Icon Energy Limited Annual Report 2017

REVIEW OF OPERATIONS continued 8 ICON ENERGY ANNUAL REPORT 2017 The Stage 1 exploration program carried out in ATP 855 achieved all exploration and technical objectives. This included flowing natural gas from five wells on test, achieving the highest flow rate of 4.5 MMscf/d from a shale gas well (Halifax-1) in the Cooper Basin, having six Petroleum Discoveries within the permit and identifying a significant natural gas resource within the Permian Formations of the Nappamerri Trough. Following the Government declaring PCA’s over ATP 855, Icon is now progressing evaluation and appraisal of the gas resource, which is located in an ideal position for development in central Australia. The work will involve a series of technical studies and new seismic data acquisition, which are required before Stage 2 appraisal drilling can commence. Icon’s current gas resource estimates within ATP 855, as determined by DeGolyer and MacNaughton, are now 28.5 (P50) Trillion Cubic Feet ( Tcf ) of Unconventional Prospective Raw Natural Gas 1 over the whole permit, and 1.57 Tcf of 2C Contingent Resource 2 determined within defined areas surrounding the five wells already tested. These resource estimates were evaluated in accordance with the Petroleum Resources Management System (March 2007). In its capacity as Operator, Icon assumed the plug and abandonment liability for the Stage 1 exploration program, estimated at $5.23 million and joint venture assets, including inventory and chemicals to the value of $4.89 million. Some of the ATP 855 inventory is held in leased storage and is currently being assessed for consolidation, with some items that will not be used in future activities, to be sold. In addition, a rehabilitation bond of $716,000 was lodged with the DEHP, which is refundable on completion of the well sites. Icon has contracted SGS Services personnel, located at Moomba, to maintain regular inspections on the existing wells in the permit. These inspections are currently being conducted at six weekly intervals. Icon is actively seeking a partner for the next stage of activity in ATP 855 to participate in the evaluation and appraisal of the gas resource and has appointed agents overseas to introduce a new finance investment partner. Icon has confidence that future exploration and appraisal activities could potentially lead to commercial gas reserves being proven within the permit, which could support the domestic market in Eastern Australia and, ultimately, succeed in satisfying the special conditions required to finalise Icon’s Gas Contract with China. REVIEW OF OPERATIONS 1. Icon Energy announced on 19 June 2014, that DeGolyer and MacNaughton, a well-respected and qualified international petroleum reserve and resource evaluation company, estimated that the Unconventional Prospective Raw Natural Gas Resource was 28.5 (P50) Tcf. Unconventional Prospective Resources are defined as those quantities of petroleum that are estimated, as of a given date, to be potentially recoverable from undiscovered unconventional accumulations by application of future development projects. Unconventional Prospective Resources may exist in petroleum accumulations that are pervasive throughout a large potential production area and would not be significantly affected by hydrodynamic influences (also called continuous-type deposits). The estimated quantities of petroleum that may potentially be recovered by the application of a future development project relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons. These Unconventional Prospective Resources are based on probabilistic estimates for each target formation and these have been statistically aggregated. 2. Icon Energy announced on 31 December 2014, that DeGolyer and MacNaughton, a well-respected and qualified international petroleum reserve and resource evaluation company, estimated that, the 2C Recoverable Gross Contingent Resource was 1,572 Bcf or 1.57 Tcf. 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. Image: Moomba to Ballera gas pipeline taken near Keppel-1