ARMOUR ENERGY LIMITED
and controlled entities
ABN 60 141 198 414
Annual financial report
for the year ended 30 June 2019
1
Armour Energy Limited
Contents
30 June 2019
3
Corporate directory
4
Chairmans' report
5
Review of Operations and Activities
31
Directors' report
54
Auditor's independence declaration
55
Consolidated statement of profit or loss and other comprehensive income
56
Consolidated statement of financial position
57
Consolidated statement of changes in equity
58
Consolidated statement of cash flows
59
Notes to the consolidated financial statements - sections
60
Notes to the consolidated financial statements
104
Directors' declaration
105
Independent auditor's report to the members of Armour Energy Limited
110
Tenement listing
Shareholder information 112
2
Armour Energy Limited
Corporate directory
30 June 2019
Directors
Nicholas Mather - Executive Chairman
Stephen Bizzell - Non-Executive Director
Roland Sleeman - Independent Non-Executive Director
Eytan Uliel - Independent Non-Executive Director
William (Bill) Stubbs (retired 27 November 2018) - Non-Executive Director
Karl Schlobohm (alternate director for William (Bill) Stubbs) (appointed 5 September
2018; resigned 17 November 2018)
Company secretary
Karl Schlobohm
Registered office
Principal place of business
Share register
Auditor
Solicitors
Level 27, 111 Eagle Street
Brisbane, QLD 4000
Level 27, 111 Eagle Street
Brisbane, QLD 4000
Link Market Services Ltd
Level 21, 10 Eagle Street
Brisbane, QLD 4000
BDO Audit Pty Ltd
Level 10, 12 Creek Street
Brisbane, QLD 4000
HopgoodGanim Lawyers
Level 21 Waterfront Place, 1 Eagle Street
Brisbane, QLD 4000
Stock exchange listing
Armour Energy Limited shares are listed on the Australian Securities Exchange (ASX
code: AJQ)
Website
www.armourenergy.com.au
Corporate Governance Statement
Armour Energy Limited's latest Corporate Governance Statement can be found on
our website at https://www.armourenergy.com.au/corporategovernance
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Armour Energy Limited
Chairmans' report
30 June 2019
CHAIRMAN’S REPORT
Dear Shareholder
The past 12 months have seen Armour continue to consolidate its position as a consistent producer of oil and gas via its
Kincora Project near Roma in the Surat Basin, Queensland. This is a pleasing result notwithstanding some of the operational,
plant and production well challenges faced by the Company during the year.
Given the favourable state of the Australian domestic east coast gas market, Armour’s short-term plans continue to focus
on the increase in its field and plant production capacity to meet current and forecast market demands. The Company is
aiming to do this by drilling two (2) further production wells in the next 3 months and continuing to refine and iteratively
upgrade the Kincora Gas Plant.
The continued analytical efforts of Armour’s technical team have resulted in the Company having a myriad of oil and gas
exploration and development opportunities within the Kincora project area which it intends to pursue over the short,
medium and longer terms. Further, as a result of Armour successfully being awarded additional tenure via the Queensland
Government tender process aimed at improving or fast-tracking the supply of gas to the domestic market, the Company’s
tenure footprint at Kincora has increased from 2,301 sqkms to 3,484 sqkms over the past 12 months, representing an
increase of Z51%. The exploration opportunities within these new tenement areas are currently being analysed and
preliminary activities have already begun and a fuller work program will extend over the next 12-24 months. As previously
communicated, Armour continues to prepare a range of operational plans and budgets to re-work and re-perforate existing
production wells acquired as part of the Kincora Project package.
Armour has also extended its footprint into its first CSG block with the addition of a 10% interest in the ATP2046 in a Joint
Venture with APLNG. This was a highly sought-after block and will provide Armour with not only diversification of its
portfolio but also a second income stream, with production planned for mid-2021.
With the removal last year of the temporary ban on fracture stimulations by the Northern Territory Government, the
Company was successful in seeking expenditure concessions and time extensions for its NT tenure position. Together with
the adjoining northern Queensland tenements, the Company has an enviable north Australian acreage position which already
contains estimated prospective resources and drill-ready targets. Armour’s McArthur Basin project area represents the
largest and most important part of the Northern, Central and Southern McArthur Basin where the thickest and most oil and
gas prone sections of the McArthur and Tawallah groups are present. The Jemena constructed Northern Gas Pipeline is a
significant enabler for Armour’s upstream gas projects in the Northern Territory. It is expected to provide additional and
large-scale market access for the gas resources identified by Armour and other explorers in the Northern Territory by
connecting this new petroleum province to the growing east coast gas markets.
This year, for the first time, Armour’s Annual Report specifically addresses the potential risks facing the Company in
connection with climate change and / or carbon emission related initiatives. Whilst Armour is currently only responsible
for a very minor proportion of the gas produced in Queensland, it recognizes the increasing level of investor and regulatory
expectation that these matters be addressed and disclosed. The Company will continue to make further progress in this
regard in future periods.
In July 2019, the Board reluctantly accepted the resignation of Roger Cressey as Chief Executive Officer of the Company.
On behalf of the Board, I would like to thank Roger for his for his outstanding contribution to the Company during his eight
(8) year tenure, particularly during the challenging period of re-establishing gas production and plant operations at the
Kincora Project.
Lastly, I would like to take this opportunity to thank my fellow Board members and the Company’s dedicated executive
team for another year of hard work, and also the Company’s shareholders and bondholders for their continued support and
patience during this time. I look forward to further and material progress being made over the next 12 months.
Yours sincerely
Nicholas Mather
Executive Chairman
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Armour Energy Limited
Review of Operations and Activities
30 June 2019
REVIEW OF OPERATIONS AND ACTIVITIES
EXECUTIVE SUMMARY
Armour Energy Ltd (the Company) and its controlled entities (the Group) is focused on the exploration and production
of gas and associated liquids resources.
The 2019 financial year has seen the Group achieve several of its planned strategic milestones as it continues its path
to become one of the Bowen-Surat Basin’s most prominent Oil and Gas producers. As well as completing its first full
year of Operations at Kincora, the Group drilled its first tight gas development wells at Kincora, being Myall Creek 4A
and Myall Creek 5A. Kincora Gas Plant has been fully operational for the year with 91% operational time achieved.
The Kincora wells have been producing steadily and delivered an average of approximately 9TJ/day of sales gas plus
associated liquids, with a peak sales gas production rate of approximately 12 TJ/day in January 2019.
The year also saw the Group increase its acreage position. On the Roma Shelf in the later part of 2018 the Group
added ATPs 2032, 2030, 2041, 2034 and 2035. These exploration blocks further The Group’s position regarding the
multi-TCF deep Permian and Triassic oil and light gas plays along the eastern Roma Shelf. Additionally, the Group
further diversified its portfolio with the addition of a 10% interest (APLNG 90% and Operator) in a CSG block (ATP2046)
in the proven and highly sought after Talinga Field.
Given the Group’s extensive surface and sub-surface assets, the Group is well positioned to bring significant new gas
volumes to market. The Company considers this view to be shared by Government, as demonstrated through the
Federal Government’s Gas Acceleration Program grant award with payment of [$5.4 million] towards the Groups drilling
program, and the State Government’s granting of the above-mentioned exploration acreage in the Bowen-Surat Basin.
The Group is a growing and successful domestic energy producer. In addition to the 9 TJ/d currently being produced
from the Group’s Kincora Project and delivered to Wallumbilla and the East Coast domestic gas market, the Group is
also producing approximately 170 barrels of oil and condensate per day, and approximately 14 tons per day of Liquid
Petroleum Gas (LPG). Oil and condensate is sold ex-Kincora and transported to local Queensland refineries. LPG is
also sold at the Kincora Gas Plant and on-sold mostly in Queensland and in New South Wales and South Australia,
providing energy for transport, heating and agricultural enterprises.
The Group expects to continue to achieve more milestones with our 2019 drilling and workovers program due to kick
off in September 2019. As the Group delivers this program and plans its 2020 work program, it will continue to mature
phases 3 and 4 of the growth strategy.
KEY ACHIEVEMENTS
Surat Basin - Kincora
• Kincora Project – Annual revenue increased to $27.8m, an increase of 88% from $14.75m in the previous
financial year.
• Kincora Project – Phase 1 and 2 of the Group’s growth plan have been successfully completed, with phase
3 progressing and with plans to complete by the end of 2020;
• Kincora Project – An increase of approximately 100% in 2P Reserves, from 61.7 PJ to 123.6 PJ; 255,30
tonnes of liquid petroleum gas (LPG) and 1,228,670 barrels condensate.
• Kincora Gas Plant is now fully operational with a processing capacity of up to 20 TJ/day, with plans to
increase capacity to 30 TJ/day in the mid-term.
• The Myall Creek 4A well – drilled, stimulated and connected to production for commercial sales, the 4A well
initial rate was 1.7 MMCFD and is currently flowing 0.6 to 0.8 MMCFD.
• The Myall creek 5A well – drilled and connected to production for commercial sales from its secondary target
which has proved to be gas prone and water wet. This secondary target will be isolated and plans to
hydraulically stimulate the wells in its primary targets are completed and this work is expected to be
implemented in Q4 2019.
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Armour Energy Limited
Review of Operations and Activities
30 June 2019
Surat Basin – Exploration
• Kincora Exploration awards during the period:
o ATP2030 – comprises 365 square kilometres and is contiguous with Armour’s petroleum license PL71 and
also the Ungabilla block ATP2029
o ATP2032 – comprises 318 square kilometres, is allocated as a domestic gas block, and is immediately
adjacent to Armour’s existing northern production licenses
o ATP2041 - comprises 457 square kilometres, is allocated as a domestic gas block, it is immediately adjacent
to Armour’s existing production licence PL71 and also adjacent to recently granted Santos & Shell (50:50
JV) block
o ATP2034 - comprises 30 square kilometres and is nearby Armour’s existing production license PL71
o ATP2035 - comprises 12 square kilometres and is nearby Armour’s existing production license PL71
• ATP754 which was held in Joint Venture with Ausam (Bounty) has been split into two blocks, ATP2028
adjacent to PL71 now being 100% Armour, and ATP2029 remains a 50/50 JV tenement. In July 2019,
Armour submitted PCA application over these tenements
•
the Group now holds in excess of 4,000 square kilometres of exploration tenements in the Bowen-Surat Basin.
Exploration Block - ATP2046
• The Armour Energy Limited Joint Venture with APLNG was awarded Australia’s first tenure to be allocated
to the supply of gas exclusively to Australian Manufacturers – ATP2046. Armour Energy holds a 10% JV
interest in the tenure, with APLNG as Operator of the block. The block is strategically positioned in the
Talinga Gas Field, 22km south of the town of Chinchilla and adjacent to the APLNG’s Talinga Gas and Water
Processing Facilities. It is expected that production from this highly sought-after tenure will likely commence
in mid-2021
• Early development and production opportunities providing diversity of production and 2nd revenue stream.
Uganda
• The Kanywataba oil exploration license was granted to Armour Energy Limited in September 2017. The
block is located on the Albertine Graben at the southern end of Lake Albert and is considered highly
prospective. Over 6.5 billion barrels of oil in place has been discovered in the Albertine Graben in Uganda.
• An arrangement between Armour Energy Ltd and DGR Global was implemented, with DGR taking a majority
interest of 83.18% with an obligation of carrying the work program for the first two years.
• Activities for the first year of exploration under the license have been completed, including desk top hydrocarbon
studies, purchase of previously gathered seismic data and reprocessing of same, plus soil sampling for
geo-chemical analysis.
• Activities for the second year of exploration under the license is under way nearing completion and includes
just over 100 kms of 2D seismic.
• Application for renewal of the block was submitted when due in June 2019, and renewal is anticipated in early
September that will provide a further 2 year exploration period in which it is planned that an oil well will be
drilled subject to the outcome of the current 2D seismic program and funding.
Corporate
• Under the Gas Acceleration Program (GAP) funding agreement, Armour has received $5.4 million in funds
from inception to 30 June 2019.
• Execution of a $6.8 million environmental bonding funding facility with Tribeca Global Natural Resources
Credit Fund.
• A fully underwritten Accelerated non-renounceable Rights Issue raised $10.1 million in funds through the
issue of 101 million new shares.
• Establishment of a $55 million corporate bond facility arranged by FIIG securities, used in part for early
redemption of the existing convertible notes.
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Armour Energy Limited
Review of Operations and Activities
30 June 2019
SUSTAINABILITY
Social and Corporate Responsibility
During the year, the Group invested in additional resources across multiple disciplines of Corporate, Subsurface and
Geology, Operations, Land Access and Health and Safety. The Group now has 52 employees, of which 7 are women.
The additional resources were required to support the Kincora Project and assist with achieving the milestones set out
in the Group’s growth strategy.
Where possible, the Group will recruit local businesses, contractors and employees that can support the Kincora Project.
A strong presence in the Roma and Surat communities is a key focus for the Group, including fostering positive
relationships with other key stakeholders such as land owners, governments and community groups.
Health, Safety and Environment
For the 2019 financial year, the Kincora Gas Project recorded 1 recordable incident and 1 prescribed incident. Armour
Energy has not received any formal notices or penalties from regulatory authorities during the period but is still waiting
for Regulator close out in regard to the prescribed incident (small uncontrolled gas leak)
Regulator Inspections of our Operating sites by the Department of Natural Resources, Mines and Energy (DNRME)
has not determined any regulatory noncompliance and the group continues to work with the regulators to meet
obligations.
As of June 2019, the company TRIFR (Total Reportable Incident Frequency Rate) was 11.9 with work continuing to
return TRIFR to 0 by the end of 2019.A third-party audit of the Armour Energy HSEQMS (HSE Management System)
for alignment to AS:4801 was completed with actions being progressed as part of continuous improvement.
The Group’s operations are subject to environmental regulation under federal and state legislation. For the year ended
30 June 2019, the Kincora Project recorded one reportable environmental incident which has been closed out with no
formal notices or penalties being received from a regulator in regard to Armour’s activities. An inspection by the
Department of Environment and Science returned no significant findings.
The Group has focused on improving environmental management across the Kincora Project through the continued
improvement of our environmental management system in order to assure that the Group continues to meet all
environmental obligations. Baseline environmental studies for groundwater and soil contamination have been
completed with no significant impacts detected and air emission testing has demonstrated compliance with the
Environmental Protection Policy Air (EPP Air) air quality objectives.
Climate Change Disclosure
Armour recognises that the world is transitioning to a low-carbon future, and that climate change is an important
political, social, environmental and commercial issue. In addition, the Company recognises the increasing level of
investor and regulatory expectation that the particular risks faced by the Company – and its stance generally on
climate change issues – will be addressed in its Annual Report.
Armour is well positioned to contribute to a lower-carbon future through the production and supply of natural gas.
This stems from the fact that emissions from the combustion of natural gas per unit of energy produced are
approximately 40% lower than coal. Furthermore, natural gas can significantly improve air quality in urban centres
due to its comparative negligible particulate and Sulphur Oxide emissions, together with low Nitrogen Oxide
emissions. Natural gas is also an advantageous fuel for baseload and supplemental power generation supporting
the increasing renewables sector, as gas-fired generation can be triggered from zero to full production in minutes and
is 50% less carbon-intensive than coal-fired generation.
Whilst gas is a complimentary, transitional fuel supporting intermittent renewable energy generation, it is also
important to note that natural gas is also used as a feedstock for many other applications including heating in foundry’s
and furnaces, plastics and petrochemicals, fertilisers and food manufacturing for which there are limited other viable
alternatives.
Armour is currently responsible for only <0.01% of the natural gas produced and sold in, and exported from,
Queensland. However, the Company is committed to making a contribution to a lower-carbon future through the sale
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Armour Energy Limited
Review of Operations and Activities
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of its natural gas products (as above) as well as the reduction of its own carbon footprint.
The vast majority of the Company’s gas-related infrastructure components (gas plant, gas pipelines, well-heads,
compressors, and associated field equipment) are essentially “legacy assets” acquired from Origin Energy as part of
the overall acquisition of the Kincora Gas Project near Roma in Queensland, which was completed in 2016. Based
on the operation and maintenance of these assets during its period of ownership, Armour has established the
following initiatives to reduce emissions and environmental impact:
• Reduction of “fugitive emissions” via leak management and preventative maintenance programs;
• Optimisation of the plant to run more efficiently;
• Replacement on a needs-basis of old items of plant and equipment with newer items which are less prone
•
to gas leakage, breakdown and are more energy efficient;
The development of the Kincora Stack Emission Monitoring Program to provide baseline air emission data
for assessment against EPP Air regulatory emission framework. Results show that emissions are below the
EPP Air Quality Objectives;
• A program of regular and risk-based inspection and maintenance tasks designed to mitigate leakage from
all plant, equipment and infrastructure. This includes the implementation of a Pipeline Integrity Management
System; and
The responsible and progressive remediation of petroleum facilities that have reached the end of their lives
to enable the return of land to the landholder in a condition which complies with all relevant environmental
and regulatory requirements.
•
Furthermore, Armour minimises its impact on land and waterways in relation to development and exploration activities
by undertaking the following:
• Assessment of regional and local aquifers to characterise the geochemistry of formation water prior to and
during initial stages of exploration and development activities;
• Ongoing baseline monitoring of groundwater quality to detect any changes during and after the cessation of
exploration and development lifecycles;
• Assessment & survey of local ecological communities within and around our development, exploration and
production tenements, and the implementation of innovative approaches to negate and reduce footprint and
avoid vegetation clearing; and
• Staying educated on improved and innovative environmental technologies that could have the greatest
potential for reducing overall energy consumption during the exploration and development lifecycles.
Notwithstanding the favourable landscape for the ongoing production and sale of natural gas as outlined above,
Armour anticipates that its activities may be subject to increasing regulation and costs associated with climate change,
and/or the management of carbon emissions. The Company is committed to understanding and managing the current
and emerging regulatory, reputational and market-related risks of climate change to its operations. The Company’s
Executive Team and Audit & Risk Management Committee continue to undertake a detailed review of the
recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) for any further or more detailed
disclosures required for future reporting periods. However, the Company’s view is that there are currently no climate
change related risks which are material enough to warrant disclosure in the Company’s current period Financial
Statements. This includes the potential regulatory, transitional and physical risks associated with climate change.
The Company is also conscious that other social consensus-based issues connected with climate change and
environmental stewardship may impact its operations and cost structures into the future. These are dynamic issues
which will need to be monitored and considered in the context of the Company’s decisions regarding the use of its
capital, the nature and longevity of certain assets and operations, the safety and security of its workforce, and the
interests of its broader stakeholders and the communities in which it operates. At this stage, there have been no
direct impacts on Armour’s operations or assets connected to these issues, other than the gas and hydraulic fracturing
moratoriums imposed by the Victorian and Northern Territory Governments.
