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    ICN   AU000000ICN5

ICON ENERGY LIMITED

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Icon Energy : 2015 Annual Report and Appendix 4G

10/21/2015 | 01:26am EDT

c94dcb98c4d2eddbbc2ae5.pdf


ASX / MEDIA RELEASE

21 October 2015


2015 ANNUAL REPORT


Icon Energy Limited (ASX: ICN) advises that the Company's 2015 Annual Report

was dispatched to Shareholders today.


Icon Energy releases to Shareholders, its current Corporate Governance Statement as found on pages 16-24 in the 2015 Annual Report and Appendix 4G.


The 2015 Annual Report, including the Corporate Governance Statement and Appendix 4G, are attached and can also be found on the Company's website at www.iconenergy.com



Dr Kevin Jih

Executive Director / CFO / Company Secretary

Icon Energy Limited


For more information contact Icon Energy;


Telephone: (+617) 5554 7111

Facsimile: (+617) 5554 7100

Email: info@iconenergy.com

Website: www.iconenergy.com


Page 1 of 1

ANNUAL REPORT 2015

ICON ENERGY LIMITED


NOTICE OF ANNUAL GENERAL MEETING


Icon Energy Limited

2015 Annual General Meeting


Wednesday, 25 November 2015 at 11.00am


The Arts Centre Gold Coast, Lakeside Terrace,

135 Bundall Road,

Surfers Paradise, Queensland 4217


Competent Persons Statement

The information on unconventional contingent and prospective resources in this Annual Report was reviewed by Mr Martin Berry who is a full time employee of Icon Energy Limited and has consented to the inclusion of this information in the form and context in which it appears.

Mr Berry is a Fellow of the Geological Society of London and a Member of the American Association of Petroleum Geologists.


Front Cover:

On location at ATP 855, Condor Energy Services Limited stimulation equipment.


2 ICON ENERGY LIMITED 2015 Annual Report ABN 61 058 454 569


TABLE OF CONTENTS


4 Chairman's Review

  1. Icon Energy Permit Acreage

  2. Operations Report

14 Sustainability Report

16 Corporate Governance Statement

  1. Operational Management

  2. Board of Directors

  1. 2015 Financial Statements and Reports

  2. Directors' Report

38 Remuneration Report

  1. Auditor's Independence Declaration

  2. Independent Auditor's Report

76 Shareholders Information

78 Corporate Directory


ABN 61 058 454 569 ICON ENERGY LIMITED 2015 Annual Report 3

CHAIRMAN'S REVIEW

CHAIRMAN'S REVIEW


The past year has been a very frustrating year for Icon's Directors, management, staff and shareholders. During the year, Icon enjoyed success in the Stage 1 research and development programme in ATP 855 and finished the year with a healthy cash balance in the bank of $13.75 million. The cash balance ensures that Icon will be able to fund its share of the research and development expenses in ATP 855 and exploration activity in other tenements over the next year. This is a financial position not enjoyed by many small oil and gas explorers.


Those successes however have been overwhelmed by the collapse of the oil price in early 2015, which in turn has led to a rapid decline of the share prices of energy companies, including Icon's. It also led to decisions

by many oil and gas companies to slash their capital expenditure and hence make significant reductions in exploration and research activities. Two such companies were our joint venturers in ATP 855, namely Chevron and Beach Energy. The collapse of the oil prices led to the decision by Chevron to withdraw from ATP 855 as part of its world-wide reduction of Capex on exploration activities after a decline in Chevron's world-wide earnings.


The ATP 855 Joint Venture drilled a total of six wells, with five wells stimulated and tested for up to six months. All six wells were gas discoveries. Keppel-1 was not tested


due to technical issues concerning pressure and temperature management and remains suspended for future evaluation. The drilling and testing of the wells represented core experimental activities trialling techniques designed to acquire key data and establish flow characteristics of the various horizons.


In the 2015 year, the new contractor Condor Energy Services assembled new modern stimulation equipment in the USA which was used successfully to stimulate four of the wells. These wells, Hervey-1, Geoffrey-1,

Redland-1 and Etty-1 were all located in areas where the gas bearing sediments behaved with a wide variety of responses which yielded valuable knowledge and understanding of the methods used. The analysis of the results has led to a greater understanding of the basin centred gas accumulation in the Eastern Nappamerri Trough in the Cooper Basin.


In March 2015, DeGolyer and MacNaughton provided Beach and Icon with an update on the Contingent Resources in ATP 855, with a 2C Contingent Resource estimate of 1.57 TCF.1 The 2C Contingent 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, out of a total area of the ATP 855 permit of 414,000 acres.


