potential gas sales if commercial reserves are confirmed. The eastern states gas markets are in short supply, given the startup of LNG production for export from Gladstone’s Curtis Island and cancellation of gas drilling in New South Wales and Victoria. DEAR SHAREHOLDER Icon is currently an explorer for oil and gas and aspires to reach the status of a producer. As a result of the plunging oil price over the last two years, Icon’s share price has suffered along with the share prices of other companies in the oil and gas industry listed on the Australian ASX. The second effect of the fall in oil prices has been a reduction in exploration expenditure. Oil and gas companies across the world have cut expenditure to the bone, particularly exploration expenditure. Over the last year, petroleum exploration expenditure has decreased by more than US$1 trillion per annum worldwide. In Queensland, only one exploration well was drilled in the first six months of 2016. Oil and Gas producers were all struggling to reduce expenditure by concentrating on production at the expense of exploration. There has been some improvement in the situation in recent times. Demand for oil in the northern hemisphere has been strong with 96 million barrels per day consumed worldwide. The supply however is declining at almost 5% per year, resulting in a situation where supply and demand are close to balanced. Oil prices have stabilised around the US$45-$50 level at the time of writing. Prices of oil are expected to reach US$50-$60 per barrel in the next couple of years. LNG gas prices linked to oil will improve but may become increasingly delinked from oil prices. The improvement in oil prices and reduction in volatility of price movements, along with the production decline have brought increasing confidence and investment monies are starting to flow back into exploration and production. 2 ICON ENERGY ANNUAL REPORT 2016 CHAIRMAN’S REVIEW