No financial impacts have been recorded in the current period by Armour in relation to these initiatives as:
•
•
The Company’s project equity interests in the state of Victoria are currently carried at a nil value, having
been written down in an earlier period; and
The Government of the Northern Territory has now lifted its moratorium and granting the Company an
extension of time for it to complete its exploration activities, together with reductions in its financial
commitments related thereto.
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Armour Energy Limited
Review of Operations and Activities
30 June 2019
Armour is committed to making further progress in relation to climate change disclosure and reporting in future
periods, as well as the continued monitoring and improvement of operational and sit issues connected with the issues
highlighted above.
STRATEGY AND PROGRESSION
The Group has focused on a 4-Phase growth strategy centred around the Kincora Project on the Roma Shelf, and is
working to deliver against the target milestones. To date, Phases 1 and 2 have been completed, with the current Phase
3 progressing, albeit slower than anticipated toward reaching our target of 20 TJ/d. The Group currently has gas
production and sales of 9 TJ/ day from its existing wells and Newstead Gas Storage Facility. Gas sales are currently
to Australia Pacific LNG under the Group’s existing Gas Sales Agreements for gas volumes of up to 3.65PJ/a. With an
existing agreement to access Run 2 on APA’s Wallumbilla facility at up to 30 TJ/day, any new production as wells
come onstream can be quickly commercialised. In addition to gas sales, the Group’s production and sales of oil,
condensate and LPG provides a revenue uplift of approximately 30% on gas sales.
The Group’s 4-phase growth strategy is presented below. In summary it shows that Phases 1 and 2 have been
completed, Phase 3 is the current focus being to increase production and revenues, and Phase 4 being future growth
opportunities is currently being considered and planned. The current Phase 3 focus of increasing production involves
drilling of new wells and looking to improve production from existing wells.
The Myall Creek 4A well has been drilled and is flowing an average of 0.6 to 0.8 MMCFD. Myall Creek 5A well has
been drilled and connected for commercial sales from its secondary target which has proved to be gas prone, but water
wet. Plans to connect the well to its primary target via the most optimum completion method have been developed and
this work is expected to be implemented in Q4 2019 or early Q1 2020. Elements of Phase 4 are being planned,
specifically with respect to infrastructure development and production development across existing Petroleum Leases,
and also exploration in Authorities to Prospect (ATPs) that include new high-resolution 3D seismic surveys.
Figure 1: Armour’s 4 Phases of Growth plan.
Of benefit to the Group, the East Coast gas market currently has a shortage of supply and independent reviews forecast
this shortage to continue. The Group aims to take advantage of this position and to achieve its goal of 20 TJ/day, in
the near term.
According to the Australian Energy Market Operator (AEMO) – Gas Statement of Opportunities 2019, the Eastern
Australia Gas Market (AEGM) is, based on current, industry supplied data, is tightening and will reach a shortage
point at some time in 2023. This shortage is reported to be due to a reduction in Victoria’s gas reserves, reducing the
State’s ability to export gas into New South Wales and South Australia.
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Armour Energy Limited
Review of Operations and Activities
30 June 2019
This reduction in exports is forecast to put increasing pressure on Queensland to increase production, in line with the
southern States demands from as soon as 2021. While Queensland producers have advised that drilling and
production is increasing, production rates are remaining steady. To meet the requirements of the southern states,
Queensland and Northern Territory production will need to increase by 17% beyond 2018 levels
Beyond the predicted shortage generated from the ongoing increase in demand, and potential shortfall in supply,
AEMO has also noted that there is a significant need to continue exploration activities requited to convert continent
resources (2C) and Prospective resources (3C) to reserves. This will require an increase in exploration expenditure
and funding. Again, the Groups exploration acreage associated with the Roma Shelf, North Queensland and Northern
Australia will potentially have greater significance to the domestic market.
The Group’s infrastructure is well located and accesses the Wallumbilla Hub. The Group can also trade its non-
contracted gas on the South East Queensland Gas Supply Hub where there is an active market for daily, weekly and
monthly quantities of gas.
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Armour Energy Limited
Review of Operations and Activities
30 June 2019
FINANCIAL PERFORMANCE
The 2019 financial year has been a step change for the Group with its first full year of operations at the Kincora
Plant and this is reflected in a 88% increase in revenues from the sales of Gas, LPG and condensate from the
Group’s Kincora Gas Plant.
Gas sales from the Newstead Storage facility commenced in September 2017, and gas from field production from end
December 2017. The Group has a four-phase strategy for growth, with the commencement of 9 TJ/day gas sales in
phase 3 achieved in February 2018. Current gas production is predominantly from existing wells with liquid rich gas,
therefore providing LPG and condensate by-products which are contributing strongly to sales
revenue. Armour
expects to continue our significant increase in revenues over the next financial year as we progress through phase 3 of
our growth strategy and upcoming work programs.
The Group generated sales of $27.8 million during the year ended 30 June 2019, which represents an increase of
$13.05 million from the prior year. A gross profit from operations of $8.8 million, up from $3.97 million in the previous year
was achieved, which was offset by the main expenditure areas of general and admin, financing costs, and pre-production
costs and income tax, giving a total loss after income tax for the Group of $11.7 million.
Sales Revenue ($MMs)
Sales Gas (TJ)
Condensate (Bbls)
LPG (Tonnes)
Oil (Bbls)
Total Sales Revenue
FY19
$19.8
$4.1
$2.6
$1.3
$27.8
FY18
$11.1
$1.4
$1.3
$0.9
$14.8
Change
78.4%
192.9%
100.0%
44.4%
87.8%
• Gas Production in FY 2018 began in September 2017 and reflects only 10 months of production.
• Condensate production began in March 2018 and reflects only 4 months of production.
•
LPG production began in February 2018 and reflects 5 months of production.
The loss for the year includes the following significant items:
• Sales of gas, condensate, LPG and crude oil from the Kincora project.
• Cost of goods sold of $19.0 million represent Kincora operating costs
• Financing costs of $13.6 million mainly represents interest expense, establishment costs of new
facilities, and amortisation expense relating to convertible notes and loan facilities. In March 2019,
Armour early redeemed its convertible notes which generated accounting adjustments in the P&L of $3.7
million.
• Other expenditure items are consistent in nature from the prior year and include employment expenses,
legal, marketing, regulatory and compliance, and general administrative costs. General and
administrative costs are higher than the previous year due to a growing workforce.
Assets
Total assets increased by $14.9 million from $101.5 million to $116.4 million, and include:
• Cash and cash equivalents of $9.2 million;
• Other current assets, including Receivables & Inventory of $5.0 million;
•
Financial assets comprising cash-backed security deposits and bank guarantees of $10.5 million;
• Exploration assets of $49.3 million, which primarily consists of the Group’s Northern Territory and
North Queensland assets; and
• Oil and Gas assets of $42.3 million which comprise all the land, licences and physical assets within the
Kincora Project.
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Armour Energy Limited
Review of Operations and Activities
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Liabilities
Total liabilities increased by $15.2 million from $56.7 million to $71.8 million, and include:
Trade payables, leases and other miscellaneous of $4.5 million;
•
• Corporate Bond facility, Tribeca Loan facility and lease liabilities, including accrued interest payable of
$58.7 million;
• Rehabilitation provision of $6.7 million and the present value of the deferred consideration payable to
Origin Energy relating to the purchase of the Kincora Project of $1.9 million.
Equity
Total equity remained static at $44.8 million, and include:
• Higher contributed equity of $10.1 million resulting from equity raisings during the period October to
December 2018;
• Lower reserves due to a number of changes, including the change in fair value of the Group’s
shareholding in Lakes Oil NL of $1.5 million (net of tax), and the reclassification of the convertible note
reserve to accumulated losses; offset by new reserves relating to the Group’s Tribeca loan facility.
Increases in accumulated losses reported for the period.
•
Cashflow
The Group reported net cash outflow from operating activities of $0.98 million for the period. The Group expects to be
in a positive operating cashflow position going forward, with gas sales expected to steadily increase from the current
rate of 9 TJ/d toward our target of 20 TJ/d.
Cashflows from investing activities primarily represents payments for the Group’s development wells at Myall Creek
4a and Myall Creek 5a. This expenditure was offset by the receipt of the Gas Acceleration Program grant funding
from the Federal Government of $3.4 million (including GST).
Cashflows from financing activities relate to the receipt of funding under equity raisings and corporate bond facility /
convertible note borrowings, offset by transaction costs and payment of convertible note interest. The Group has a
$12.9 million increase in financing activities for the year, due primarily to the issue of the Corporate Bond Facility of $55
million and the repayment of the convertible notes of $43.4 million.
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Armour Energy Limited
Review of Operations and Activities
30 June 2019
OPERATIONS REVIEW
Kincora Project – First Full Year of Operation
The Group has completed its full year of operations at Kincora. After five years in care and maintenance by Origin
Energy as the previous operator, the Kincora Gas Plant was recommissioned by the Group during the 2018
financial year. This began with the dry gas circuit coming into production with gas from the Newstead storage
facility in September 2017, and the wet gas circuit or LPG circuit operational at the end of December 2017. Since
then, the Group has been focused on increasing production and in February 2019 achieved a daily production of 13
TJ/day. The Group’s aim is still to produce up to 20 TJ/d, but this now anticipated to be in 2020, as opposed
to 2019 as originally envisaged, and will come from increased production through drilling new wells and potentially
increased production from existing wells following workovers.
Importantly, the Group is well positioned in relation to South East Queensland market and has existing production and
pipeline infrastructure in place. Future production wells strategically drilled close to existing in-field infrastructure can
be rapidly connected into the east coast pipeline network, which is a big positive for the Company and all stakeholders,
including investors and shareholders.
During the period the group drilled 2 development wells, being Myall Creek 4a and Myall Creek 5a. the results of these
are noted below.
Production and Revenues from the field production of gas and associated liquids has been increasing year on year
and the production of all gas, associated liquids and oil has increased. The Kincora Gas Plant has been fully
operational for the year with 91.6% availability.
Production Rates
Sales Gas (TJ)
Condensate (Bbls)
LPG (Tonnes)
Oil (Bbls)
FY19
3,267
42,163
4,475
14,072
FY18
1,928
16,106
2,262
8,358
Change
69.4%
161.8%
97.8%
68.4%
• Gas Production in FY 2018 began in September 2017 and reflects only 10 months of production.
• Condensate production began in January 2018 and reflects only 6 months of production.
•
LPG production began in January 2018 and reflects 6 months of production.
Gas production has been consistent over the period with a peak of 12 TJ/day in January. Work is ongoing to
increase production toward our strategic targets.
Development Wells
Myall Creek 4A well (100% owned, PL511)
The Group’s first production well in the Kincora Field Development Program was the Myall Creek 4A (MC4A) well which
has been located and designed on the basis of the Myall Creek 3D survey, historical well data, the application of
modern extraction techniques, deep (>1800-meters) tight gas sandstone geology in a liquid rich trend and proximity to
existing infrastructure.
The MC4A was successfully drilled in June 2018 and penetrated through the regional Triassic aged Snake Creek
Shale seal into the prognosed 300-metre gross Triassic and Permian gas charged window at 1848 metres depth.
Significant quantities of hydrocarbons were subsequently recorded between 1848 metres and the top of the Basement
at 2148 metres.
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The regionally productive Triassic Sandstones, Showgrounds Sandstone and Rewan Formation, had gas shows of
4% to 60%, and the targeted Permian Tinowon and Wallabella sandstones had gas shows of up to 100%. Gas
chromatograph readings recorded a liquid (condensate and LPG) rich gas composition.
In August 2018, the Group successfully completed the multi-stage hydraulic stimulation program on the well within the
highly prospective sandstone intervals of the Permian and Triassic formations below 1850-metres. The aim of this
extraction program was to enable commingled production from stacked hydrocarbon saturated Triassic and Permian
sandstones.
Instantaneous gas rates varied between approximately 0.6 MMCFD and 1.7 MMCFD on various choke settings during
flow back/slugging through 4-1/2-inch casing.
In mid-September 2018 a static gradient survey was taken in the wellbore and recorded bottom-hole pressures
consistent with over-pressured virgin reservoir conditions. Bottom-hole flowing pressures from the unconventional tight
gas sands to the wellbore through the application hydraulic stimulations are under analysis. Additional data from actual
sales production is needed to characterize the effectiveness of well flow performance versus hydraulic stimulation
design.
MC4A was brought online in October 2018. During May 2019 a workover was undertaken to isolate formation fluids
from entering the well and to improve the production performance. This involved the installation of packers and sliding
sleeves to allow for selective access to the most productive zones in this well. Immediately following the workover,
the well was returned to production and delivered a stabilised rate of 500,000 Mscf/d from two of the productive
zones, being the Black Alley and the Tinowon B. Production is currently 0.6 MMCFS to 0.8 MMCFD Further testing
is planned from the remaining zones which could increase production and sales from this well. Subsequent plant
operational issues have delayed the testing of the production zones which is now planned to occur in late Q3 / early
Q4.
Myall Creek 5A well (100% owned, PL511)
The Easternwell Rig 101 commenced drilling on [1 November 2018] and well was planned to be drilled to a total
vertical depth of 2,355 metres. During drilling, a section of the drill collars above the jars in the bottom hole assembly
(BHA) became stuck due to differential sticking and caused drilling to stop. Operations to retrieve the BHA were not
successful. The well was fully cemented back to the 9-5/8” casing shoe, and a side-track drilling operation executed.
The well was successfully drilled through the production zone to 2244.5 metres depth. During drilling of the production
zone, good shows of gas were observed through the over pressured Permian sandstones. Based on mudlog data,
pressure data and wirelines logs the reservoir production zone is proved to be saturated with liquid rich
hydrocarbons. The initial results from the logging of the Myall Creek 5A (MC5A) well indicated that hydrocarbons
were present in the Triassic Rewan Basal Sandstones a secondary target and the prolific Permian Tinowon
Sandstones.
Armour connected MC5A into the Kincora gas pipeline network and tested the Basal Rewan formation to determine
if the zone was commercial. The Basal Rewan sand is a secondary target and only one of four gas production targets
identified in this well. The primary targets being the Black Alley and Tinowon Formations. The assessment of the
Basal Rewan zone, post perforation, confirmed Armour’s initial geological prognosis of good porosity and excellent
permeability, with an initial short-term flow rate of 2 million standard cubic feet per day (2MMscf/d) from the Basal
Rewan. However, this production was not sustained due to formation water production and the well was subsequently
shut in.
Armour has since developed a design for hydraulic stimulation of the primary targets for this well, being the regional
tight gas formations within the Black Alley and Tinowon Formations. Both the Upper and Lower Tinowon Formations
are virgin over‐pressured, with low to moderate permeability, and are known hydrocarbon bearing formations.
Stimulation is targeting an increase the total hydrocarbon recovery from the well. The stimulation of the primary target
zones is planned to be carried out in Q4 2019.
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Kincora Exploration – Expanding Footprint in Key Area
Since the Group’s acquisition of the Kincora Project from Origin in 2015/2016, it continues to review, develop detailed
databases and models from the significant volumes of subsurface information and building on new knowledge
regarding the prospectivity across the Roma Shelf region, including the eastern flank of the current tenure held at the
time of the acquisition. As a result of these studies, Armour issued expressions of interest to the Queensland
Government seeking release of acreage for further exploration.
As a result, over the last 12 months the Group has been successful in expanding its footprint on the Roma Shelf in
the Bowen-Surat Basin. The Group sees this acreage as instrumental in the fulfilling the company’s objectives and
will support ongoing exploration and development of the petroleum resources of this area within the Bowen-Surat
Basin.
Armour was notified by the Queensland Department of Natural Resources, Mines and Energy that it is the preferred
tenderer for Area PLR201718-2-4. This area is considered highly prospective for gas and liquids, and Armour’s 100%
owned gas pipeline infrastructure – Pipeline License No. 20 (PPL 20) traverses the newly awarded exploration block.
The award of the tenure adds to the Company’s commitment to the further development of oil, gas and liquids from
the Roma Shelf, supported by ongoing strong demand for gas in the East Coast Energy Market.
Armour was also awarded the Authority to Prospect No. 2032 (ATP2032). The Company has been notified by the
Queensland Department of Natural Resources and Mines that it now holds 100% of ATP2032 which is located
immediately to the north of Armour’s PL22 and within proximity to the Kincora Gas Plant.
The Authority to Prospect 2032 covers 318 square kilometres or 105 sub-blocks over the prospective Bowen-Surat
Basin. The ATP was awarded with the condition that gas produced will be for supply to the Australian domestic
market only, which aligns with Armour’s current production from the Kincora Gas Plant into the Roma to Brisbane
Gas Pipeline.
ATP2032 is immediately adjacent to Armour’s existing production licences and associated infrastructure, meaning
that any commercial discovery within the tenure could be readily connected to Armour’s Kincora Gas Plant and thus
to into Queensland’s domestic market.
Additionally, the Group was notified by the Queensland Department of Natural Resources, Mines and Energy this it
has been formally awarded the exploration acreage ATP2030 to Armour Energy.
The tender area comprises 365 square kilometres and is contiguous with Armour’s petroleum licenses and the
Ungabilla block on ATP2029 (refer map per Figure 5).
ATP2030 connects Armour’s PL71 and ATP2029 creating a significant acreage position incorporating an immense
volume of over-pressured, continuous hydrocarbon-saturated tight Triassic and Permian reservoir section that is
being developed by Armour (Figure 7). This commercial play type is deep, detectable and in recent years Armour
has been the only company to have issued expressions-of-interest to the Queensland Department of Natural
Resources based upon the technical capabilities and correct operational approach to develop the resources in
conjunction with the Kincora Gas Plant.
Kincora Deep Gas Play
Historically Bowen-Surat Basin operators have relied solely on structural/stratigraphic conventional production; circa
1500m to 2100m depth ranges. Exploitation of these conventional gas and oil traps over the past 50-years have
identified a significant underexploited tight gas resource window down-dip of the mature commercial fields that are
sourced from the deep Taroom Trough. Connected directly up-dip (and down-dip of the mature fields) to the Taroom
Trough source rock kitchen, is an immense wedge of hydrocarbon saturated over-pressured continuous Triassic-
Permian tight gas play and located beneath portions of Armours 100% operated Bowen-Surat acreage along the
western flank of the Roma Shelf (per figure 4)
This commercially detectable liquid-rich underexploited regional gas play has only recently been discovered through
the utilization of 3D seismic technologies and hydrocarbon stimulation results from Armour’s commingled Myall Creek
4A and 5A wells drilled in 2018. Recently acquired Authorities-to-Prospect (ATPs) granted by the Queensland
government, circa 2017, 2018 and 2019, and certain existing acreage are being brought forward for new high
resolution 3D seismic surveys that will commence in Q2-Q3 2020.