1The following notes and statements are relevant to these Contingent and Prospective Resource estimates: Icon's equity share of the abovementioned resources is 35.1%;

· The resource estimates were evaluated in accordance with the Petroleum Resources Management System (PRMS);

  • Probabilistic estimates have been made for each target formation and these have been statistically aggregated;

  • Icon confirms that it is not aware of any new information or data that materially affects the information included in the announcements released on 19 June 2014 and 27 March 2015 and that all the material assumptions and technical parameters underpinning the estimates in the announcements continue to apply and have not materially changed.


4 ICON ENERGY LIMITED 2015 Annual Report ABN 61 058 454 569


Pictured: Mr Stephen Barry, Chairman and Non-Executive Director of Icon Energy Limited.


In June 2014, DeGolyer and MacNaughton provided Beach and Icon with a report on the Gross Unconventional Prospective Natural Gas Resources

over the entire area of ATP 855, with a most likely (P50) Prospective Gas Resource of 28.49 TCF.


The Stage 2 program could raise the 2C Contingent Resource to the category of 2P Reserves. This would require demonstration of commercial flow rates, an infrastructure development plan and market contract for the gas. On 26 June 2015, Icon extended the Gas Sales Agreement with Shantou Sino Energy Co Ltd until 30 June 2018. This time frame is now our best estimate for reaching the 2 TCF reserve estimate needed to satisfy Icon's primary contract condition. Stage 2 of the research and development program, subject to Joint Venture approval, will be aimed at progressing towards confirming gas commerciality.


At the end of the 2015 financial year, Icon was in a strong cash position to go forward with Stage 2. Beach Energy has advised that prior to commencing a Stage 2 work programme, a new farmin partner is required to replace Chevron. Icon retains its 35.1% working interest in the ATP 855 Joint Venture.


On 28 February, Icon announced that it intended to undertake an on-market share buy-back (Buy-back) over the next 12 months of up to 10% of Icon ordinary

shares on issue (ie up to 61.9 million shares). The Buy- back provided Icon with an opportunity to strengthen the Company's capital position at a cyclical low point in the resources market and also demonstrates the Board's strong belief in the underlying value of the

Company's assets. Burrell Stockbroking is acting as the transaction broker in relation to the Buy-back and a total of 16,207,299 shares purchased under the Buy-back have subsequently been cancelled.


Elsewhere in the Cooper Basin, Icon has revived a suspended permit area in ATP 594. The permit is located on the highly prospective eastern flank of the Cooper Basin which has been lightly explored in past years. This eastern flank of the Basin contains the Jackson Oilfield, which is the largest oil discovery in Queensland. The significant Kenmore and Bodalla South oilfields lie just to the east of ATP 594. Oil production from the area is a light diesel like crude which is refined in the Eromanga township and diesel distributed from there by IOR Energy Pty Ltd. A refining market exists in the area with the refinery capacity only 55% utilised. The Department of Natural Resources and Mines has renewed the ATP 594 permit for an initial period of four years but with opportunity to apply for renewals of up to a total of twelve years.


3D seismic acquisition is planned in Stage 1 exploration for ATP 594. This is anticipated in late 2015, depending on


ABN 61 058 454 569 ICON ENERGY LIMITED 2015 Annual Report 5

CHAIRMAN'S REVIEW


availability of equipment, monsoon weather conditions and permitting.


In Victoria, Icon's Gippsland tenements comprise PEP 170 which has been awarded to Icon and also PEP 172 and PEP 173, both of which are pending. That acreage remains suspended due to the extended Moratorium on drilling oil and gas wells in Victoria. A commission has been conducting a review of the issues surrounding the Moratorium. A report is to be handed down to the Victorian Government in November 2015.


Icon must wait until the Victorian Government deliberates on the review and decides how future exploration is

to be conducted. In the meantime Icon has prepared several independent reports on the Gippsland onshore area to satisfy part of the Government requirements for permit holders' work plans. Exploration which requires an extensive research and development programme will remain suspended until a clear path forward is established.


Icon remains fully compliant with the laws and


regulations in all Petroleum exploration operations in Queensland, Victoria and South Australia.


Icon would like to thank the Icon staff specialists who were active participants in the ATP 855 research programme and their expert contribution is acknowledged. The Directors wish to thank our

management team and all staff for the work done by them during the last year.


As to the future, Icon has the financial resources and the determination of its management and staff to continue to prove up the resources in its tenements, in order to add value for our shareholders. We have faith in our vision

for the future and look forward to success. We hope to reward your loyalty.


S M Barry Chairman


6 ICON ENERGY LIMITED 2015 Annual Report ABN 61 058 454 569

ICON ENERGY LIMITED PERMIT ACREAGE




Basin

Permit

Block

State

Operator Area

sq/km

% Int.

