Re: IRG Stream Log - INDEPENDENT RESOURCES Cantor Fitzgerald reiterated...

INDEPENDENT RESOURCES Cantor Fitzgerald reiterated its “buy” rating on the stock after the Italian hydrocarbon ministry gave a favourable opinion for accepting the firm’s San Gervasio production concession application. The broker has a target price of 67p, well above the 2.5p range the stock currently trades on. It added that the project would be a “welcome boost to the company’s liquidity position”. This in turn has resulted in a number of interested parties sitting up and taking notice of IRG assets in Italy. The Company's wholly-owned subsidiary Independent Energy Solutions ("IES"), recently completed the FB2 coal bed methane (CBM) well in its target zone present at a depth of 340 m (1100 ft) and executed a test of the coal's productivity in this shallower part of the Ribolla basin (incorporating both the Casoni and Fiume Bruna blocks) . A hydraulic fracture operation coupled with a ceramic proppant, designed to enhance productivity, completed successfully and this was followed by a production test that began on 17 April 2010. In the Company's latest Interim Results, announced on 8 June 2010 IRG reported that initial results from FB2 were due shortly. The Company is pleased to bring these forward. Results from that operation showed that the coal is relatively easy to fracture, producing vertical fractures, and it accepts sufficient quantities of proppant. The gas, desorbed at depth, flowed to surface and was tested to be of high quality, (93-94% of methane, with 1-2% of higher hydrocarbons, 4% nitrogen and only 1% CO2), perfectly suitable for sale, and with very little associated water, minimizing a potentially costly requirement to treat waste water. The carbonaceous formation was found to have 1-2 millidarcies of permeability. Interestingly, the thermogenic gas, formed at high pressure and temperature from the natural cracking of the organic matter in the rock matrix, is found in a rock with insufficient thermal maturity to generate gas. This is significant because it indicates gas migration from deeper in the basin and implies large scale natural permeability. The organic matter in the source rock matrix has demonstrated this coal's capability to produce gas of very good quality. Further analysis suggests the Ribolla coal sequence can be classified as semi-dry. IRG has been able to measure gas desorption from cuttings from the same interval previously cored, reporting similarly high level of desorbed gas, particularly from the carbonaceous shale. IRG has concluded that the Ribolla Carbonaceous Sequence (including the coal and the overlying and underlying shale) responds more like a gas shale than a classic high permeability CBM coal. Accordingly, extra pressure differential (proportional to the vertical distance from the surface to the bottom of the well) is needed to extract the gas at commercial rates. This drives the consequent decision to focus activity in the deeper part of the basin, where much higher drive pressure is present, and where coal and gas shale are interpreted to be at an average depth of 1,000 m. These findings have consequences for the likely development plan which is the current focus of attention since it will drive the next steps. The Company is focusing on a plan that calls for wells with long horizontal sections, likely to be cased, perforated and stimulated each with a multiple stage fracturing job. Broader consequences: A new and extensive organic-rich carbonaceous shale basin The Fiume Bruna project has heretofore been described in terms of a relatively shallow Coal Bed Methane (CBM) play but recent analysis, a new depositional model, and well results indicate that this organic-rich basin is more extensive and likely more productive at depths averaging 1,000 meters (3280 ft). The extent of the deeper part of the basin is interpreted by gravity anomalies, and by available offshore seismic sections located immediately to the SW of the Casoni block. Beyond the positive results from FB2 described above, recent new sources of data have come from the construction of a regional depositional model of the Ribolla basin and beyond. This has allowed IRG to map and analyze this laterally-persistent gas-bearing carbonaceous shale sequence, consistently located immediately above and below the main coal seam. The Casoni and Fiume Bruna blocks cover more than 450 km2 (111,000 acres) and contain more than 140 km2 (35,000 acres) of potentially productive area with a coal plus gas shale sequence at an average depth of 1000 m (3280 ft). The depositional model and the measured data indicates in the entire area an interval of coal and gas shale more than 9 m thick on average, with an average gas content of 4.7 m3/t (152 scf/ton) and an average density of 1.41 g/cm3. The Company has therefore upgraded its previously-announced gross prospective estimates of in-place gas and recoverable gas to 2C Contingent Resources of 8.6 BCM (300 BCF) and 4.6 BCM (160 BCF), respectively. These figures now include both the Fiume Bruna and Casoni blocks. The following table summarizes the change of estimates and the change of resources category over time since IPO in December 2005, excluding any potential for enhanced gas recovery by CO2 injection (ECBM). FIUME BRUNA CASONI TOTAL P(mean) 2C 2C Dec 2005 GIIP (BCF) 212 --- --- 212 PR (BCF) 111 --- --- 111 Jul 2007 GIIP (BCF) 167 --- --- 167 PR (BCF) 92 --- --- 92 Jun 2010 GIIP (BCF) --- 112 188 300 CR (BCF) --- 60 100 160 GIIP = Gas Initially In Place PR = Prospective Resources CR = Contingent Resources This represents an improvement of the gross figures, not only due to the addition of the Casoni license area but also the use of a more appropriate average gas content of the rock based on extensive measurements. The upgrade from Prospective Resources, as it was previously reported, to Contingent Resources, arises from successfully flowing natural gas to surface and is pursuant to the SPE-PRMS* guidelines which the Company uses for its resource estimates. The Company expects to commission a new external Competent Person's Report in due course. Next steps Since the Company's seismic database was acquired for the shallower part of the basin using low-energy seismic acquisition techniques, a test seismic line is planned to determine the best acquisition parameters to map the subsurface carbonaceous stratum in the deeper part of the basin. This will define an appropriate seismic acquisition program that will focus on proving the extent of the basin and siting a well location in the middle of the fairway. The Company will soon commence a detailed bio-stratigraphy study focused on investigating the geological section drilled last year by the FB1 well. Depending on the results of this study and the new seismic, a re-entry of the FB1 well (presently suspended with casing at 224 m depth) is envisaged. IRG believes that an operator's specialized practical experience on a similar shale play would be a great addition to the project. IRG will be updating the market in this regard as news develops. Unconventional Gas in Italy: the Ribolla Basin* Roberto Bencini1, Elio Bianchi2, Roberto De Mattia2, Alberto Martinuzzi2, Simone Rodorigo2, and Giuseppe Vico2 1Independent Resources plc, Rome, Italy ([email protected]) 2Independent Resources plc, Rome, Italy Abstract CBM and Shale Gas production is growing fast and is becoming an important energy source in many countries. CBM is methane produced directly from coal seams. Methane is found adsorbed into the coal matrix and it is produced at low pressure by pumping away any water from the coal seam and stimulating the methane flow through the coal cleats to the well bore. Similarly, Shale Gas is natural gas that is produced by desorption from organic rich clay at low pressure, after multistage stimulation of long horizontal boreholes, often from formations that are less permeable than coal. Independent Resources plc is developing the first unconventional gas project in Italy, at the 100% owned “Fiume Bruna” and “Casoni” exploration licences (Central Italy), where some 300 BCF of natural gas are calculated to be in place, of which 160 BCF are interpreted to be primarily recoverable from the two blocks. The gas is interpreted to be producible from both the coal and the organic rich shale that is associated with the coal seam, at an average depth of approximately 1000 m. Results to date include knowledge that the Miocene age organic rich sequence: - consists of one laterally continuous 9-11 meter thick seam of coal and black shale, - is saturated with thermogenic gas, - is dry, - is able to produce excellent quality natural gas by desorption after stimulation, - has a permeability of 1-2 mD, - responds more like a gas shale than a classic high permeability coal.