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In 2019 Santos & Shell formed a JV and was awarded an ATP that immediately offsets Armour’s Myall Creek Field.
This JV seeks to exploit and mirror Armour’s commercial tight sandstone gas play and Black Alley Shale play success
discovered at Myall Creek in 2018.
Armour has significant acreage running room to exploit this play at depths that are achievable with in-country
mechanical equipment and contractors; circa 2100m to 4000m. This new regional play currently has an area
estimated at approximately 10,000-km2. Hydrocarbons can be immediately tied into existing infrastructure and sales
through the Kincora Gas Plant. Growth potential of this play could underpin the next volumes of LNG spec-gas and
domestic supply. Coupled with reported existing reserves and resources, this new play could fuel Armour’s future
growth and reserve replacement for several decades. Armour is seeking farm-in partners and in discussions with
Major Australian operators to advance this potential multi-TCF play.
Figure 4: West-East diagrammatic cross-section of Bowen-Surat Basin across Armour
Energy’s regional acreage position
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Figure 5: Map showing Armour’s Roma Shelf, Surat Basin leases including new awards in the financial year.
Kincora Reserves and Resources Upgrade
During 2018 Armour continued work on the geological and engineering studies across the Kincora Project as well
as the drilling of additional wells in Myall Creek and restarting production in the Parknook area. The results of
these studies, new wells and the restarting additional existing wells have contributed to an independently
assessed and verified 2P reserves increase of 56% since Armour’s last reported reserves increase on 30 October
2018.
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These reserves have been evaluated in accordance with the Society of Petroleum Engineers – Petroleum
Resource Management System (SPE-PRMS) guidelines and are shown as follows in Table 1.
Total Reserves Myall Creek (1)
Estimated Total Gas (BCF)
Estimated Total Gas (PJ)
LPG (C3 C4) Yield (Tonne)
Condensate (C5) Yield (Bbl)
1P
34.8
39.6
81,770
393,524
2P (1P+2P)
3P (1P+2P+3P)
108.7
123.6
255,303
1,228,670
258.5
294.0
607,019
2,921,336
Table 1. Armour Energy reserves as per 31 December 2018
Notes:
•
•
•
•
•
•
•
Petroleum reserves are classified according to SPE-PRMS.
Petroleum reserves are stated on risked net basis with historical production removed
All reserves are listed 100% Armour (reserves exclude Waldegrave JV area)
Petroleum Reserves have no deduction applied for gas used to run the process plant estimated at 7%.
BSCF = billion cubic feet, PJ = petajoules, bbls = barrels, gas conversion 1.137 PJ/BCF.
1P = Total Proved; 2P = Total Proved + Probable; 3P = Total Proved + Probable + Possible.
LPG Yield 2065 tonnes/petajoule, Condensate Yield 9938 barrels/petajoule
Table 2. Armour Energy gas reserves growth as per 31 December 2018
This latest reserves upgrade increases the full year (Dec 17 to Dec 18) 2P gas reserves by 100% confirming the
ongoing and increased viability of the Kincora Project. This is further supported by recent announcements noting
that:
• Armour has progressed to firm contracted gas supply with Australia Pacific LNG (APLNG) from its
Kincora Gas Project (ASX announcement 6 Dec 18);
•
Formal award of additional petroleum acreage near Armour’s Kincora production facilities, as part of its
Roma Shelf project (ASX announcement 21 Dec 18);
• Armour commences sales to the Queensland spot gas market (ASX announcement 21 Jan 19).
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This latest reserves upgrade confirms Armour’s position as having significant uncontracted gas that will support the
Company’s production growth during 2019 to our targeted 20 TJ/d and well into the future.
The Company also notes that revenues from liquids sales provide an uplift of approximately 25% on top of gas
sales. This latest reserves upgrade also notes an increase in 2P condensate reserves of 100% over the year Dec
17 to Dec 18, as shown in the following table.
Table 3. Armour Energy condensate reserves growth as per 31 December 2018
Additionally, the Group’s independent expert, SRK Consulting (Australasia) Pty Ltd, has estimated 5.1 PJs 2C, 18.6
PJs 3C and Best Estimate 40 PJs Prospective Resources1 in the overlying Triassic Rewan Formation in the Myall
Creek Field.
As part of the Myall Creek drilling campaign, new wells will be completed for production from both the Permian Tinowon
and overlying Triassic Rewan Formation, as these formations appear to represent one continuous 300 metre saturated
hydrocarbon interval beneath the regional Snake Creek Shale seal. The Rewan Formation 2C and 3C Contingent
and Best Estimate Prospective Resources are categorized primarily due to a lack of connected wells to
compression in the field, historical poor well design and historical production techniques. Currently, the Rewan
Formation is completed open-hole in the Company’s Horseshoe-3 and connected to sales in the Myall Creek Field.
The recommended well program in the Myall Creek Field may include the Triassic Rewan in the hydraulic completion
strategy with the Permian Upper and Lower Tinowon, where applicable. Any testing, completions and flows of
hydrocarbons would move
the current Rewan Contingent Resources to a 1P-2P-3P Reserves, Prospective
Resources to a Contingent status and sustainably update the Reserves and Resources in the Myall Creek Field.
1 The estimated quantities of petroleum that may potentially be recovered by the application of a future development
project(s) related 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.
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The Group’s independent resource auditor SRK supports the proposed stimulation and completion programs over
the Rewan and Tinowon Formation sandstones and believes the Group’s operations are aligned to achieve good
individual well production rates over the longer-term life of the field. SRK recommended testing and completion of
the Rewan Formation to progress the Resources to Reserves subject to economic production being achieved.
Upon success of flowing hydrocarbons from the Rewan Formation, SRK will consider this reservoir more generally
aligned with similar locations within the Myall Creek 3D area and that using the current well design the Rewan
Formation should be added into the Myall Creek Field Development Plan.
Technical Statement – Petroleum Reserves
The Group’s reported Bowen-Surat Basin Reserves in February 2019 which documents total petroleum net
Reserves classified in accordance with SPE-PRMS guidelines and ASX listing rules.
The independently verified Reserves Update Report compiled by SRK Consulting (Australasia) Pty Ltd details a high
degree of confidence in the commercial producibility of Permian, Triassic and Jurassic aged reservoirs previously
discovered and produced in operated granted petroleum licenses using 2D-3D seismic, historic and modern well data,
reservoir pressure data, electric logs and rock properties from chip & core samples, gas composition analysis,
hydraulic stimulation results, analysis of historical well production, decline curve analysis, offset field production data
and prior production data from wells before the Kincora Gas Plant was shut-in by the previous operator, Origin Energy.
The reported Reserves are used in connection with estimates of commercially recoverable quantities of petroleum
only and in the most specific category that reflects an objective degree of uncertainty in the estimated quantities
of recoverable petroleum. The Petroleum Reserves are reported net of fuel and net to the Group to the APA
Group metered sales connection to the Roma to Brisbane Pipeline (Run 2) at Wallumbilla and the report discloses
the portion of petroleum Reserves that will be consumed as fuel in production and lease plant operations. The Group
will be using calibrated metering and gas chromatographs at the Kincora Gas Plant as a reference point for
the purpose of measuring and assessing the estimated petroleum Reserves from the produced gas.
The economic assumptions used to calculate the estimates of Petroleum Reserves are commercially sensitive to
the Kincora Project. The methodology used to determine the economic assumptions are based upon strategic
objectives that include, but not limited to, new drills, workovers, recompletes and surface facility modifications to
ramp up to and maintain a 20 TJ/day production profile for 15 years. The ramp up from current production at 9
TJ/day to 20 TJ/day is planned to be achieved by first half of 2019. The sanctioned development model includes a
starting and ending monthly schedule of working/net interest capital expenditure to develop and maintain the
petroleum Reserves, operational expenditure to develop and produce the Petroleum Reserves, fixed Petroleum
Reserve prices under-contract and escalated Petroleum Reserve futures based upon Wallumbilla Hub prices,
tax/royalty sensitivities, revenue from gross and net petroleum production yields and cash flow from petroleum
production yields and summation of discounted cash flows.
The Petroleum Reserves are located on granted petroleum licenses with approved environmental authorities
and financial assurances. The Group has a social license to operate and relevant surface access agreements are
in-place. The Group is the owner and operator of the Kincora Project and PPL3 sales gas pipeline which connects
the Kincora Gas Plant to the Wallumbilla gas hub via the connection agreement with APA. The Group holds
granted Petroleum Licenses over the reported estimates of Petroleum Reserves, associated gathering and field
compressors. The basis
for confirming the commercial producibility and booking of the estimated petroleum
Reserves is supported by actual historic production & sales and/or formation tests. The analytical procedures used
to estimate the petroleum reserves were decline-curve analysis to 50 thousand cubic-feet-day, historic production
data and relevant subsurface data including, formation tests, 2D-3D seismic surveys, well logs and core analysis
that indicate significant extractable petroleum.
The proposed extraction method of the estimated Petroleum Reserves will be through approved conventional drilling
and, where applicable, hydraulic stimulation techniques to accelerate production, commingle the productive zones
and extract volumes from tight gas zones. Wellbores will be cased and cemented with a high-pressure wellhead
completion. Petroleum will be recovered through 2-3/8” production tubing and gathered to field compression sites for
delivery to the Kincora Gas Plant.
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Petroleum Leases(2)
Main Fields/Site Name
Group Working
Interest (%)
JV Partner Working
Interest (%)
PLs 21, 22, 27
PL 264
ATP 647
PLs 14, 53, 70
PL 227
PL 511
PL 71P
PL 71E
ATP 754
PL 30
PL 512
Kincora Project Area
Emu Apple Oil
Myall Creek East
Kincora Project Area
Horseshoe
Myall Creek
Parknook (Production)
Parknook (Exploration)
ATP 754
Riverslea
Major Field
PCA(A) 157
Weribone Pooling Area
PCA(A) 157
Bainbilla Pooling Area
100%
100%
100%
100%
100%
100%
100%
100%
50%
90%
84%
50.64%
24.75%
Bounty ‐ 50%
AGL ‐ 10%
AGL ‐ 16%
AGL ‐ 28.71%; Senex ‐
20.65%
AGL ‐ 75.25%
PLs 10W, 11W, 12W, 28,
69, 89, 320W, 321
PL 11 SC East Exclusion
Zone
Waldegrave
46.25%
Southernpec ‐ 53.75%
Snake Creek
25%
Southernpec ‐ 75%
Table 4 – Kincora Project Petroleum Tenures
Technical Statement – Contingent Resources
A. Triassic Rewan Formation Contingent Resources in the Myall Creek Field
The Group engaged the services of SRK Consulting (Australasia) Pty Ltd to provide independent expert reports
on
the operated Resources and Prospective Resources associated within the Company’s 100% working
interest petroleum licenses PL 227 and PL 511 (Myall Creek 3D area) in the Kincora Project reported on 14 May
2018, (Table 5). These Contingent Resources are in addition to the Myall Creek Reserves.
Resources Rewan Formation, Myall Creek Field (4)
Estimated Net Total Gas (BCF)
Estimated Net Total Gas (PJ)
LPG Yield (Tonne)
Condensate Yield (BBL)
1C
1.3
1.4
2,832
13,630
2C
4.8
5.1
10,457
50,326
3C
17.6
18.6
38,343
184,529
Table 5 – Bowen-Surat estimated net aggregated quantities of Contingent Resources
Table 5 Notes:
1. Contingent Resources are classified according to SPE-PRMS.
2. Contingent Resources are stated on a risked net basis with historical production removed.
3. Contingent Resources are stated inclusive of previous reported estimates.
4.
Petroleum Reserves have no shrinkage applied, estimated to be 5%.
5.
BCF = billion cubic feet, LPG = liquefied petroleum gas, PJ = petajoules, kbbl = thousand barrels, kTonne = thousand tonnes;
Conversion
1.055 PJ/BCF.
6.
7.
1C = Total Proved; 2C = Total Proved + Probable; 3C = Total Proved + Probable + Possible.
LPG Yield 2065 tonnes/petajoules, Condensate Yield 9938 barrels/petajoules.
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ATP2046
Armour announced earlier in the year that the Queensland Department of Natural Resources, Mines and Energy
(DNRME) had awarded Authority to Prospect - ATP2046 to a Joint Venture between Armour Energy Limited (10%)
and Australia Pacific LNG Pty Ltd (APLNG) (90% and Operator) – see Figure 6. APLNG is a Joint venture between
Origin, Conoco Philips & Sinopec.
ATP2046 is an 18km2 coal seam exploration tenure located 22km south-west of Chinchilla and adjoins APLNG’s
Talinga Project. The block was part of the first national tender where gas has been designated to be supplied
exclusively to a manufacturer, an initiative by the Queensland Government. This block is understood to have been
highly contested due to high production rates from the blocks surrounding it. The APLNG/Armour JV anticipates first
production to be achieved around mid-2021.
Figure 6 – Location of Authority to Prospect – ATP2046
Under the Joint Venture, Armour will have access to APLNG’s extensive geological/sub-surface knowledge of the
tender area (due to it being directly adjacent to the APLNG Talinga field) which will allow the Joint Venture to expedite
development and deliver gas from the exploration block. Gas production will have direct access to the domestic gas
market through APLNG’s existing gas processing and water management facilities and infrastructure located
immediately adjacent in the Talinga field.
As a part of the the Joint Venture, APLNG will operate the tenure, however both parties are able to independently
market their proportion of produced gas. Based on ATP2046’s close proximity to APLNG’s Talinga Gas Plant, it is
antipated that the gas will have an existing path to market, and Armour is in the process of identifying potential gas
customers that satisfy the condtions of the tenures, specifically the clasification of a “maufacturer” as set out in the
bidding process.
Australia Pacific LNG is a large supplier of gas to the East Coast domestic market, providing approximately 30% of
the total volume of gas sold into the domestic market in 2018 and has long term domestic contractual commitments
until year 2042. Armour has an established relationship with APLNG having implemented in 2016 a flexible Gas Sales
Agreement (GSA) for the supply of up to 3.65PJ/a from Armour’s Kincora Gas Project to APLNG. Up to 10TJ/day is
currently being supplied by Armour to APLNG.
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Northern Territory & Northern Queensland
Northern Territory
In September 2016, the Northern Territory Government (NTG) announced a moratorium on hydraulic fracturing of
onshore unconventional reservoirs including the use of hydraulic fracturing for exploration, extraction and production.
In April 2018 the Chief Minister of the Northern Territory announced that the moratorium was lifted, and all 135
recommendations made in the final report of the independent Scientific Inquiry into Hydraulic Fracturing of Onshore
Unconventional Reservoirs in the Northern Territory will be adopted. In a further media release in July 2018, the
Northern Territory Government released its plan to implement those recommendations. Since then the NTG has
implemented legislation and policies addressing several of the inquiry recommendation and as a result, exploration
activities have re-commenced in the Territory by Origin and Santos.
As a result of the inquiry and moratorium, Armour has sought suspensions, extensions and variations to the work
programs of its granted tenements in the Territory. It is anticipated that approval of these suspensions, extensions
and variations will be received in the coming months. Following receipt of approvals, the Group intends to resume
exploration activities and res-establishing its social license in the areas.
Figure 7 – Northern Territory acreage
The Group’s McArthur Basin project area represents the largest and most important part of the Northern, Central
and Southern McArthur Basin where the thickest and most oil and gas prone s e c t i o n s of the McArthur and
Tawallah source rocks are present. Figure 8 shows the deep oil and gas plays within the McArthur Basin that the
Group intends to resume exploration of during phase 3 of the Groups growth strategy.
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Northern Queensland
Figure 8 – McArthur Basin deep oil and gas plays
ATP 1087 is the Group’s 100% owned highly prospective shale gas play in the Isa Super Basin, with 18.7 TCF best
estimate prospective gas resources2 (refer table 6), well understood rock properties of up to 11% Total Organic Content,
and stacked play opportunities.
The Group has drilled 6 wells to date in ATP1087, including the Egilabria-2 well, which was an Australian first of
achieving flows from a hydraulically stimulated lateral well in shale. The Group has acquired extensive seismic and
other geological data during its tenure and has drill ready targets to achieve large scale production in the future.
Plans for ATP1087 within the Group’s phase 3 growth strategy includes appraisal work to establish commercial flow
rates, and to acquire further seismic data and drill an exploration well deeper into the basin.
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Figure 19 – Isa Super Basin
The Group’s 100% owned Northern Australia acreage best estimate prospective gas resource within shale formations
is 57 TCF2, refer table 6 below. The estimated quantities of petroleum that may potentially be recovered by the
application of a future development project(s) related 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.
The Group is actively seeking farmin partners to assist in the exploration and development its northern Australian
tenements – across the NT and north Queensland.
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Table 6 – Best estimate prospective gas resources (recoverable) – NT/QLD combined.
Refer ASX release of 21 September 2015 for full details
TABLE 6 FOOTNOTES- RESOURCE REPORTS
(1) MBA Report, Conventional and Unconventional Prospective Resource Estimate EP 171 & EP 176, NT, October 2011
(2) D&M Report, Prospective Resources Attributed to Certain Prospects in Various License Blocks, NT, April 2013
(3) SRK Report, Coxco Dolomite Resource Evaluation Batten Trough, McArthur Basin, EP 171, 176, 190, NT, November 2013
(4) MBA Report, Unconventional Prospective Resource Assessment, ATP (A) 1087, QLD, November 2011
(5) SRK Report, SRK Report, Conventional and Unconventional Resource Assessment of the Wollogorang and McDermott Formations – Tawallah
Group, NT, September 2015
(6) SRK Report, Lawn Hill Formation Prospective Gas Resources ATP 1087, QLD, September 2015
(7) SRK Report, Riversleigh Siltstone Formation Prospective Gas Resources ATP 1087, QLD, September 2015
Uganda project
The exploration activity on the Kanywataba block has progressed including soil sampling and Iodine testing, basin
study analysis work and 2D seismic design in preparation for the 2D seismic survey planned to be carried in Q3 prior
to the end of the first exploration period which ends in September 2019. The application for license renewal for the
second exploration period was submitted in June as required.
The Group has a 16.82% interest in the Kanywataba block, and DGR Global, a major shareholder in Armour,
holds the other 83.18% interest in the entity. Until the time of transfer to a project specific company, or if such transfer
does not occur, the Company and DGR Global have agreed that the beneficial interest in the Kanywataba
Block will be split 16.82% the Company and 83.18% DGR Global.
In consideration for the beneficial interest split DGR Global has agreed to meet tenement expenditure and work
program commitments for the first 2-year period of exploration and indemnify the Company for these costs. The
expenditure commitments agreed to by DGR are to fund US$873,000 for a Performance Guarantee, US$442,000 to
complete the grant of the lease and US$1.98m for years 1 and 2 exploration commitments.