Cooper/ Eromanga

ATP 594

QLD

Icon Energy

1,230

100.00

ATP 855

QLD

Beach Energy

1,679

35.10

ATP 549 W

West

QLD

Drillsearch

463

33.33

ATP 794 R

Regleigh

QLD

Icon Energy

697

60.00

ATP 794 S

Springfield

QLD

Icon Energy

1,548

60.00

PRL 33-49

Post-Premian Section

SA

Beach Energy

1,601

33.33

Surat


ATP 626


QLD


Icon Energy


758


100.00

Gippsland


PEP 170


VIC


Icon Energy


805


100.00

PEP 172*

VIC

Icon Energy

1,312

100.00

PEP 173*

VIC

Icon Energy

1,223

100.00

* Under Application


ABN 61 058 454 569 ICON ENERGY LIMITED 2015 Annual Report 7


OPERATIONS REPORT


8 ICON ENERGY LIMITED 2015 Annual Report ABN 61 058 454 569


OPERATIONS REPORT



ATP 855 COOPER BASIN, QUEENSLAND

Icon Energy holds 35.1% equity in ATP 855 covering 414,000 acres and is located on the Queensland and South Australia border. The current interests in ATP 855 are Beach Energy (Operator) 64.9% and Icon Energy 35.1%.



Icon Energy, in conjunction with Beach Energy Limited (Operator) 46.9% and Chevron Australia 18%, continued to build on the excellent results achieved in the 2013- 2014 financial year, during which the Joint Venture

(JV) drilled five wells; Keppel-1, Hervey-1, Geoffrey-1, Redland-1 and Etty-1 following on from Halifax-1 well drilled the previous year. All wells drilled were reported as Petroleum Discoveries having exhibited good gas shows, confirming the continuation of the basin-centred gas play in the Nappamerri Trough, in Queensland, with ATP 855 containing the deepest sections of the Trough.

During the year a multi-well stimulation campaign using Condor Energy Services Ltd was carried out on four wells, Hervey-1, Geoffrey-1, Redland-1 and Etty-1. Key target reservoirs were identified for specific zone fracture

stimulation and flow testing in each well. These tests were aimed at gathering information on the contribution from individual target zones, which represented only a proportion of each well's capability.

The campaign commenced at Hervey-1 on 15 September 2014 with the hydraulic stimulation of five zones; one in the Patchawarra Formation, one in the Daralingie Formation and three in the Toolachee Formation.

Hervey-1 was opened to flow on 22 October 2014 and by 29 October the well was flowing at a rate of 0.6MMscf/d with 335psi wellhead pressure through a 22/64' choke. The extended flow test was completed on 28 November 2014 after the flow rate had reduced to 0.2MMscf/d through a 40/64' choke and wellhead pressure of 27psi, and the well was shut in on pressure build up.

Results from Hervey-1 support the working hypothesis that these shallower zones are not as over-pressured in the south easterly part of ATP 855. The component parts of the gas at Hervey-1 were measured at 69% methane and 31% CO2.


The hydraulic stimulation program at Etty-1 commenced on 11 October 2014 with one zone in the Daralingie Formation and three zones in the Toolachee Formation.


Etty-1 was subsequently put on extended flow test from 28 October 2014 with the well reaching a gas flow rate of 0.9MMscf/d and declining to 0.7MMscf/d over a period of 77 days, demonstrating excellent flow characteristics and

better than forecast decline rates. Total flow during this period was 57 million standard cubic feet of gas with a measured methane content of 70% and CO2 content of 30%.


ABN 61 058 454 569 ICON ENERGY LIMITED 2015 Annual Report 9

OPERATIONS REPORT


Test results confirmed that at least 93% of the gas flow was being produced from the single interval stimulation in the Daralingie Formation. This new play has earmarked Etty-1 as a priority target for further appraisal (subject to Joint Venture approval). Etty-1 was shut in on 15 January 2015 on pressure build up.

The hydraulic stimulation at Redland-1 commenced on 28 October 2014 with three zones stimulated in the Toolachee Formation. However, a mechanical issue in the Redland-1 wellbore has prevented the Joint Venture from assessing the deliverability of these zones. The well has now been shut in.

The fracture stimulation program at Geoffrey-1 commenced on 12 November 2014 with four zones in the Patchawarra Formation and one zone in the Epsilon Formation.

Extended flow testing began on 7 December 2014 with Geoffrey-1 reaching a peak flow rate of 1.1MMscf/d via a 12/64' choke and a wellhead pressure of 3,058psi. Gas analysis was measured with a methane content of 75% and CO2 content of 25%.

