ICON ENERGY 2011 ANNUAL REPORT

COOPER BASIN -
CORE PROJECT ATP 855P

Beach Energy & Icon Energy reach Farmin Agreement

The Federal Court proceedings between Icon Energy and Beach Energy in relation to ATP855PP were settled on 15 July 2011.

On that same date, Icon Energy signed a Farmin Agreement with Beach Energy in relation to ATP855P.

Under the terms of the Farmin Agreement:
(a) Icon Energy transferred a 40% interest in ATP855P to Beach Energy (subject to DEEDI approval);
(b) Beach Energy will drill a horizontal pilot unconventional well into one of the strata comprising the Roseneath, Epsilon and Murteree sequence, then case and suspend the well, suitable for fracture stimulation (which is expected to occur within 30 days of rig release from the well);
(c) Beach Energy will fund Icon Energy's share of the farmin operations at an estimated cost of $16 million (gross), with the exception of a $1.75 million contribution to be made by Icon Energy;
(d) The cost of fracture stimulation, completing and flow testing the well will be paid by the joint venture parties in proportion to their participating interest shares;
(e) Beach Energy will be recommended by Icon Energy to be the operator of ATP855P; and
(f) Icon Energy will be recommended by Beach Energy to undertake the management of coal seam gas operations in ATP855P.

Pending DEEDI approval of the transfer from Icon Energy to Beach Energy, ATP855P will be held as follows: Icon Energy 40%; Beach Energy 40%; Deka Resources 10% and Well Traced 10%. Deka Resources and Well Traced are both wholly owned subsidiaries of Adelaide Energy.

ATP 855P Icon Energy / Beach Energy Joint Venture

Icon Energy took a strategic decision to harness Beach Energy's established expertise in shale gas exploration and drilling in the Nappamerri Trough so as to expedite operations in ATP855P, in which Icon Energy is to largely be carried, except for a small staged contribution of AUD$1.75 million. Beach Energy also has experience in horizontal drilling and fraccing. Both Icon Energy and Beach Energy are looking forward to a successful joint venture in ATP855P.

Prospective Resource

ATP855P is highly prospective area for oil, coal seam gas and for deep shale gas.

The independent United States Energy Information Administration's World Shale Gas Resources Report (EIA Report) published on 5 April 2011 significantly raised the potential Gas in Place (GIP) in the ATP855P tenement. The EIA Report's "Initial Assessment of 14 Regions Outside the United States" has placed the shale gas resource potential in the Cooper Basin as a whole at 342 TCF of gas, with the recoverable equivalent at some 85 TCF.

Using the EIA's assessment, Icon Energy's internal estimates conservatively place the potential recoverable amount from ATP855P at some 20 TCF.

Assuming the EIA Report is corroborated through drilling operations (expected to commence in ATP855 in June 2012),it is anticipated that the potential of ATP855 alone will be more than sufficient to satisfy the LNG Sales Agreement that Icon Energy signed with Shantou SinoEnergy in March 2011.

Just across the Queensland/South Australian border from ATP855P is South Australian permit PEL 218. Icon Energy holds an interest in the shallow, post-Permian, portion of PEL218 and not in the deep Permian levels of PEL218.

Beach Energy, as operator of the deep Permian levels of PEL218, has recently reported a serious shale gas play in the tenement.

In late 2010 and early 2011, Beach Energy drilled two deep shale wells in PEL218 - Encounter-1 and Holdfast-1. Beach Energy drilled these two wells off-structure to test the basin centred gas potential in PEL218.

Both wells have indicated that there is a thick shale section through PEL218, averaging 240m in depth. This shale section has been extensively cored by Beach Energy and it is understood that technical evaluation of these cores is continuing.

Beach has reported that gas desorption from shale suggests that almost 100 TCF GIP exists in the PEL218 shales. The sands are also gas bearing indicating that there may be a basin centred gas play in addition to the shale play, potentially adding a further 200 TCF GIP to PEL218.

A successful flow test was performed by Beach Energy at Holdfast-1 in PEL218. Holdfast-1 was also fracture stimulated in June 2011 and flow tested in July 2011. Beach Energy has indicated that the Encounter-1 well will be stimulated and flow tested in late 2011.

The Holdfast-1 well flowed up to 2 MMscfd, and Beach Energy has a gas resource of 2 TCF booked for 100km² around Holdfast-1 and Encounter-1 in PEL218. Beach Energy has stated that the potential GIP exceeds 200 TCF in the sands across PEL218.

EIA Report on Shale Gas in the Nappamerri Trough

Source: U.S Energy Information Administration ("EIA") ."World Shale Gas Resources: An Initial Assessment of 14 Regions Outside the United States" April 2011. Independent Statistics & Analysis. US Department of Energy Washington, DC 20585.

The Nappamerri Trough is large (15,000 km²), deep (>10,000 feet), thermally mature, and overpressured, appears to be the most prospective portion of the Cooper basin for gas shale development.

The top Permian horizon reaches maximum depths of over 4,000 meters in the center of the Nappamerri Trough and over 3,000 meters in the Patchawarra Trough. Prospective Permian shales occur at depths of 3,000 to 4,000 meters. Nearly the entire extent of the two troughs appears to be depth-prospective for shale development. Furthermore, relatively little faulting occurs within these troughs.

The stratigraphy of the Cooper Basin is shown in the Shale Gas Cooper Basin with ATP855P Map on the previous page.

Conventional and tight sandstone oil & gas reservoirs are found in the Patchawarra and Toolachee formations, interbedded with coal deposits. These were sourced by two organic-rich complexes: the Late Carboniferous to Late Permian Gidgealpa Group and the Late Permian to Middle Triassic Nappamerri Group, both of which were deposited in non-marine settings. Of the two source rock groups, the Gidgealpa Group appears the more prospective. Most of the gas generated by the Nappamerri Group likely came from its multiple, thin, discontinuous coal seams.

The Cooper Basin also has been Australia's most active area for gas shale leasing and testing. Santos, Beach Energy, Icon, Adelaide Energy and DrillSearch Energy have active shale evaluation programs, though only Beach is known to have drilled a test well. Starting in October 2010 Beach drilled and completed a vertical shale test well in the eastern Nappamerri Trough, thought to be Australia's first dedicated shale test wells. Encounter-1 and Holdfast penetrated 350 meters of REM shales and was drilled to a total depth of 3,612 m, the well penetrated 393 m of REM shale formation with continuous gas shows. The company is analysing five REM cores for gas content and mechanical properties. Beach has conducted a stimulation program in Holdfast-1 and flowed gas at 1.8MMCFPD. Beach has announced gas in place of 1 TCF in Holdfast-1 and 1 TCF in place in Encounter-1."

ATP 855P Icon Energy / Beach Energy Drilling Programme

In August 2011, Beach Energy, as operator of ATP855P, secured the Ensign #65 drilling rig to drill a horizontal pilot unconventional production well in ATP855P.

Beach Energy has stated that the Ensign #65 rig will arrive in Australia from North America in April 2012 and will be ready to commence drilling in ATP855P by no later than June 2012.