The Kanywataba block is located at the southern end of Lake Albert in the Albertine Graben where approximately 115
wells have been drilled, and 101 wells encountered hydrocarbons delivering an 88% success rate on economic
discoveries. To date, discoveries in the Albertine Graben total approximately 6.5 billion barrels of oil initially in place,
with estimated recovery being 1.5 billion barrels and oil being light to medium gravity (30-35 API) with associated wet
and dry gas. The Albertine Graben is a Rift Basin, a geological formation known to host a third of the world’s oil
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Armour Energy Limited
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reserves and similar geology to the Gippsland Basin in Victoria, Australia. The Albertine Graben is considered to
provide world class reservoir qualities, multiple reservoirs and less than 40% of the Albertine Graben has been
evaluated. Production licenses have been awarded to Total, Tullow and CNOOC on blocks to the north of the
Kanywataba block, on the east coast of Lake Albert.
Map Source - DGR Global Website - http://www.dgrglobal.com.au/dgr-uganda
Based on the Highly Prospective Oil Columns Kanywataba Block internal report dated 13 September 2017, the
Group has assessed the prospectivity of the block and estimates low, best and high unrisked prospective oil resource
to range from 646 to 969 MMBBLS3 of oil in place across 7 prospects each with stacked reserves. The Group
considers the main resource risk to be potential loss of hydrocarbon charge, and on that basis considers prospects 2
and 3 to represent the most prospective targets.
3 The estimated quantities of petroleum that may potentially be recovered by the application of a future development
project(s) related 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.
27
Armour Energy Limited
Review of Operations and Activities
30 June 2019
Kanywataba Block
Prospect Number
Stacked 1
Stacked 2
Stacked 3
Stacked 4
Stacked 5
Stacked 6
Stacked 7
SUM ALL PROSPECTS
Unrisked Prospective Oil Resource
Estimate (MMBLS)
Low
479
86
59
1
2
13
7
646
High
719
128
89
2
3
19
11
969
Best
599
107
74
2
2
16
9
808
Table 7 – unrisked prospective oil resource estimates
TABLE 7 FOOTNOTE
Competent Persons Statement
Resource estimates have been compiled from data provided by the Company’s Chief Geologist, Mr Luke Titus. Mr Titus’ qualifications include a
Bachelor of Science from Fort Lewis College, Durango, Colorado, USA and he is an active member of AAPG and SPE. Mr Titus’ has over 20 years of
relevant experience in both conventional and unconventional oil and gas exploration in various international hydrocarbon basins. Mr Titus has sufficient
experience that is relevant to Group reserves and resources to qualify as a Reserves and Resources Evaluator as defined in the ASX Listing Rules
5.11. Mr Titus consented to the inclusion in this report of the matters based on his information in the form and context in which it appears.
Cautionary Statement - The estimated quantities of petroleum that may potentially be recovered by the application of a
future development project(s) 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.
A crude oil export pipeline is under construction from the Hoima District (centrally located in the Ugandan oil
discoveries region) to the port of Tanga in Tanzania with completion targeted in 2020. Also, the Government of
Uganda is negotiating the construction of a refinery to provide petroleum products for Uganda and its regional
neighbours.
CORPORATE ACTIVITIES
Gas Acceleration Program
In the previous financial year Armour Energy (Surat Basin) Pty Ltd (Armour Surat) executed an agreement with the
Federal Government under the Gas Acceleration Program (GAP) for a total of $6 million. GAP provides grants to
businesses to accelerate direct investment in onshore natural gas projects and provides funding on a cost-contribution basis
of up to 50% of a participant’s eligible drilling costs. Armour Surat was awarded a GAP grant of $6m which it expects to
provide approximately 40% of its costs for the drilling, completion (including stimulation) and connection c os ts for its 4
well Kincora Area Development Program scheduled to be completed by June 2019.
Armour Surat received the initial GAP grant payment of $2.3 million (net of GST) in June 2018, with subsequent
payments of $3.1 million (net of GST) received by Armour up to 30 June 2019 at completion of project milestones.
Tribeca Facility
As disclosed in last year’s financial report, the Company and subsidiary, Armour Surat entered into a credit facility
agreement (Tribeca Facility Agreement) with Equity Trustees Limited (in its capacity as the trustee of the Tribeca Global
Natural Resources Credit Fund) and Tribeca Global Natural Resources Credit Master Fund (together Tribeca) for
the provision by Tribeca of an environmental bonding finance facility to Armour Surat (the Tribeca Facility).
The Tribeca Facility is secured by a guarantee from the Company, a second ranking specific security over two (2) bank
accounts controlled by Westpac Banking Corporation (the Credit Accounts) in the name of Armour Surat, and a second
ranking featherweight security interest over all of the present and after- acquired property of Armour Surat. The Credit
Accounts contain the funds against which Westpac Banking Corporation has issued unconditional bankers’
undertakings in favour of the State of Queensland, to guarantee the environmental obligations of Armour Surat to the
Department of Natural Resources and Mines (DNRM). The Tribeca Facility may be paid down through monies in the
Credit Accounts as and when the banker’s undertakings expire or are returned by the State of Queensland.
28
Armour Energy Limited
Review of Operations and Activities
30 June 2019
The Tribeca Facility will provide Armour Surat with a source of further working capital to facilitate its continued
development of its Kincora Gas Project. The Tribeca Facility has a 9% per annum coupon rate payable by the Company
quarterly in arrears on amounts drawn and in addition, the Company has agreed to grant to Tribeca 41,000,000 unlisted
options to subscribe for ordinary shares (Options) with an exercise price of A$0.166. The Options will expire on the third
anniversary of the first drawdown date under the Tribeca Facility. As at the date of this report, the Group has drawn all
eligible funds from the loan facility, with a loan balance of $6,759,200.
Non-Renounceable Entitlements Offer
In September 2018 the company completed an Accelerated Non-Renounceable Entitlements Offer to both institutional
and eligible retail shareholders, on the basis of 1 new fully paid ordinary share for every 4 shares held at an issue price
of $0.10 per share (New Share), to raise approximately $10.1 million (before costs of the entitlement offer). The
Entitlement offer consisted of an entitlement offer to institutional shareholders and raised approximately $2.65 million
and an entitlement offer to retail shareholders, which raised approximately $3.27 million. The underwriter, Samuel
Holdings Pty Ltd (as Trustee), placed the shortfall amount of $4.21 million.
Corporate Bond Finance Facility / Redemption of Existing Convertible Notes
During the period the Group raised $55 million via the issue of secured and amortising notes (the New Notes). The
offering for the New Notes was managed by FIIG Securities Limited (FIIG). The Proceeds from the issue of the New
Notes was applied to the redemption of all the existing Convertible Notes on issue with the balance retained for working
capital and field program expenditure.
The New Notes were issued at the same time as the redemption of the existing Convertible Notes in order to provide for
a smooth transition of the underlying security arrangements.
For more information on the terms and conditions of the notes, please refer to Armour’s announcement on 19th March
2019 for full details.
Private Placement
On 23 September 2019 the Company announced the successful close of a $4 million private placement via the allotment
of 80 million shares at a price of 5 cents per share. Investors will also receive one (1) unlisted option exercisable at 8
cents per share (through to 30 September 2023) for every two (2) shares subscribed for in the placement. The proceeds
of the private placement will be used by the Company to progress its Kincora Project field program, meet the costs of the
raising, and for general working capital purposes.
Competent Persons Statement
Consents
The resources information in this report are based on, and fairly represent, data and supporting documentation prepared
by, or under the supervision, of Dr Bruce McConachie. Dr McConachie is an Associate Principal Consultant of SRK
Consulting (Australasia) Pty Ltd and has a PhD (Geology) from QUT and is a member of AusIMM, AAPG, PESA and
SPE. The Resources information in this ASX announcement was issued with the prior written consent of Dr McConachie
in the form and context in which it appears.
Resource reviews were carried out in accordance with the SPE Reserves Auditing Standards and the SPE-PRMS
guidelines under the supervision of Mr. Luke Titus, Chief Geologist, Armour Energy Limited. Mr. Titus qualifications
include a Bachelor of Science from Fort Lewis College, Durango, Colorado, USA and he is an active member of AAPG
and SPE. He has over 20 years of relevant experience in both conventional and unconventional hydrocarbon exploration
& production in the US and multiple international basins. Mr. Titus meets the requirements of qualified petroleum reserve
and resource evaluator as defined in Chapter 19 of the ASX Listing Rules and consents to the inclusion of this information
in this release.
SPE-PRMS
Society of Petroleum Engineer’s Petroleum Resource Management System - Petroleum resources are the estimated
quantities of hydrocarbons naturally occurring on or within the Earth’s crust. Resource assessments estimate total
quantities in known and yet-to-be discovered accumulations, resources evaluations are focused on those quantities that
can potentially be recovered and marketed by commercial projects. A petroleum resources management system provides
a consistent approach to estimating petroleum quantities, evaluating development projects, and presenting results within
a comprehensive classification framework.
PRMS provides guidelines for the evaluation and reporting of petroleum reserves and resources.
29
Armour Energy Limited
Review of Operations and Activities
30 June 2019
Under PRMS
“Reserves” are those quantities of petroleum which are anticipated to be commercially recovered from known
accumulations from a given date forward. All reserve estimates involve some degree of uncertainty. The uncertainty
depends chiefly on the amount of reliable geologic and engineering data available at the time of the estimate and the
interpretation of these data. The relative degree of uncertainty may be conveyed by placing reserves into one of two
principal classifications, either proved or unproved. Unproved reserves are less certain to be recovered than proved
reserves and may be further sub-classified as probable and possible reserves to denote progressively increasing
uncertainty in their recoverability.
“Contingent Resources” are those quantities of petroleum estimated, as of a given date, to be potentially recoverable
from known accumulations, but the applied project(s) are not yet considered mature enough for commercial development
due to one or more contingencies. Contingent Resources may include, for example, projects for which there are currently
no viable markets, or where commercial recovery is dependent on technology under development, or where evaluation
of the accumulation is insufficient to clearly assess commerciality. Contingent Resources are further categorized in
accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity
and/or characterized by their economic status.
“Prospective Resources” are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from
undiscovered accumulations by application of future development projects. Prospective Resources have both a chance of
discovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of
certainty associated with recoverable estimates assuming their discovery and development and may be sub-classified
based on project maturity.
Previous reported information on the Contingent Resources in this report relate to Armour Energy’s Surat Basin PLs and
ATPs is based on an independent review conducted by RISC Operations Pty Ltd (RISC) 2015 Independent Technical
Specialist Report Roma Shelf dated 30 September 2015 and SRK Consulting (Australasia) Pty Ltd Myall Creek Contingent
Resources Report PLs 227 and 511 (19 July 2016) and SRK Consulting (Australasia) Pty Ltd PL 71 Contingent Resources
Report- Parknook, Namarah and Warroon area (19 July 2016) and Armour Energy Target Statement dated 7 October 2015
related to Armour Energy’s Surat Basin PLs and ATPs is based on the Annexure A - Independent Expert Report review
conducted by BDO Corporate Finance (QLD) Ltd and fairly represents the information and supporting documentation
reviewed.
All the material assumptions and technical parameters underpinning the estimates in the relevant market announcement
continue to apply and have not materially changed.
The estimated quantities of petroleum that may potentially be recovered by the application of future development project(s)
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.
The estimates referred to in this report relating to the Kincora Project Reserves and Resources Upgrades are based on
the following reports.
Reports:
AEP021_Armour Surat Basin Reserves Update_Rev1, May 14, 2018 AEP022_Armour Basal Rewan Contingent
Resource Estimation_Rev2, May 14, 2018 AEP022_Surat Prospects and Leads Resources_Main_Rev1, May 14, 2018
AEP022_Surat Prospects and Leads Resources_ATP754_Rev1, May 14, 2018 AEP022_Surat Prospects and Leads
Resources_ATP1190_Rev1, May 14, 2018
AEP022_Surat Prospects and Leads Resources_PL71 Exploration_Rev1, May 14, 2018
30
Armour Energy Limited
Directors' report
30 June 2019
The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'Group') consisting of Armour Energy Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it
controlled at the end of, or during, the year ended 30 June 2019.
Directors
The following persons were Directors of Armour Energy Limited during the whole of the financial year and up to the date of
this report, unless otherwise stated:
Nicholas Mather
Stephen Bizzell
Roland Sleeman
Eytan Uliel
William (Bill) Stubbs (retired 27 November 2018)
Karl Schlobohm (alternate director for William (Bill) Stubbs) (appointed 5 September 2018; resigned 17 November 2018)
Information on Directors
The details of the Directors in office during the year and at the date of this report (unless otherwise stated) are as follows:-
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Nicholas Mather (appointed 18 December 2009)
Executive Chairman
BSc (Hons, Geol), MAusIMM
Mr Mather's special area of expertise is the generation of and entry into undervalued
or unrecognised resource exploration opportunities. He has been involved in the junior
resource sector at all levels for more than 25 years. In that time he has been
instrumental in the delivery of major resource projects that have delivered significant
gains to shareholders. As an investor, securing projects and financiers, leading
exploration campaigns and managing emerging resource companies, Mr Mather brings
a wealth of valuable experience.
DGR Global Limited
Dark Horse Resources Limited
Aus Tin Mining Limited
Lakes Oil NL
Sol Gold Plc, which is listed on the London Stock Exchange (LSE) and Toronto
Exchange (TSX)
IronRidge Resources Limited, which is listed on the London Alternative Investment
Market (AIM)
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Executive Chairman, Member of the Remuneration Committee
3,647,968
1,500,000
31
Armour Energy Limited
Directors' report
30 June 2019
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Stephen Bizzell
Non-Executive Director
B.Comm, MAICD
Mr Bizzell is the Chairman of boutique advisory and funds management group Bizzell
Capital Partners Pty Ltd.
Mr Bizzell was previously Executive Director of Arrow Energy Ltd, from 1999 until its
acquisition by Shell and Petro China for $3.5 billion in August 2010. He was
instrumental in Arrow Energy's corporate and commercial success and its growth from
a junior explorer to a large integrated energy company. He was also co-founder and
Non-Executive Director of Bow Energy Ltd until its takeover for $0.55 billion in January
2012. He has had further experience in the unconventional oil and gas sector as a
Director of Dart Energy Ltd.
Mr Bizzell qualified as a chartered accountant and early in his career was employed in
the corporate finance division of Ernst & Young and the Corporate Tax division of
Coopers & Lybrand.
Renascor Resources Limited (formerly Renaissance Uranium Limited)
Stanmore Coal Limited
Laneway Resources Limited
Strike Energy Limited
Former directorships (last 3 years): Diversa Limited (resigned 6 October 2016)
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
UIL Energy Limited (resigned 27 December 2018)
Chair of the Audit and Risk Committee; Member of the Remuneration Committee;
Member of the Health, Safety and Environment Committee
1,659,051
1,500,000
Roland Sleeman
Independent Non-Executive Director
B.Eng (Mech), MBA
Mr Sleeman has 34 year's experience in oil and gas as well as utilities and
infrastructure. Mr Sleeman has served in senior management roles, including with
Eastern Star Gas Limited as Chief Commercial Officer and AGL as General Manager
of the Goldfields Gas Pipeline.
Mr Sleeman has extensive engineering and business experience including negotiation
of gas sales agreements that provided a foundation for development of the North West
Shelf Project, commercialisation of new gas and power station opportunities and
management of major gas transmission pipeline infrastructure.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Chair of the Remuneration Committee; Chair of the Health, Safety and Environment
Committee; Member of the Audit and Risk Committee
58,333
750,000
Interests in shares:
Interests in options:
Name:
Title:
Experience and expertise:
Eytan Uliel
Independent Non-Executive Director
Mr Uliel is a finance executive with extensive oil and gas industry experience. Since
2015 he has served as Commercial Director of Bahamas Petroleum Plc, a UK Listed
company, with conventional oil exploration acreage offshore The Bahamas. From
2009- 2014, Eytan was Chief Financial Officer and Chief Commercial Officer of Dart
Energy Limited, an ASX listed company that had unconventional gas assets (coal bed
methane and shale gas) in Australia, Asia and Europe, and Chief Commercial Officer
of its predecessor Company, Arrow International Limited, a Singapore based company
that had unconventional gas assets primarily in Asia and Australia.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Member of the Audit and Risk Committee
Nil
Nil
32
Armour Energy Limited
Directors' report
30 June 2019
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
William (Bill) Stubbs (retired 27 November 2018)
Non-Executive Director
LLB
Mr Stubbs is a lawyer of 35 years' experience and is currently the Chairman of DGR
Global Ltd.
Mr Stubbs has held the position of Director of various public companies over the past
25 years in the mineral exploration and biotech fields. He was the founding Chairman
of Arrow Energy NL which originally pioneered coal seam gas development in
Queensland's Bowen and Surat Basins from 1998, and is now a world-wide coal seam
gas company.
DGR Global Limited
Lakes Oil NL
Former directorships (last 3 years): None
None
Special responsibilities:
-
Interests in shares:
-
Interests in options:
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
Company secretary
Karl Schlobohm
B.Comm, B.Econ, M.Tax, CA, FGIA
Mr Schlobohm is a Chartered Accountant with over 25 years’ experience across a wide range of industries and businesses.
He has extensive experience with financial accounting, corporate governance, company secretarial duties and board
reporting.
He currently acts as the Company Secretary for ASX-listed DGR Global Ltd, Dark Horse Resources Ltd, Aus Tin Mining Ltd,
LSE/ TSX - listed SolGold Plc and AIM-listed IronRidge Resources Ltd.
Meetings of Directors
Full Board
Audit and
Risk
Committee
Audit and
Risk
Committee
Remuner-
ation
Committee
Remuner-
ation
Committee
Full Board
HSE(*)
Committee
HSE (*)
Committee
Held (**)
Attended
Held (**)
Attended
Held (**)
Attended
Held (**)
Attended
Director
Nicholas Mather
Roland Sleeman
Stephen Bizzell
Eytan Uliel
William (Bill)
Stubbs
12
12
12
12
5
11
12
12
11
4
-
-
2
2
1
-
-
2
1
1
2
3
-
-
-
2
3
-
-
-
-
1
-
-
1
-
1
-
-
1
(*) Health, Safety and Environment Committee
(**) Held: represents the number of meetings held during the time the Director held office.
Corporate structure
Armour Energy Ltd (Armour) is a company limited by shares that is incorporated and domiciled in Australia. It was converted
to a public company on 14 January 2011 and became an ASX-listed company on 26 April 2012.
33
Armour Energy Limited
Directors' report
30 June 2019
Principal activities
The Group is focused on the discovery and production of oil and gas assets, as well as exploration for economically viable
reserves of both conventional and unconventional natural oil and gas. The Group is currently focused on operating its Kincora
Gas Plant and the development of its other valuable East Coast Australia oil and gas assets, strategically located on the
Roma Shelf in the Surat Basin, Queensland.