The hydraulic stimulation and testing program achieved its objective of obtaining diagnostic gas flows and decline rates from specific formations within the Permian sequence.


Summary of ATP 855 Drilling, Stimulation and Testing Results


Well

Halifax-1

Keppel-1

Hervey-1

Etty-1

Redland-1

Geoffrey-1

Total Depth

4,267m

3,898m

4,269m

3,807m

3,804m

4,125m

Gas Shows

Yes

Yes

Yes

Yes

Yes

Yes

Stimulation stages

14

N/A

5

4

3

5


Max. flow rate


4.5MMscf/d

Flowed gas to surface unstimulated

Flow rate of 0.6MMscf/d

Flow rate of 0.9MMscf/d primarily from a single stage

Flow rate of 0.1MMscf/d


1.1MMscf/d

2C Contingent Resources (gross)

Halifax-1, Hervey-1, Etty-1, Redland-1 and Geoffrey-1 1,572 Bcf


Comments

Highest gas flow rate from unconventional shale gas and tight sands well in Cooper Basin

Flowed gas to surface unstimulated

Initial flow rate from 5 stages

Initial flow rate show 93% of gas primarily from the Daralingie Formation

Mechanical issues prevented on going

extended flow test

Flow rate heavily choked back at 12/64' with well head pressure of 3,058psi


On 27 March 2015 Icon announced that Beach Energy Limited, in its capacity as Operator of the ATP 855 Joint Venture, had engaged DeGolyer and MacNaughton, a well-respected and qualified international petroleum reserve and resource evaluation company, 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 in respect of the estimated Contingent Resources attributable to ATP 855 had been disclosed by Beach Energy to Icon Energy, and the estimated Contingent Resources as at 31 December 2014 are as follows:


Gross Contingent Resources1

1C (Bcf)

2C (Bcf)

3C (Bcf)

343

1,572

5,841


1Contingent 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.


10 ICON ENERGY LIMITED 2015 Annual Report ABN 61 058 454 569


OPERATIONS REPORT



Icon Energy's interest in the Contingent Resources is 35.1%.


The Contingent Resource estimate was evaluated in accordance with the Petroleum Resources Management System (PRMS) (March 2007).


DeGolyer and MacNaughton evaluated the well results from recent activities in Etty-1, Hervey-1, Redland-1 and Geoffrey-1 as well as the historical results from Halifax-1. The consultant's 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 penetrated, which 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.


In the report, DeGolyer and MacNaughton stated, 'when compared to the flow rates for Halifax-1 (ASX Release 26 August 2013), the flow rates for the most recent wells (Etty- 1, Hervey-1, Redland-1 and Geoffrey-1) appear much lower and this can be attributed to a reduced number of hydraulic stimulations in the wells and a conservative choke strategy implemented during the most recent flow-testing'.


As a result of this work, DeGolyer and MacNaughton have estimated that the 1C Recoverable Gross Contingent Resource (as at 31 December 2014) in ATP 855 has increased by 25 Bcf, from 318 Bcf to 343 Bcf, the 2C Recoverable Gross Contingent Resource has increased by 943 Bcf, from 629 Bcf to 1,572 Bcf and the 3C Recoverable Gross Contingent Resource has increased by 4,726 Bcf, from 1,115 Bcf to 5,841 Bcf.


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.


On 27 March 2015 Icon announced that Chevron Exploration Australia 1 Pty Ltd (Chevron) would not be participating in Stage 2 in ATP 855 in Queensland. The equity interests in ATP 855 following this decision are Beach Energy 64.9% and Icon Energy 35.1% (unchanged).


Chevron advised Icon that the extensive technical evaluation that the Joint Venture carried out has confirmed a large

gas resource and the potential for further appraisal and development. However, at the time, the opportunity did not align strategically with Chevron's global exploration and development portfolio.


However, the Stage 1 program achieved all the exploration and technical objectives that were set by the Joint Venture partners. This included flowing natural gas from four wells, 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 in ATP 855 and identifying a significant natural gas resource within the Permian formations of the Nappamerri Trough.


The Joint Venture will now prepare a work program for the next phase of activity, which will work towards further defining the resource potential and ultimately progress the project towards commerciality.


Qualified Petroleum Resource Evaluator Requirements


The information in this Annual Report 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 Annual Report 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.


ABN 61 058 454 569 ICON ENERGY LIMITED 2015 Annual Report 11

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Net income 2020 -2,95 M -2,14 M -2,14 M
Net cash 2020 5,42 M 3,94 M 3,94 M
P/E ratio 2020 -1,62x
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Free-Float 59,1%
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