The Group's production facilities include field gas compression, extensive gathering systems, the Kincora gas processing
plant, and a dedicated pipeline to the Roma to Brisbane Pipeline at Wallumbilla. The assets also include the Newstead
(underground) gas storage facility and other potential gas storage facilities. Furthermore, the assets include a number of oil
fields with associated facilities.
Significant changes in the state of affairs
In August 2018, Armour completed a fully underwritten non-renounceable Entitlement Offer which raised $10.1 million in
equity and issued 101,384,299 new shares.
In March 2019, the Company completed the refinancing of its convertible notes, which were due to expire in September 2019.
A new corporate bond for $55 million was issued to institutional and sophisticated investors, to refinance the early redemption
of the notes, provide additional expenditure for production expansion, exploration and working capital.
There were no other significant changes in the state of affairs of the Group during the financial year.
34
Armour Energy Limited
Directors' report
30 June 2019
Operating and Financial Review
The loss for the Group after providing for income tax amounted to $11,683,748 (30 June 2018: $11,557,788).
Our business
The Group is an emerging producer and supplier of gas, LPG, oil and condensate for the East Coast of Australia market.
The Group's main producing asset is the Kincora gas project, based in the Surat basin near Roma. Australia, and employs
over 50 people. Our customers are largely represented by large corporates (gas); other smaller companies for by-products
(LPG) and all gas sales are delivered through the Roma to Brisbane Gas Pipeline, at Run 2 Wallumbilla.
Changes in nature of activities during the year
During the year, the Stage 3 production initiatives outlined in the prior year annual report were initiated, including;-
●
●
●
●
●
●
drilling and bringing into production additional wells which will be part funded under the Australian Government’s GAP
grant of up to $6 million (of which $5.4 million net of GST received);
refinancing of convertible notes with expiry September 2019, and replacement with $55 million corporate bond;
increasing production to a consistent 10TJ per day and commencing spot sales into the Queensland gas market;
2019 drilling program in advanced planning stage for September 2019 spud, to increase production in line with the 20
TJ/d strategic plans;
essential maintenance and engineering studies on the Kincora Gas Plant was carried out in order to reduce production
bottlenecks and increase plant reliability;
diversification of revenues and a second income stream with the recently awarded Sykes Block and joint operation with
APLNG.
Our business strategy
The Group operates in the highly competitive East Coast Australia gas market that is constantly innovating. Our business
strategy relies upon the following key elements:
· Armour is contracted to Australia Pacific LNG for the supply of up to 3.65PJ per year for 5 years;
· For production volumes beyond this, Armour will be able to take advantage of the strong east coast gas market;
· Wallumbilla Gas Price has continued to increase in addition to quarterly volume increases;
The continued implementation of strategies to ensure that the business is capable of supporting our growth objectives, whilst
maintaining a focus on profitability across our operation will benefit shareholders through increases in shareholder value.
Financial Review Highlights
●
●
●
●
●
●
●
Increase in revenue of $13 million
Increase in gross profit of $4.8 million
Processing costs decreased from [$X/ GJ] to [$X/ GJ]
Refinance of Convertible Notes with a $55 million Corporate Bond facility
Establishment of a $6.8 million environmental bond loan facility
Successful entitlement offer which raised $10.1 million in equity
Second income stream secured with APLNG joint operation on Sykes Block
35
Armour Energy Limited
Directors' report
30 June 2019
Financial Performance and Cash Flows
Revenue from Contracts with Customers
Cost of Sales
Gross Profit/(loss)
Other income and expenses
Finance income
Finance expenses
Income tax (expense) / benefit
Profit/(loss) after income tax expense
Consolidated
30 June
2019
$
30 June
2018
$
27,819,335 14,748,819
(10,773,299)
(19,018,113)
8,801,222
(6,333,678)
192,524
(13,656,309)
(687,507)
3,975,520
(7,324,396)
162,135
(8,927,249)
556,202
(11,683,748)
(11,557,788)
Revenue from Contracts with Customers and Gross Profit significantly increased due to a full year of production. Finance
costs increased due to the early redemption of the Company's Convertible Notes and refinance of a Corporate Bond facility.
Underlying EBITDA (non-IFRS measure)
Underlying EBITDA reflects statutory EBITDA as adjusted to reflect the Director's assessment of the result for the ongoing
business activities of the Group. These numbers have not been audited.
Profit/(loss) before income tax and net finance expenses
Depreciation and amortisation
Finance income
Impairment and write-off of exploration assets
Net gain or loss on disposal of assets
Earnings before interest, depreciation and amortisation (EBITDA)
Consolidated
30 June
2019
$
30 June
2018
$
2,660,068
1,135,632
(192,524)
71,329
61,976
(3,186,741)
878,681
(162,135)
4,107
-
3,736,481
(2,466,088)
36
Armour Energy Limited
Directors' report
30 June 2019
Operating and Financial Review (continued)
Cash flow
In the year ended 30 June 2019, a total net cash inflow of $4.1 million was recorded. The net outflow from operating activities
was $1 million with $28 million of revenue positively contributing from operations.
Cash outflows from investing activities were $13.7 million, mainly attributable to development and exploration activities
around the Kincora project.
During the year, the Group redeemed convertibles notes on issue repaying $43.4 million and issued a corporate bond for
$55 million, providing additional working capital for the implementation of Stage 3 initiatives. Net cash inflows from financing
activities were $18.79 million.
Net cash at the beginning of the year
Net cash from operating activities
Net cash from investing activities
Net cash from financing activities
Net cash at the end of the year
Consolidated
30 June
2019
$
30 June
2018
$
5,104,627
(986,638)
(13,688,453)
18,795,640
7,711,840
(258,015)
(8,266,504)
5,917,306
9,225,176
5,104,627
Future likely developments, prospects and business strategies
Operations
The Group has focused on a 4-Phase growth strategy centred around the Kincora Project on the Roma Shelf, and is working
to deliver against the target milestones. To date, Phases 1 and 2 have been completed, with the current Phase 3 progressing,
albeit slower than anticipated toward reaching our target of 20 TJ/d.
The Group currently has gas production and sales of 9 TJ/ day from its existing wells and Newstead Gas Storage Facility.
Gas sales are currently to Australia Pacific LNG under the Group’s existing Gas Sales Agreements for gas volumes of up to
3.65PJ/a. With an existing agreement to access Run 2 on APA’s Wallumbilla facility at up to 30 TJ/day, any new production
as wells come onstream can be quickly commercialised. In addition to gas sales, the Group’s production and sales of oil,
condensate and LPG provides a revenue uplift of approximately 30% on gas sales.
The Group’s 4-phase growth strategy is presented below. In summary it shows that Phases 1 and 2 have been completed,
Phase 3 is the current focus being to increase production and revenues, and Phase 4 being future growth opportunities is
currently being considered and planned. The current Phase 3 focus of increasing production involves drilling of new wells
and looking to improve production from existing wells.
Exploration and development
Since the Group’s acquisition of the Kincora Project from Origin in 2015/2016, it continues to review, develop detailed
databases and models from the significant volumes of subsurface information and building on new knowledge regarding the
prospectivity across the Roma Shelf region, including the eastern flank of the current tenure held at the time of the
acquisition. As a result of these studies, Armour issued expressions of interest to the Queensland Government seeking
release of acreage for further exploration.
As a result, over the last 12 months the Group has been successful in expanding its footprint on the Roma Shelf in the
Bowen-Surat Basin. The Group sees this acreage as instrumental in the fulfilling the company’s objectives and will support
ongoing exploration and development of the petroleum resources of this area within the Bowen-Surat Basin.
There are no further developments of which the Directors are aware which could be expected to affect the results of the
Group’s operations and plans, other than information which the Directors believe comment on, or disclosure of, would
prejudice the interests of the Group.
37
Armour Energy Limited
Directors' report
30 June 2019
Managing Risk
Armour Energy is a producing oil and gas Group operating in a volatile pricing market. Factors specific to Armour or those
which impact the market more broadly, may individually or in combination impact the financial and operating performance of
the Group. These events may be beyond the control of the Board or management of Armour Energy.
The major risks associated with an investment in the Group are summarised below:-
Operating risks
Armour Energy has a single operation in production and is therefore reliant on continued performance of operations at the
Kincora Gas project. There are numerous operating risks which may result in a reduction in performance that decreases the
Group’s ability to produce gas to meet customer shipping needs. The risks include, but are not limited to, factors such as
weather conditions, machinery failure, critical infrastructure failure or natural disasters.
Market risks
The key drivers for the business’s financial performance are commodity price risk. Armour Energy is not of a size to have
influence on gas or other petroleum product prices and is therefore a price-taker in general terms.
Geological risks
Resource and Reserve estimates are prepared by external experts in accordance with the JORC code for reporting. The
estimates are inherently subjective in some respects therefore there is a risk that the interpretation of data may not align with
the future experienced conditions in the field. Due care is taken with each estimation.
Regulatory and land access risks
The Group’s operations and projects are subject to State and Federal laws and regulation regarding environmental hazards.
These laws and regulations set various standards regulating certain aspects of health and environmental quality, provide for
penalties and other liabilities for the violation of such standards and establish, in certain circumstances, obligations to
remediate current and former facilities and locations where operations are or were conducted. The ability to secure and
undertake exploration and operational activities within prospective areas is also reliant upon satisfactory resolution of native
title and management of overlapping tenure.
To address these risks, the Group develops strong, long-term effective relationships with landholders, with a focus on
developing mutually acceptable access arrangements as well as appropriate legal and technical advice to ensure it manages
its compliance obligations appropriately. The Group minimises these risks by conducting its activities in an environmentally
responsible manner, in accordance with applicable laws and regulations and where possible, by carrying appropriate
insurance coverage. In addition, the group engages experienced consultants and other technical advisors to provide expert
advice where necessary.
Safety
Safety remains of critical importance in the planning, organisation and execution of Armour Energy’s exploration and
operational activities. The Group is committed to providing and maintaining a working environment in which its employees
are not exposed to hazards that will jeopardise an employee’s health and safety, or the health and safety of others associated
with our business.
Sovereign Risk
The Group has limited influence over the direction and development of government policy. Successive changes to the
Australian energy and resources policies, including taxation and innovation policies, have impacted Australia’s global
competitiveness and reduced the attractiveness of Australian fossil-fuel projects to foreign investors. The Group’s view is
that whilst there is currently a negative perception of fossil fuels, gas and LPG being less carbon intensive than alternate
energy sources (such as thermal coal) will continue to play a significant role as both a domestic and export commodity.
Access to capital
At 30 June 2019, the Group remains well funded with cash reserves and an at call working capital facility expected to be
sufficient to meet the business’s operating costs. Armour Energy’s ability to effectively continue as an oil and gas producing
business may be dependent upon several factors including the success of the mine operations, or the successful exploration
and subsequent exploitation of the Group’s tenements. Should these avenues be delayed or fail to materialise, the Group
expects to have the ability to successfully raise additional funding through debt, equity or farm out/sell down to allow the
Group to continue as a going concern and meet its debts as and when they fall due.
38
Armour Energy Limited
Directors' report
30 June 2019
Options on issue
At the date of this report, the unissued ordinary shares of Armour Energy Limited under option are as follows:-
Grant Date
Date of Expiry
29 March 2016
29 March 2016
29 March 2016
19 December 2016
19 December 2016
19 December 2016
29 May 2017
29 May 2017
29 May 2017
31 July 2017
31 July 2017
31 July 2017
31 July 2018
29 March 2021
29 March 2021
29 March 2021
14 December 2019
14 December 2019
14 December 2019
29 May 2020
29 May 2020
29 May 2020
14 December 2019
14 December 2019
14 December 2019
31 July 2021
Exercise
Price
Number
under option
$0.195
3,150,000
$0.345
3,150,000
$0.495
2,250,000
$0.215
1,250,000
$0.265
1,250,000
$0.315
1,250,000
$0.215
666,666
$0.265
666,667
$0.315
666,667
$0.215
1,691,664
$0.265
1,691,668
$0.315
1,691,668
$0.161 41,000,000
60,375,000
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance
with the requirements of the Corporations Act 2001 and its Regulations. This information has been audited as required by
section 308(3C) of the Corporations Act 2001.
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
1. Principles used to determine the nature and amount of remuneration
2. Details of remuneration
3. Service agreements
4. Share-based compensation
5. Group performance and link to remuneration
6. Other transactions with key management personnel
The remuneration report details the remuneration arrangements for Key Management Personnel ("KMP") who are defined
as those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly
or indirectly, including any Director (whether executive or otherwise) of the Group, and includes the executive team.
The following persons are considered Key Management Personnel for the Group:-
i) Directors
Nicholas Mather - Executive Chairman
Roland Sleeman - Non-Executive Director
Stephen Bizzell - Non-Executive Director
Eytan Uliel - Non-Executive Director
William (Bill) Stubbs - Non-Executive Director (retired 27 November 2018)
Karl Schlobohm - Alternate Non-Executive Director for William Stubbs (appointed 5 September 2018; resigned 17 November
2018)
39
Armour Energy Limited
Directors' report
30 June 2019
ii) Executives
Roger Cressey - Chief Executive Officer (resigned 24 July 2019)
Karl Schlobohm - Company Secretary
Richard Aden - Chief Financial Officer (from 23 July 2018)
Priy Jayasuriya - Interim Chief Financial Officer (from 28 April 2018 to 23 July 2018)
Richard Fenton - General Manager - Access, Infrastructure and Planning (from 16 July 2018 to 23 May 2019)
Nathan Rayner - Chief Operating Officer (from 26 November 2018 to 19 July 2019)
Peter Ashford - Chief Commercial Officer (to 20 July 2018)
Owing to a management restructure, Luke Titus - Chief Geologist ceased to be KMP for the 2019 financial year.
Other than the above, there were no changes to KMP after the reporting date and before the date the financial report was
authorised for issue.
1. Principles used to determine the nature and amount of remuneration
The Group's remuneration policy is designed to attract, motivate and retain Executives and Non-Executive Directors by
identifying and rewarding high performers and recognising the contribution of each person to the continued growth and
success of the Group.
The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good reward
governance practices:
●
●
●
●
competitiveness and reasonableness;
acceptability to shareholders;
alignment of executive compensation;
transparency.
The Remuneration Committee is responsible for providing recommendations to the Board of Directors on the remuneration
arrangements for its directors and executives. The performance of the Group depends on the quality of its directors and
executives.
The Board assesses the appropriateness of the nature and amount of remuneration of such officers on a periodic basis by
reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit.
Such officers are given the opportunity to receive their base remuneration in a variety of forms including cash and fringe
benefits. It is intended that the manner of payments chosen will be optimal for the recipient without creating undue cost for
the Group. Further details on the remuneration of Directors and Executives are set out in this Remuneration Report.
The Group aims to reward the Executives with a level and mix of remuneration commensurate with their position and
responsibilities within the Group. The Board’s policy is to align Director and Executive objectives with shareholder and
business objectives by providing a fixed remuneration component.
The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it
should seek to enhance shareholders' interests by:
●
●
●
link reward with the strategic goals and performance of the Group;
focusing on sustained growth in shareholder wealth and achievement of these strategic goals; and
ensuring total remuneration is competitive by market standards.
Additionally, the reward framework should seek to enhance executives' interests by:
●
●
●
rewarding capability and experience;
reflecting competitive reward for contribution to growth in shareholder wealth;
providing a clear structure for earning rewards.
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate.
40
Armour Energy Limited
Directors' report
30 June 2019
Non-executive directors remuneration
The board seeks to set aggregate remuneration at a level which provides the Group with the ability to attract and retain
directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. The Group’s specific policy for
determining the nature and amount of remuneration of non-executive directors is as outlined below.
The Company's constitution and ASX listing rules require the aggregate non-executive directors' remuneration be determined
periodically by a general meeting. The most recent determination was at the Annual General Meeting held on 9 November
2011 where the shareholders approved a maximum annual aggregate remuneration of $500,000.
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors'
fees and payments are reviewed annually by the Remuneration Committee. The Remuneration Committee may, from time
to time, receive advice from independent remuneration consultants to ensure non-executive directors' fees and payments
are appropriate and in line with the market. The chairman's fees are determined independently to the fees of other non-
executive directors based on comparative roles in the external market. The chairman is not present at any discussions relating
to the determination of his own remuneration.
During the year ended 30 June 2019, the Company engaged global organisational consulting firm Korn Ferry (NYSE:KFY)
to review the reward strategy across the Group. Korn Ferry recommended a review of both short-term incentive (STI) and
long-term incentive (LTI) options to ensure consistency within the Group and to better align STI and LTI's with the Group's
organisational strategic objectives and performance. Korn Ferry was paid a fee of $44,800 in cash (2018: nil).
If a Non-Executive director performs extra services, which in the opinion of the directors are outside the scope of the ordinary
duties of the director, the Group may remunerate that director by payment of a fixed sum determined by the directors in
addition to or instead of the remuneration referred to above. However, no payment can be made if the effect would be to
exceed the maximum aggregate amount payable to non-executive directors. A non-executive director is entitled to be paid
travelling and other expenses properly incurred by them in attending director's or general meetings of the Group or otherwise
in connection with the business of the Group.
All directors have the opportunity to qualify for participation in the Employee Share Option Plan, subject to the approval of
shareholders.
The rights, responsibilities and remuneration terms for each non-executive director are set out in a letter of appointment,
pursuant to which:-
●
●
●
●
●
●
Directors are granted the rights to access Group information, and the right to seek independent professional advice;
Directors are provided with a Deed of Access and Indemnity;
Directors are provided with coverage under the Group's directors and officers insurance policy;
Directors are made aware of the Group's Corporate Governance policies and procedures;
Directors are currently entitled to remuneration of $50,000 per annum, plus reasonable expenses for travel and
accommodation;
There are no fixed terms or notice periods, with the exception of the Chairman.
The remuneration of non-executive directors for the year ended 30 June 2019 is detailed in Section 2 of this remuneration
report.
Executive remuneration
The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which
has both fixed and variable components and is commensurate with their position and responsibilities within the Group and
so as to;
●
●
●
link reward with the strategic goals and performance of the Group;
align the interests of the executives with those of shareholders; and
ensure total remuneration is competitive by market standards.
The remuneration of the executives is recommended by the Remuneration Committee and determined by the Board. The
remuneration will comprise a fixed remuneration component and also may include offering specific short and long-term
incentives, in the form of:
●
●
●
●
base pay and non-monetary benefits;
short-term performance incentives;
share-based payments;
other remuneration such as superannuation and long service leave.
41
Armour Energy Limited
Directors' report
30 June 2019
The combination of these comprises the executive's total remuneration. The remuneration of executive directors and other
KMP for the year ended 30 June 2019 is detailed in Section 2 of this Remuneration report.
Voting and comments made at the Company's 2018 Annual General Meeting ('AGM')
At the 2018 AGM, 99.4% of the eligible votes received supported the adoption of the remuneration report for the year ended
30 June 2018. The Company did not receive any specific feedback at the AGM regarding its remuneration practices.
2. Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel (KMP) of the Group are set out in the following tables.
Short-term benefits
Post-
employment
benefits
Share-based payments
30 June 2019
Directors:
Nicholas Mather
Stephen Bizzell
Roland Sleeman
Eytan Uliel
William (Bill) Stubbs*
Other Key Management
Personnel:
Roger Cressey*
Karl Schlobohm
Richard Aden***
Richard Fenton**
Nathan Rayner**
Priy Jayasuriya***
Cash salary
and fees
$
210,000
50,000
50,000
50,000
20,833
396,219
50,000
302,442
291,348
181,857
4,399
1,607,098
Cash
Super-
Non-
bonus monetary annuation
$
$
$
Equity-
Equity-
settled
settled
Options Shares
$
$
Total % option/
shares
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
210,000
50,000
50,000
50,000
20,833
41,638
-
15,464
-
9,854
-
66,956
25,675
-
18,870
17,826
13,425
-
75,796
13,211
4,404
-
-
-
4,404
22,019
476,743
-
54,404
-
336,776
-
309,174
-
205,136
-
-
8,803
- 1,771,869
-%
-%
-%
-%
-%
2.8%
8.1%
-%
-%
-%
50.0%
*
**
Mr Stubbs retired on 27 November 2018. Mr Cressey resigned on 24 July 2019.
Mr Fenton was employed between 16 July 2018 and 23 May 2019. Mr Rayner was employed between 26 November
2018 and 19 July 2019.
*** Mr Jayasuriya was interim CFO from 28 April 2018 to 23 July 2018. Mr Aden commenced employment as CFO on 23
July 2018.
42
Armour Energy Limited
Directors' report
30 June 2019
Short-term benefits
Post-
employment
benefits
Share-based payments
30 June 2018
Directors:
Nicholas Mather
Stephen Bizzell
Roland Sleeman
Eytan Uleil*
William (Bill) Stubbs
Matthew Beach*
Other Key Management
Personnel:
Roger Cressey
Karl Schlobohm
Peter Ashford
Priy Jayasuriya **
Peter Harding-Smith**
Luke Titus***
Cash salary
and fees
$
210,000
50,000
50,000
29,167
50,000
47,848
434,847
50,000
350,396
12,201
200,446
237,986
1,722,891
Equity-
Cash
settled
bonus monetary annuation Options Shares
$
Equity-
settled
Super-
Non-
$
$
$
$
Total % options/
shares
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
26,245
76,519
-
12,715
32,528
41,116
-
18,197
18,589
29,133
22,609
50,972
99,971 228,652
-
-
-
-
-
-
210,000
50,000
50,000
29,167
50,000
47,848
-
537,611
-
62,715
-
424,040
-
30,398
-
248,168
-
311,567
- 2,051,514
-%
-%
-%
-%
-%
-%
14.2%
20.3%
9.7%
59.9%
11.7%
16.4%
*
**
Mr Uleil was appointed on 20 November 2017. Mr Beach resigned on 16 May 2018.
Mr Harding-Smith ceased employment as CFO on 27 April 2018. Mr Jayasuriya was interim CFO from 28 April 2018 to
23 July 2018.
*** In the prior year, Mr Titus was considered KMP however owing to a management restructure, he is not considered a
KMP in the current year.
All other directors were not entitled to or awarded any performance based incentives or bonuses during the current or prior
year.
The Group has an incentive scheme which rewards employees for contributing to the overall performance of the Group. The
underlying objective of the incentive arrangements is to:
●
●
●
Ensure employees understand the Group's business drivers, objectives and performance;
Strengthen the involvement and focus of employees in achieving the business' objectives; and
Improve teamwork, communication and interaction among employees.
Under the incentive scheme, the Group may at its discretion, on an annual basis, pay a bonus to permanent employees who
are employed by the Group on the final day of the relevant financial year (that is, 30 June).
The maximum amount of bonus that will be paid to each employee in any year is set out in the employee's contract of
employment.
The actual amount of bonus paid to each individual employee will be dependent on:
●
●
For 70% of the potential maximum award, the individual employee's performance relative to pre-agreed key
performance indicators ('KPIs'); and
For 30% of the potential maximum award, the overall corporate performance compared to predetermined corporate
performance targets but subject to satisfactory personal performance.
43
Armour Energy Limited
Directors' report
30 June 2019
The proportion of the bonus paid/payable or forfeited is as follows:
Name
Other Key Management Personnel:
Roger Cressey
Karl Schlobohm
Peter Ashford
Priy Jayasuriya
Peter Harding-Smith
Richard Aden
Richard Fenton
Nathan Rayner
Short term
incentive
paid/payable
Short term
incentive
paid/payable
Short term incentive forfeited
30 June
2019
30 June
2018
30 June
2019
30 June
2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100%
-
100%
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
-
No performance-based bonuses were paid or granted for the current or previous financial year
For the year ended 30 June 2019 $99,961 of salary and fees were taken as ordinary shares in lieu of cash (2018:$nil). The
amount of shares awarded was determined with reference to the share value based on 20 day VWAP at the time of
qualification for the share allotment.
44
Armour Energy Limited
Directors' report
30 June 2019
3. Service agreements
It is the board’s policy that employment agreements are entered into with all executives and employees.
Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details
of these agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Roger Cressey
Chief Executive Officer
12 September 2017
Resigned 24 July 2019
Mr Cressey is entitled to a base remuneration of $375,000 per annum, exclusive of
superannuation.
Mr Cressey is entitled to participate in the issue of incentive options in Armour Energy
Ltd in accordance with the Company's Employee Share Option Scheme
Both the Group and Mr Cressey are entitled to terminate the contract upon giving three
(3) months written notice.
The Group is entitled to terminate the agreement immediately upon Mr Cressey's
insolvency or certain acts of misconduct.
Mr Cressey is entitled to terminate the agreement immediately upon a significant
diminution in his benefits, job content, status, responsibilities or authority.
Mr Cressey is entitled to a bonus at the discretion of the board, having regard to his
performance, and that of the Company. It is intended that the board will establish a set
of agreed key performance indicators for the determination and measurement of future
employment-related bonuses, and will also establish a suitable grant of employment-
related options.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Nicholas Mather
Executive Chairman
18 December 2009
On-going
Mr Mather is entitled to a base remuneration of $210,000 per annum, inclusive of
superannuation.
Bonus payments are at the discretion of the Remuneration committee.
Employment contracts entered into with other KMP all contain the following key terms:
●
●
●
●
Performance based salary increases and/or bonuses paid at the discretion of the Board;
Short and long-term incentives, such as options paid at the discretion of the Board;
Resignation / notice period of 3 months by either the KMP or the Company;
No payouts upon resignation or termination, outside industrial regulation (i.e. 'golden handshakes').
All executive employment agreements have three months (or less) notice periods. Salaried executives are entitled to their
statutory entitlements of accrued annual leave and long service leave together with any superannuation on termination.
All directors and key management personnel have no entitlement to termination payments in the event of removal for
misconduct.
45
Armour Energy Limited
Directors' report
30 June 2019
3. Service agreements (continued)
The base remuneration, inclusive of superannuation, included in the contractual arrangements to other key management
personnel is set out below:
Key Management Personnel
Karl Schlobohm
Priy Jayasuriya*
Richard Aden*
Richard Fenton**
Peter Harding-Smith*
Peter Ashford*
Nathan Rayner***
Base salary
incl super
$50,000
$50,000
$340,000
$340,000
$301,125
$359,708
$340,000
Maximum
bonus
payable
$0
$0
$102,000
$102,000
$90,000
$107,912
$102,000
*
**
Mr Ashford ceased employment on 29 July 2018. Mr Harding-Smith ceased employment as CFO on 27 April 2018. Mr
Jayasuriya was interim CFO from 28 April 2018 to 23 July 2018. Mr Aden commenced employment as CFO on 23 July
2019.
Mr Fenton was employed between 16 July 2018 and 23 May 2019. Mr Rayner was employed between 26 November
2018 and 19 July 2019.
4. Share-based compensation
Issue of shares in lieu of fixed remuneration
Name
Date
Richard Aden
Richard Aden
Richard Aden
Richard Aden
Richard Fenton
Richard Fenton
Nathan Rayner
Nathan Rayner
Nathan Rayner
5 October 2018
17 January 2019
16 April 2019
24 June 2019
5 October 2018
17 January 2019
17 January 2019
16 April 2019
24 June 2019
Shares
Issue price
$
75,385
238,095
96,154
145,828
114,231
151,099
34,798
208,333
72,914
1,136,837
$0.10
$0.08
$0.09
$0.07
$0.10
$0.08
$0.08
$0.09
$0.07
11,423
20,000
9,231
10,769
7,538
12,692
2,923
20,000
5,385
99,961
Options granted as part of remuneration for the year ended 30 June 2019
Under the Company's employee share option plan (ESOP), which was approved by shareholders at the 2016 AGM, share
options may be issued to directors and executives as part of their remuneration. The options are not issued based on
performance criteria, but are issued to the majority of directors and executives of the Group to align comparative shareholder
return and reward for directors and executives.
During the year ended 30 June 2019 there were no options granted as remuneration to Key Management Personnel (2018:
5,500,000). Details of all options on issue over unissued ordinary shares in Armour Energy Ltd at 30 June 2019 to Key
Management Personnel as remuneration are set out in the table below:
46
Armour Energy Limited
Directors' report
30 June 2019
2019
KMP
Vesting date
- all 100%
vested
29/03/2019
R Cressey
K Schlobohm 29/03/2019
29/03/2019
R Cressey
K Schlobohm 29/03/2019
29/03/2019
R Cressey
K Schlobohm 29/03/2019
19/12/2016
N Mather
19/12/2016
S Bizzell
19/12/2016
R Sleeman
19/12/2016
N Mather
19/12/2016
S Bizzell
19/12/2016
R Sleeman
19/12/2016
N Mather
19/12/2016
S Bizzell
19/12/2016
R Sleeman
31/07/2017
R Cressey
31/07/2017
R Cressey
31/07/2017
R Cressey
Grant date
29/03/2016
29/03/2016
29/03/2016
29/03/2016
29/03/2016
29/03/2016
19/12/2016
19/12/2016
19/12/2016
19/12/2016
19/12/2016
19/12/2016
19/12/2016
19/12/2016
19/12/2016
31/07/2017
31/07/2017
31/07/2017
Grant
number
Exercise
price
Exercise
Date
900,000
300,000
900,000
300,000
900,000
300,000
500,000
500,000
250,000
500,000
500,000
250,000
500,000
500,000
250,000
466,666
466,667
466,667
$0.195 29/03/2021
$0.195 29/03/2021
$0.345 29/03/2021
$0.345 29/03/2021
$0.495 29/03/2021
$0.495 29/03/2021
$0.215 14/12/2019
$0.215 14/12/2019
$0.215 14/12/2019
$0.265 14/12/2019
$0.265 14/12/2019
$0.265 14/12/2019
$0.315 14/12/2019
$0.315 14/12/2019
$0.315 14/12/2019
$0.215 14/12/2019
$0.265 14/12/2019
$0.315 14/12/2019
Number
vested
Value per
option at
grant date*
Balance at
30 June
2019
900,000
300,000
900,000
300,000
900,000
300,000
500,000
500,000
250,000
500,000
500,000
250,000
500,000
500,000
250,000
466,666
466,667
466,667
$0.06
$0.06
$0.06
$0.06
$0.06
$0.06
$0.07
$0.07
$0.07
$0.65
$0.65
$0.65
$0.64
$0.64
$0.64
$0.31
$0.27
$0.25
900,000
300,000
900,000
300,000
900,000
300,000
500,000
500,000
250,000
500,000
500,000
250,000
500,000
500,000
250,000
466,666
466,667
466,667
8,750,000
8,750,000
8,750,000
*
Value per option at grant date is calculated using the Black-Scholes option pricing model, which takes into account
factors such as the option exercise price, the share price at the date of issue and volatility of the underlying share price
and the time to maturity of the option (refer Note [TBC]).
Performance Shares
There are nil performance shares on issue over unissued ordinary shares in Armour Energy Ltd as at 30 June 2019 (2018:
nil).
Shares issued on exercise of remuneration options
There were nil options exercised during the year that were previously granted as remuneration (2018: nil).
Shareholdings
Details of all ordinary shares in Armour Energy Ltd at 30 June 2019 held by Key Management Personnel is set out below:
Directors / Key Management Personnel
Granted as /
Balance at
in lieu of
1 Jul 2018 compensation
Options
exercised
Net changes
Other*** 30 Jun 2019
Nicholas Mather
Stephen Bizzell
Roland Sleeman
William (Bill) Stubbs(*)
Roger Cressey
Karl Schlobohm
Richard Aden (**)
Richard Fenton (**)
Priy Jayasuriya (**)
Nathan Rayner (**)
-
-
-
-
-
-
-
-
-
-
-
-
338,877
-
(413,183)
424,010
41,762
40,000
115,957
(84,439)
-
3,647,968
1,659,051
58,333
-
2,120,054
391,049
595,462
381,287
-
316,045
462,984
9,169,249
3,647,968
1,320,174
58,333
413,183
1,696,044
349,287
-
-
84,439
-
-
-
-
-
-
-
555,462
265,330
-
316,045
7,569,428
1,136,837
47
Armour Energy Limited
Directors' report
30 June 2019
*
**
Mr Stubbs retired on 27 November 2018. Mr Cressey resigned on 24 July 2019.
Mr Fenton was employed between 16 July 2018 and 23 May 2019. Mr Rayner was employed between 26 November
2018 and 19 July 2019.
Mr Harding-Smith ceased employment as CFO on 27 April 2018. Mr Jayasuriya was interim CFO from 28 April 2018 to
23 July 2018. Mr Aden commenced employment as CFO on 23 July 2018.
*** "Net change other" above includes the balance of shares held on appointment / resignation, shares issued in lieu of
authorised bonuses, and shares acquired or sold for cash on similar terms and conditions to other shareholders
All other directors and key management personnel, did not hold any shares in the Company at the start, during or at the end
of the year.
There were no shares held nominally at 30 Jun 2019 (30 Jun 2018: nil).
Option holdings
Details of all option holdings in Armour Energy Ltd at 30 June 2019 held by Key Management Personnel is set out below:
Directors/ Key
management
personnel
Balance at
1 Jul 2018
Granted as
remuneratio
n
Options
Net Change
exercised
other (***)
Balance at
30 Jun
2019
Total
vested
Total
Vested
and
exercisable
Total
unvested
and un-
exercisable
750,000
1,500,000
6,500,000
750,000
Nicholas Mather
Stephen Bizzell
Roland Sleeman
William (Bill)
Stubbs
Matthew Beach
750,000
(*)
4,100,000
Roger Cressey
900,000
Karl Schlobohm
1,500,000
Peter Ashford
Priy Jayasuriya (*) 1,100,000
Peter Harding-
Smith (*)
Luke Titus (**)
1,500,000
2,700,000
22,050,000
-
-
-
-
-
-
-
-
-
-
-
-
- 1,500,000 1,500,000 1,500,000
-
- (5,000,000) 1,500,000 1,500,000 1,500,000
750,000
-
750,000
750,000
-
-
(750,000)
-
-
-
-
(750,000)
-
-
- 4,100,000 4,100,000 4,100,000
-
900,000
-
-
-
- (1,500,000)
-
- (1,100,000)
900,000
-
-
900,000
-
-
-
-
(1,500,000)
- (2,700,000)
(13,300,000
)
-
-
-
-
-
-
-
8,750,000
8,750,000
8,750,000
-
-
-
-
-
-
-
-
-
-
-
-
*
Mr Beach ceased employment on 16 May 2018. The options held by Mr Beach were valid for 90 days following the
termination date of 16 May 2018.
Mr Ashford ceased employment on 20 July 2018. The options held by Mr Ashford were valid for 90 days following the
termination date of 20 July 2018.
Mr Harding-Smith ceased employment on 27 April 2018. The options held by Mr Harding-Smith were valid for 90 days
following the termination date of 27 April 2018.
Mr Jayasuriya was interim CFO from 28 April 2018 to 23 July 2018.
Mr Aden and Mr Fenton commenced employment on the 23 July 2018 and 16 July 2018 respectively.
**
In the prior year, Luke Titus was considered KMP however owing to a management restructure, he is not considered a
KMP in the current year.
*** "Net Change Other" above includes the balance of options held on appointment / resignation, options acquired or sold
for cash on similar terms and conditions to other shareholders, and options that have expired unexercised.
All other directors and key management personnel, did not hold any options in the Company at the start, during or at the end
of the year.
There were no options held nominally at 30 June 2019 (2018: nil).
48
Armour Energy Limited
Directors' report
30 June 2019
5. Group performance and link to remuneration
During the financial year, the Group has generated losses as its principal activity was the discovery and production of world
class oil and gas assets, as well as exploration for economically viable reserves of both conventional and unconventional
natural oil and gas.
Armour Energy Limited listed on the ASX on 26 April 2012. The closing share price at 30 June 2019 was $0.067.
The earnings of the Group for the five years to 30 June 2019 are summarised below:
2015
$
2016
$
2017
$
2018
$
2019
$
Sales revenue
Profit (loss) after income tax
115,040
(6,575,074)
153,569
(18,873,927)
572,600 14,748,819 27,819,335
(11,683,748)
(12,198,333)
(11,474,692)
The Group was in the exploration and development stage up until the 2018 financial year and as such, the link between
remuneration, Group performance and shareholder wealth was tenuous. Share prices are subject to the influence of oil and
gas prices and market sentiment toward the sector, and as such increases or decreases may occur quite independent of
Executive performance or remuneration. The Group is currently in the production and development stage, therefore the link
between Group performance and shareholder wealth should be more strongly linked in future years.
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
Share price at financial year end (cents)
2015
5.0
2016
6.0
2017
7.0
2018
9.0
2019
6.7
6. Other transactions with key management personnel
Company debt instruments held by key management personnel
The number of convertible notes in the Company held during the financial year by each director and other members of key
management personnel of the Group, including their personally related parties, is set out below:
Balance at
the start of
Received
as part of
the year remuneration
Additions
Disposals/
other (*)
Balance at
the end of
the year
Convertible Note holdings
Nicholas Mather
Stephen Bizzell
Roger Cressey
Karl Schlobohm
Priy Jayasuriya
9,813,550
10,130,239
2,594,911
632,951
527,460
23,699,111
Convertible Note payments
Nicholas Mather
Stephen Bizzell
Roger Cressey
Karl Schlobohm
Priy Jayasuriya
-
-
-
-
-
-
Interest
$
161,037
166,233
21,467
42,582
8,655
-
-
-
-
-
-
(9,813,550)
(10,130,239)
(2,594,911)
(632,951)
(527,460)
(23,699,111)
-
-
-
-
-
-
Early
redemption
premium
$
Disposal
of convertible
notes
$
Total paid
during 2019
$
35,083
36,216
9,277
2,263
1,886
1,079,490
1,114,326
285,440
69,625
58,021
1,275,610
1,316,775
316,184
114,470
68,562
399,974
84,725
2,606,902
3,091,601
49
Armour Energy Limited
Directors' report
30 June 2019
*
The Company refinanced the convertible notes on issue on 29 March 2019 and the notes were redeemed at their face
value. Refer to Note 23 for further details.
Corporate bond holdings
Stephen Bizzell
Balance at
Received
the start of
as part of
Disposals/
the year
remuneration
Additions(*)
other
Balance at
the
end of the
year
-
-
100
-
100
Interest
$
Additions
$
Disposals
$
Total paid
during 2019
$
Corporate bond payments
Stephen Bizzell
2,127
-
-
2,127
* On 29 March 2019 the Company issued 55,000 new $1,000 corporate bonds, some of which were subscribed for by key
management personnel. Refer to Note 23 for further details.
All other directors and key management personnel, did not hold any debt instruments in the Company at the start, during or
at the end of the year.
Other transactions with key management personnel and their related parties
Bizzell Capital Partners Pty Ltd
Mr Stephen Bizzell (a Director), is the Chairman of boutique corporate advisory and funds management group Bizzell Capital
Partners Pty Ltd.
The Group entered into an agreement with Bizzell Capital Partners Pty Ltd as Lead Manager for the capital raising program
detailed in an ASX announcement on 16 December 2016. Under the agreement, a management fee was payable of one (1)
percent of the funds raised under the offer, a placement fee of five (5) percent of all new shares issued, an underwriting fee
of five (5) percent of the value of shares underwritten in the entitlement offer, and an option fee of five (5) million options
were issued.
Bizzell Capital Partners held 5,000,000 underwriting options which expired on 30 August 2018, as well as 10,130,239
convertible notes which were redeemed for cash on 29 March 2019. On 29 March 2019, Bizzell Capital Partners purchased
100 $1,000 corporate bonds in the FIIG refinance (refer to borrowing disclosures). As at 30 June 2019, Bizzell Capital
Partners held nil options, nil convertible notes, and 100 corporate bonds (2018: 5,000,000 underwriting options, 10,130,239
convertible notes, and nil corporate bonds). The corporate bonds were purchased on the same terms and conditions as all
other bondholders.
As detailed in 'Events after the reporting period', Armour Energy completed a private placement which raised gross proceeds
of $4 million via the allotment of 80 million shares, with attaching unlisted options. Bizzell Capital Partners managed the
private placement and is entitled to a capital raising fee on arm's length terms. Bizzell Capital Partners is also entitled to
receive an allotment of 8 million unlisted options exercisable at 8 cents through to 30 September 2023, subject to a resolution
to be put to shareholders at the Company's November 2019 Annual General Meeting.
During the year ended 30 June 2019, the Group also paid Bizzell Capital Partners corporate advisory fees of $55,625 for his
involvement in the 2018 entitlement offer, and 2019 refinance of convertible notes (2018: nil).
Samuel Holdings Pty Ltd and Bizzell Capital Partners Pty Ltd
Samuel Holdings Pty Ltd is an entity associated with the Company's Chairman, Nicholas Mather.
In August 2019, Armour completed an entitlement offer fully underwritten by Samuel Holdings Pty Ltd (as trustee). Samuel
Holdings was paid a $1 underwriting fee, and a 3% sub-underwriting fee was payable by Armour on written sub-underwriting
commitments. Bizzell Capital Partners held a sub-underwriting agreement and was responsible for any selling fees, stamping
fees and sub-underwriting fees it had to pay out of the fees to other brokers or to sub-underwriters of the offers. The gross
fees paid under this agreement to Bizzell Capital Partners for the year ended 30 June 2019 was $144,500 (2018: $704,100).
50
Armour Energy Limited
Directors' report
30 June 2019
Other than the above, there were no other transactions with Key Management Personnel for the year ended 30 June 2019.
This concludes the Remuneration report, which has been audited.
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the
Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company
or any related entity.
Events after the Reporting Date
Authority to Prospect ATP2046 Formally Awarded to Armour Energy Limited and Australia Pacific LNG Pty Ltd Joint Venture
As announced on 18 July 2019, the Queensland Department of Natural Resources, Mines and Energy (DNRME) formally
awarded the Authority to Prospect – ATP2046 to a Joint Venture between Armour Energy Limited (10%) and Australia Pacific
LNG Pty Ltd (APLNG) (90% and Operator).
ATP2046 is an 18km sqkms coal seam exploration tenure located 22km south-west of Chinchilla and adjoins APLNG’s
Talinga Project. The block was part of the first national tender where gas has been designated to be supplied exclusively to
Australian domestic manufacturers, an initiative by the Queensland Government.
Resignation of CEO
Mr Roger Cressey, CEO of Armour Energy Limited resigned on 24 July 2019.
2019 Well Program
As announced on 19 August 2019, the Group has entered into a contract for the drilling of two development wells for the
Group's 100% owned Kincora Gas Project. This work program is a continuation of the 2018-2019 Phase 3 growth strategy
which includes drilling of new wells and workover and stimulation of existing wells. These activities, together with any
necessary further work on the Kincora Gas Plant, will assist Armour in progressing to its targeted 20 TJ/day gas sales.
The wells have been designed to a depth of approximately 2,100-meters (measured depth) and will target liquid-rich,
overpressured Permian and Triassic conventional and tight gas sandstones. The first well, Myall Creek North 1 was spudded
on 23 September 2019.
Capital raising
On 23 September 2019 the Company announced the successful close of a $4 million private placement via the allotment of
80 million shares at a price of 5 cents per share. Investors will also receive one (1) unlisted option exercisable at 8 cents per
share (through to 30 September 2023) for every two (2) shares subscribed for in the placement. The proceeds of the private
placement will be used by the Company to progress its Kincora Project field program, meet the costs of the raising, and for
general working capital purposes.
The Company proposes to undertake an entitlement offer to existing shareholders on the same terms as the placement, and
will release full details in due course.
51
Armour Energy Limited
Directors' report
30 June 2019
No other matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect the
Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year or since the end of the
year.
Environmental regulation
The Group is subject to significant environmental regulation in relation to its operations. The group has conducted an
extensive review of the environmental status of the Surat Basin processing plant and associated exploration and production
fields, used for the production of oil, gas, LPG and condensate, and has estimated the potential costs for future restoration
and abandonment to be $6,688,065.
The Group has complied with the conditions of its various Environmental Licences to Operate under the Environmental
Protection Act 1994, through the implementation of its Health, Safety & Environmental Management System (HSEMS) and
assurance processes.
During the financial year, the Kincora Gas Project recorded one recordable incident and one prescribed incident. Armour
Energy has not received any formal notices or penalties from regulatory authorities during the period but is still waiting for
Regulator close out in regard to the prescribed incident (small uncontrolled gas leak).
Regulator Inspections of our operating sites by the Department of Natural Resources, Mines and Energy (DNRME) has not
determined any regulatory noncompliance and the Group continues to work with the regulators to meet obligations.
Climate Change
The Group recognises that the world is transitioning to a low-carbon future, and that climate change is an important political,
social, environmental and commercial issue. In addition, the Company recognises the increasing level of investor and
regulatory expectation that the particular risks faced by the Company – and its stance generally on climate change issues.
Refer to the 'Review of Operations and Activities' for more information.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility
on behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 42 to the financial statements.
The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in note 44 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company,
acting as advocate for the Company or jointly sharing economic risks and rewards.
52
Armour Energy Limited
Directors' report
30 June 2019
Officers of the Company who are former partners of BDO
There are no officers of the Company who are former partners of BDO.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this Directors' report.
Corporate Governance
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of the Group
support and have adhered to the ASX corporate governance principles, where appropriate for the Company. The Group’s
corporate governance statement has been released as a separate document and is located on our website at
www.armourenergy.com.au/corporategovernance.
This Directors' report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations
Act 2001.
On behalf of the Directors
___________________________
Nicholas Mather
Chairman
27 September 2019
Brisbane
53
Armour Energy Limited
Auditor's independence declaration
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
DECLARATION OF INDEPENDENCE BY T J KENDALL TO THE DIRECTORS OF ARMOUR ENERGY LIMITED
As lead auditor for the audit of Armour Energy Limited for the year ended 30 June 2019, I declare that,
to the best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Armour Energy Limited and the entities it controlled during the year.
T J Kendall
Director
BDO Audit Pty Ltd
Brisbane, 27 September 2019
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation.
54
Armour Energy Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2019
Revenue
Revenue from contracts with customers
Cost of goods sold
Gross profit
Other income
Expenses
General and administrative expenses
Exploration expenditure written off
Pre-production costs
Other expenses
Finance costs
Note
Consolidated
30 June
2019
$
30 June
2018
$
8
27,819,335 14,748,819
(10,773,299)
(19,018,113)
8,801,222
3,975,520
208,722
184,984
17
26
(6,174,435)
(71,329)
-
(104,112)
(13,656,309)
(4,671,721)
(4,107)
(2,316,136)
(355,281)
(8,927,249)
Loss before income tax (expense)/benefit
(10,996,241)
(12,113,990)
Income tax (expense)/benefit
10
(687,507)
556,202
Loss after income tax (expense)/benefit for the year attributable to the owners
of Armour Energy Limited
(11,683,748)
(11,557,788)
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Change in fair value of financial assets at fair value through other comprehensive
income
Income tax on items that may be reclassified to profit or loss
19
10
(2,126,990)
638,097
2,125,000
(637,500)
Other comprehensive income for the year, net of tax
(1,488,893)
1,487,500
Total comprehensive income for the year attributable to the owners of Armour
Energy Limited
(13,172,641)
(10,070,288)
Basic loss per share
Diluted loss per share
Cents
Cents
11
11
(2.4)
(2.4)
(3.0)
(3.0)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
55
Armour Energy Limited
Consolidated statement of financial position
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Exploration and evaluation assets
Oil and gas assets
Other financial assets
Property, plant and equipment
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Convertible notes
Employee benefits
Other current liabilities
Borrowings
Deferred consideration
Total current liabilities
Non-current liabilities
Borrowings
Convertible notes
Employee benefits
Provision for restoration and abandonment
Deferred consideration
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings/ (accumulated losses)
Total equity
Note
Consolidated
30 June
2019
$
30 June
2018
$
12
14
15
9,225,176
2,667,516
1,960,822
522,734
14,376,248
5,104,627
2,385,069
1,388,333
159,594
9,037,623
17
18
19
49,276,740 48,903,126
42,344,331 30,987,611
10,516,785 12,560,501
32,466
102,175,981 92,483,704
38,125
116,552,229 101,521,327
16
23
36
24
21
25
37
20
22
4,140,312
7,621,297
-
1,543,466
309,040
130,249
-
178,806
1,241,506
69,355
1,000,000
1,000,000
6,690,858 10,543,173
57,444,029
67,167
- 37,511,879
55,972
6,688,065
1,809,240
65,102,608 46,132,323
51,371
6,688,065
919,143
71,793,466 56,675,496
44,758,763 44,845,831
29
30
106,538,828 96,367,882
7,474,762
(58,996,813)
3,268,695
(65,048,760)
44,758,763 44,845,831
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
56
Armour Energy Limited
Consolidated statement of changes in equity
For the year ended 30 June 2019
Consolidated
Balance at 1 July 2017
Issued
capital
$
Reserves
$
Accumulated
losses
$
Total equity
$
91,301,423
5,188,617
(47,439,025) 49,051,015
Loss after income tax benefit for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
-
-
-
-
1,487,500
(11,557,788)
-
(11,557,788)
1,487,500
1,487,500
(11,557,788)
(10,070,288)
Transactions with owners in their capacity as owners:
Value of conversion rights - convertible notes, net of issue
costs
Shares issued during the year
Share issue costs
Recognition of deferred tax assets in relation to share issue
costs
Share-based payments
-
5,256,156
(270,995)
457,627
-
-
81,298
-
-
341,018
-
-
-
-
-
457,627
5,256,156
(270,995)
81,298
341,018
Balance at 30 June 2018
96,367,882
7,474,762
(58,996,813) 44,845,831
Consolidated
Balance at 1 July 2018
Issued
capital
$
Reserves
$
Accumulated
losses
$
Total equity
$
96,367,882
7,474,762
(58,996,813) 44,845,831
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
-
-
-
(1,488,893)
(11,683,748)
-
(11,683,748)
(1,488,893)
Total comprehensive income for the year
-
(1,488,893)
(11,683,748)
(13,172,641)
Transactions with owners in their capacity as owners:
Value of conversion rights - convertible notes, net of issue
costs
Value of conversion rights - Tribeca Loan facility, net of issue
costs
Transfer of conversion rights on redemption of convertible
notes
Convertible notes converted into shares
Shares issued during the year
Share issue costs
Recognition of deferred tax assets relating to share issue
costs
Reserve transfer - expired share-based payments
Share-based payments
-
-
(20,520)
2,893,012
-
-
(20,520)
2,893,012
-
154,126
10,265,776
(298,366)
(5,381,802)
-
-
-
(1)
5,381,801
-
154,126
- 10,265,776
-
(298,366)
49,410
-
-
-
(250,000)
42,136
-
250,000
-
49,410
-
42,136
Balance at 30 June 2019
106,538,828
3,268,695
(65,048,760) 44,758,763
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
57
Armour Energy Limited
Consolidated statement of cash flows
For the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Payments for production
Interest received
Interest paid
Other income
Note
Consolidated
30 June
2019
$
30 June
2018
$
30,029,497 13,711,037
(6,126,900)
(8,035,624)
170,623
-
22,849
(28,593,632)
(2,635,131)
203,791
(47)
8,884
Net cash used in operating activities
13
(986,638)
(258,015)
Cash flows from investing activities
Reductions in security deposits
Payments for security deposits
Payments for property, plant and equipment
Payments for oil and gas assets
Payments for exploration and evaluation
Grant funds received in relation to oil and gas assets
Research and Development funds in relation to oil and gas assets
Research and Development funds in relation to exploration assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from issue of corporate bond
Proceeds from borrowings
Repayment of borrowings
Transaction costs on the issue of shares and notes
Interest and other finance costs paid
Net cash from financing activities
12,000
(226,079)
(22,187)
(16,713,985)
(169,367)
3,431,165
-
-
-
(441,511)
(18,759)
(11,909,298)
(433,609)
2,551,555
1,958,526
26,592
(13,688,453)
(8,266,504)
29
25
25
13
10,138,450
55,000,000
6,759,200
(43,388,436)
(2,954,495)
(6,759,079)
3,752,307
-
6,870,000
(4,019,592)
(685,409)
-
18,795,640
5,917,306
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
4,120,549
5,104,627
(2,607,213)
7,711,840
Cash and cash equivalents at the end of the financial year
12
9,225,176
5,104,627
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
58
Armour Energy Limited
Notes to the consolidated financial statements - sections
30 June 2019
PAGES 63 to 72
PAGES 60 to 63
PAGES 72 to 76
PAGES 76 to 81
SECTION 1 – BASIS OF PREPARATION
Note 1. General information
Note 2. Statement of Compliance
Note 3. Significant accounting policies
Note 4. Going concern
Note 5. Use of estimates and judgements
Note 6. Comparatives
SECTION 2 – FINANCIAL PERFORMANCE
Note 7. Operating segments
Note 8. Revenue from contracts with customers
Note 9. Expenses
Note 10. Income tax
Note 11. Earnings per share
SECTION 3 – WORKING CAPITAL MANAGEMENT
Note 12. Current assets - Cash and cash equivalents
Note 13. Cash flow information
Note 14. Current assets - trade and other receivables
Note 15. Current assets - Inventories
Note 16. Current liabilities - Trade and other payables
SECTION 4 – RESOURCE ASSETS
Note 17. Non-current assets - Exploration and evaluation assets
Note 18. Non-current assets - Oil and Gas assets
Note 19. Non-current assets - Other financial assets
Note 20. Non-current liabilities – Provision for restoration
Note 21. Current liabilities - Deferred consideration
Note 22. Non-current liabilities - Deferred consideration
SECTION 5 – CAPITAL STRUCTURE
Note 23. Current liabilities - Convertible notes
Note 24. Current liabilities - Borrowings
Note 25. Non-current liabilities – Borrowings
Note 26. Finance costs
Note 27. Fair value measurement
Note 28. Financial risk management
Note 29. Equity - Issued capital
Note 30. Equity - Reserves
SECTION 6 – GROUP AND RELATED PARTY INFORMATION PAGES 93 to 97
Note 31. Interests in subsidiaries
Note 32. Interests in joint operations
Note 33. Parent entity information
Note 34. Related party transactions
SECTION 7 – EMPLOYEE MATTERS
Note 35. Key management personnel disclosures
Note 36. Current liabilities - employee benefits
Note 37. Non-current liabilities – employee benefits
Note 38. Share-based payments
SECTION 8 – OTHER
Note 39. Commitments
Note 40. Contingent liabilities
Note 41. Events after the reporting period
Note 42. Remuneration of auditors
Note 43. Accounting Policies
PAGES 97 to 99
PAGES 82 to 92
PAGES 100 to 103
59
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 1. General information
Armour Energy Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is Level 27, 111 Eagle Street, Brisbane QLD 4000.
The financial statements cover Armour Energy Limited as a Group consisting of Armour Energy Limited and the entities it
controlled at the end of, or during, the reporting period. The financial statements are presented in Australian dollars, which is
Armour Energy Limited's functional and presentation currency.
The Group is principally engaged in the exploration, development and production of oil and gas resources in Australia.
The financial statements were authorised for issue, in accordance with a resolution of Directors, on 27 September 2019. The
Directors have the power to amend and reissue the financial statements.
Note 2. Statement of Compliance
The Group’s Financial Statements as at and for the year ended 30 June 2019:
●
●
●
●
●
●
●
●
●
is a general purpose financial report;
is prepared on a going concern basis (discussed further in Note 4);
has been prepared in accordance with the Corporations Act 2001;
has been prepared in accordance with accounting standards and interpretations in this report, which encompass the:
–– Australian Accounting Standards (“AASBs”) and other authoritative pronouncements of the Australian Accounting
Standards Board; and
–– International Financial Reporting Standards and Interpretations (“IFRS”) as issued by the International Accounting
Standards Board (“IASB”);
has been prepared under the historical cost convention, except for, the revaluation of financial assets at fair value
through other comprehensive income. The methods used to measure fair values are discussed further in note 27;
is presented in Australian Dollars (“AUD”), which is both the Company’s and the Group’s presentation currency;
includes significant accounting policies in the notes to the Financial Statements that summarise the recognition and
measurement basis used and are relevant to the understanding of the Financial Statements;
presents reclassified comparative information where required for consistency with the current year’s presentation;
adopts all new and amended standards and interpretations issued by the relevant bodies (listed above), that are
mandatory for application beginning on or after 1 July 2018. None had a significant impact on the Financial Statements;
●
has not early adopted any standards and interpretations that have been issued or amended but are not yet effective.
Note 3. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective
notes or below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in the relevant notes.
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 33.
60
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 3. Significant accounting policies (continued)
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Armour Energy Limited
('Company' or 'parent entity') as at 30 June 2019 and the results of all subsidiaries for the year then ended. Armour Energy
Limited and its subsidiaries together are referred to in these financial statements as the 'Group'.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to
the Group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Group.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's
normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the
reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability
for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the
assets, and obligations for the liabilities, relating to the arrangement. The Group entered into joint arrangement with various
parties for interest in exploration tenements as disclosed above. Exploration expenditures incurred in relation to these joint
operations have been capitalised in accordance with AASB 6 Exploration for and Evaluation of Mineral Resources.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets
and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks
and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively retains
substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower,
the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease
liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the asset's
useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease
term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line basis
over the term of the lease.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-
financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount.
61
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 3. Significant accounting policies (continued)
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Note 4. Going concern
The financial statements have been prepared on a going concern basis which contemplates the continuity of normal business
activities and the realisation of assets and discharge of liabilities in the ordinary course of business.
The Group has achieved stable production during the last 12 months, resulting in $27,819,335 of revenue during the year.
The group is forecasting to significantly increase revenue over the coming 12 months due to implementation of a multi-stage
field development plan designed to exploit the Group's reserves.
For the year ended 30 June 2019, the Group generated a consolidated loss of $11,683,748 and incurred net operating cash
outflows of $986,638. As at 30 June 2019 the Group had cash and cash equivalents of $9,225,176 net current assets of
$7,685,390 and net assets of $44,758,763.
Whilst there is growing confidence in the performance of the Kincora Gas Plant and the future ramp up of production from
the Kincora Gas Project, at the date of signing these accounts the above conditions give rise to a material uncertainty which
may cast significant doubt over the Group’s ability to continue as a going concern.
Notwithstanding the above, the Directors consider it appropriate to prepare the financial statements on a going concern basis
after having regard to the following matters:
● As announced on 27 March 2019 the Company was refinanced by redeeming the balance of the convertible notes on
issue at the start of the year (375,200,950 notes) and issuing convertible notes with secured notes and provide
additional working capital for the Group to continue the development of the Kincora Project;
● On 23 September 2019 the Company announced the successful close of a $4 million private placement via the allotment
of 80 million shares at a price of 5 cents per share. Investors will also receive one (1) unlisted option exercisable at 8
cents per share (through to 30 September 2023) for every two (2) shares subscribed for in the placement. The proceeds
of the private placement will be used by the Company to progress its Kincora Project field program, meet the costs of
the raising, and for general working capital purposes.
●
●
The cash generating ability of the Kincora Project will continue to increase as the Group has moved into Phase 3 of its
growth strategy to increase production levels;
The implementation of the field development plan will require capital investment, and the Group has the ability to
manage capital and liquidity by taking some or all of the following actions:
- Raising additional capital or securing other forms of financing, as and when necessary to meet the levels of
expenditure required to meet the Group's working capital requirements;
- Reducing its level of capital expenditure through farm-outs and/or joint ventures;
- Managing its working capital expenditure;
- Applying for eligible Research and Development tax refund receipts, and other Government incentives; and
- Disposing of non-core assets.
Should the Group be unable to continue as a going concern, it may be required to realise its assets and liabilities other than
in the ordinary course of business, and at amounts that differ from those stated in the financial statements.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset
amounts, or to the amount and classification of liabilities that might be required should the Group not be able to achieve the
matters set out above and thus be able to continue as a going concern.
62
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 5. Use of estimates and judgements
The Group has identified a number of critical accounting policies under which significant judgements, estimates and
assumptions are made. Actual results may differ from these estimates under different assumptions and conditions. This may
materially affect financial results and the carrying amount of assets and liabilities to be reported in the next and future periods.
These estimates and underlying assumptions are reviewed on an ongoing basis.
Additional information relating to these critical accounting policies is embedded within the following notes:
Note
10
17
18
18
20
Deferred tax assets
Exploration and evaluation assets
Oil and Gas assets
Government Grants
Provision for rehabilitation
There are no other critical accounting judgements, estimates and assumptions that are likely to affect the current or future
financial years.
Note 6. Comparatives
There were no reclassifications to the prior year's consolidated statement of profit or loss and other comprehensive income.
Note 7. Operating segments
Identification of reportable operating segments
The Group has identified its operating segment based on the internal reports that are reviewed and used by the Board (chief
operating decision makers "CODM") in assessing performance and determining the allocation of resources. The Group is
managed primarily on a geographic basis, which is the location of the respective areas of interest (tenements) in Queensland
and the Northern Territory, Australia. Operating segments are determined on the basis of financial information reported to
the Board.
For the year ended 30 June 2019, Management identifies the Group as having two reportable segments, being exploration
activities (Exploration & Evaluation), and the production and development of petroleum products (oil, gas, LPG and
condensate) in the Surat Basin, Queensland (Production & Development), and will report on these segments accordingly.
Unallocated/ Corporate segments represent administration and other overheads that are not allocated to an operating
segment activity.
The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation) on a monthly basis. The
accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements.
The information is reported to the CODM on a monthly basis.
Types of products and services
The principal products and services of each of these operating segments are as follows:
Production & Development
The Group produces petroleum products from its Kincora operating plant, including oil, gas,
LPG and condensate and sells these to customers.
The Group does not produce any products or services from this operating segment; it
involves expenditure to explore, and evaluate potential future economic reserves and
resources.
Exploration & Evaluation
Intersegment transactions
An internally determined cost base is set for all intersegment services provided. All such transactions are eliminated on
consolidation into the Group's financial statements.
63
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 7. Operating segments (continued)
Intersegment receivables, payables and loans
Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans payable
that earn or incur non-market interest are not adjusted to fair value based on market interest rates. Intersegment loans are
eliminated on consolidation.
Intersegment Assets
Segment assets are clearly identifiable based on their nature and physical location.
Intersegment Liabilities
Liabilities are allocated to segments where there is a direct nexus between the liability and the operations of the segment.
Borrowings and tax liabilities are generally considered to relate to the whole Group and are not allocated. Segment liabilities
include trade and other payables and certain provisions.
Major customers
During the year ended 30 June 2019 approximately 69% (2018: 75%) of the Group's external revenue was derived from
sales to one Australian based customer.
Unallocated items
The following items of income, expenses, assets and liabilities are not allocated to operating segments as they are not
considered core to the operation of any segment:
●
●
Corporate head office costs and salaries of non-site based staff;
Proceeds from capital raisings, and associated convertible note debt.
64
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 7. Operating segments (continued)
Operating segment information
Consolidated - 30 June 2019
Revenue
Revenue from contracts with customers
Total revenue
EBITDA
Depreciation and amortisation
Impairment of assets
Loss on disposal of assets
Interest revenue
Finance costs
Profit/(loss) before income tax expense
Income tax expense
Loss after income tax expense
Assets
Segment assets
Unallocated assets:
Unallocated assets
Total assets
Liabilities
Segment liabilities
Unallocated liabilities:
Unallocated liabilities
Total liabilities
Exploration & Production & Unallocated/
Corporate
$
Evaluation Development
$
$
Total
$
- 27,819,335
- 27,819,335
- 27,819,335
- 27,819,335
(2,656)
-
(71,329)
-
-
-
(73,985)
9,475,472
(1,116,869)
-
(61,976)
-
(1,598,349)
6,698,278
(5,736,336)
(18,763)
-
-
192,524
(12,057,959)
(17,620,534)
3,736,480
(1,135,632)
(71,329)
(61,976)
192,524
(13,656,308)
(10,996,241)
(687,507)
(11,683,748)
49,276,740 57,549,813
- 106,826,553
9,725,676
116,552,229
17,091 16,332,534
- 16,349,625
55,443,841
71,793,466
65
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 7. Operating segments (continued)
Consolidated - 30 June 2018
Revenue
Revenue from contracts with customers
Total revenue
EBITDA
Depreciation and amortisation
Impairment of assets
Interest revenue
Finance costs
Profit/(loss) before income tax benefit
Income tax benefit
Loss after income tax benefit
Assets
Segment assets
Unallocated assets:
Unallocated assets
Total assets
Liabilities
Segment liabilities
Unallocated liabilities:
Convertible notes payable
Unallocated liabilities
Total liabilities
Exploration & Production & Unallocated/
Corporate
$
Evaluation Development
$
$
Total
$
- 14,748,819
- 14,748,819
- 14,748,819
- 14,748,819
(1,679)
-
(4,107)
-
-
(5,786)
1,259,093
(893,309)
-
-
(25,051)
340,733
(3,723,502)
(3,130,618)
-
162,135
(5,756,952)
(12,448,937)
(2,466,088)
(4,023,927)
(4,107)
162,135
(5,782,003)
(12,113,990)
556,202
(11,557,788)
54,022,045 46,411,160
- 100,433,205
1,088,122
101,521,327
- 15,821,268
- 15,821,268
39,055,344
1,798,884
56,675,496
Accounting policy for operating segments
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and
incur expenses, whose operating results are regularly reviewed by the entity’s chief operating decision makers ("CODM") to
make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial
information is available. This may include start-up operations which are yet to earn revenues.
Operating segments are presented using the 'management approach', where the information presented is on the same basis
as the internal reports provided to the CODM.
Operating segments that meet the quantitative criteria as prescribed by AASB 8 Operating Segments are reported separately.
However, an operating segment that does not meet the quantitative criteria is still reported separately where information
about the segment would be useful to users of the financial statements.
Information about operating segments that are below the quantitative criteria are combined and disclosed in a separate
category for “all other segments”.
Note 8. Revenue from contracts with customers
Revenue
Revenue from contracts with customers
66
Consolidated
30 June
2019
$
30 June
2018
$
27,819,335 14,748,819
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 8. Revenue from contracts with customers (continued)
Disaggregation of revenue
The Group generated revenue from the sale of petroleum products, which are derived from the same production process,
have materially similar performance obligations and are for goods that have been transferred at a point in time. Therefore,
no disaggregation of revenue by product line or recognition method has been presented.
Revenue from contracts with customers:
Sale of petroleum products (Kincora Project)
Accounting policy for revenue
The Group recognises revenue as follows:
Revenue from contracts with customers
Consolidated
30 June
2019
$
30 June
2018
$
27,819,335 14,748,819
Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange
for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a
customer; identifies the performance obligations in the contract; determines the transaction price which takes into account
estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance
obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and
recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer
of the goods or services promised.
Revenue recognition with respect to the Group's specific business activities are as follows:
Sale of goods
The Group satisfies its performance obligation at the point in time when control of oil and gas products has transferred to the
customer. Specifically:
- for oil and LPG sales this is when the products are collected by truck at the production site; and
- for gas sales this is at the point of the custody transfer meter at Run 2 of the Roma to Brisbane Pipeline (RBP).
Revenue on sale of goods is variable depending on physical production amounts, and is due by the customer within 30 days
from the end of the invoiced month.
Interest
Interest revenue is recognised as interest accrues using the effective interest rate method. This is a method of calculating
the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to
the net carrying amount of the financial asset.
67
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 9. Expenses (continued)
Note 9. Expenses
Loss before income tax includes the following specific expenses:
Cost of sales
Operating expenses
Depreciation
Plant and equipment
Motor vehicles
Office equipment
Oil and Gas assets - classified as pre-production costs
Oil and Gas assets - classified as cost of goods sold
Total depreciation
Impairment
Exploration and evaluation
Net foreign exchange (gains)/ loss
Net foreign exchange loss
Superannuation expense(*)
Defined contribution superannuation expense
Share-based payments expense
Share-based payments expense
Employee benefits expense excluding superannuation
Employee benefits expense excluding superannuation
Consolidated
30 June
2019
$
30 June
2018
$
19,018,113 10,773,299
3,042
-
15,721
-
1,116,869
14,385
120
5,962
136,457
722,027
1,135,632
878,951
71,329
4,107
(54,702)
16,126
599,120
224,549
42,136
341,018
7,707,593
2,824,452
68
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 10. Income tax
(a) Component of income tax expense (benefit)
Income tax expense (benefit) is made up of:
Deferred tax
Aggregate income tax expense/(benefit)
The prima facie tax on profit / (loss) before income tax is reconciled to the income tax
expense as follows:
Loss before income tax (expense)/benefit
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Share-based payments
Expenses not deductible for tax purposes
Current year tax losses not recognised
Prior year over (under)
Deferred Tax Asset utilised following R&D cash back
Income tax expense/(benefit)
(b) Reconciliation of net deferred tax
Consolidated
30 June
2019
$
30 June
2018
$
687,507
(556,202)
687,507
(556,202)
(10,996,241)
(12,113,990)
(3,298,872)
(3,634,197)
12,641
351
102,306
5,351
(3,285,880)
3,102,461
147,659
723,267
(3,526,540)
2,101,344
141,117
727,877
687,507
(556,202)
Current year
Opening
Balance
1 July 2018
Net charged
to income
Net charge
to other
comprehen
sive
income
Net charged
to equity
Closing
Balance
30 June 2019
Deferred tax asset
Carried forward losses
Accruals/ Provisions
Property, Plant & Equipment (Armour)
Capital raising costs through P&L
Capital raising costs in equity
Provision for rehabilitation
Financial assets at fair value through other
comprehensive income
Amortisation of Convertible Notes
Amortisation of Tribeca Facility
12,196,242
145,081
12,572
203,757
65,523
1,378,837
(3,691,154)
60,803
-
(94,760)
(26,626)
-
-
-
-
-
-
-
-
-
-
-
49,410
-
8,505,088
205,884
12,572
108,997
88,307
1,378,837
143,830
834,970
-
-
526,561
264,504
638,097
-
-
-
-
-
781,927
1,361,531
264,504
Potential benefit at 30%
14,980,812
(2,960,672)
638,097
49,410 12,707,647
Deferred tax liability
Exploration & Evaluation assets
Oil & Gas assets
(13,551,293)
(1,429,519)
521,969
1,751,196
Potential benefit at 30%
(14,980,812)
2,273,165
-
-
-
-
-
-
(13,029,324)
321,677
(12,707,647)
Net deferred tax
-
(687,507)
638,097
49,410
-
Deferred tax assets not recognised
Unused tax losses
30,127,464
9,704,437
Tax benefit at 30%
9,038,239
2,911,331
-
-
- 39,831,901
- 11,949,570
69
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 10. Income tax (continued)
Prior year
Net charge to
other
comprehensiv
e income
Net charged
to income
Opening
Balance
1 July 2017
Net charged
to equity
Closing
Balance
30 June 2019
Deferred tax asset
Carried forward losses
Accruals/ Provisions
Property, Plant & Equipment (Armour)
Capital raising costs through P&L
Capital raising costs in equity
Provision for rehabilitation
Financial assets at fair value through other
comprehensive income
Amortisation of Convertible Notes
13,059,533
36,643
13,082
257,203
1,188
1,378,837
(863,291)
108,438
(510)
(53,446)
(16,963)
-
-
-
-
-
-
-
- 12,196,242
-
145,081
-
12,572
-
203,757
81,298
65,523
-
1,378,837
781,330
147,173
-
687,797
(637,500)
-
-
-
143,830
834,970
Potential benefit at 30%
15,674,989
(137,975)
(637,500)
81,298 14,980,812
Deferred tax liability
Exploration & Evaluation assets
Oil & Gas assets
(14,014,292)
(1,660,697)
462,999
231,178
Potential benefit at 30%
(15,674,989)
694,177
Deferred tax assets not recognised
Unused tax losses
Provision for rehabilitation
23,122,984
1,040,451
24,163,435
7,004,480
-
7,004,480
Tax benefit at 30%
7,249,031
2,101,344
-
-
-
-
-
-
-
-
-
-
(13,551,293)
(1,429,519)
(14,980,812)
- 30,127,464
-
1,040,451
- 31,167,915
-
9,350,375
In order to recoup carried forward losses in future periods, either the Continuity of Ownership Test (COT) or Same Business
Test (SBT) must be passed. The majority of losses are carried forward at 30 June 2019 under COT.
Deferred tax assets which have not been recognised as an asset, will only be obtained if:
(a) The Group derives future assessable income of a nature and of an amount sufficient to enable the losses to be realised;
(b) The Group continues to comply with the conditions for deductibility imposed by the law; and
(c) No changes in tax legislation adversely affect the Group in realising the losses.
(c) Petroleum Resources Rent Tax
On 19 March 2012, the Australian Government passed through the Senate, the Petroleum Resource Rent Tax Act 2012,
with application to certain profits arising from petroleum extracted in Australia. In broad terms, the tax was imposed on a
project-by-project basis. A bill was introduced in the Australian Parliament on 13 February 2019 to reform the Petroleum Rent
Resource Tax (PRRT) measures in Australia. Schedule 2 of the reform bill relates to onshore petroleum projects, and from
1 July 2019 PRRT will cease to apply. The reform subsequently received Royal Assent and was enacted on 5 April 2019
without any amendments.
Key judgement - deferred tax assets
In determining the recoverability of the recognised deferred tax assets, management has assessed that it will be utilised
through eligible expenditure under the research and development grant. To the extent that the Group does not have sufficient
eligible expenditure the ability to utilise the net deferred tax assets could be impacted.
70
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 10. Income tax (continued)
Accounting policy for income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable
income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the
assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
●
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor
taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the
timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable
future.
●
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax
assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the
carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable
that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against
current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on
either the same taxable entity or different taxable entities which intend to settle simultaneously.
Armour Energy Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an income tax
consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group
continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the 'separate
taxpayer within group' approach in determining the appropriate amount of taxes to allocate to members of the tax
consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax
consolidated group.
Accounting policy for Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of
the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
71
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 11. Earnings per share (continued)
Note 11. Earnings per share
Options are not considered dilutive as they are currently out of the money. Options may become dilutive in the future.
Consolidated
30 June
2019
$
30 June
2018
$
Loss after income tax attributable to the owners of Armour Energy Limited
(11,683,748)
(11,557,788)
Weighted average number of ordinary shares used in calculating basic loss per share
487,281,207
383,160,387
Weighted average number of ordinary shares used in calculating diluted loss per share
487,281,207
383,160,387
Number
Number
Basic loss per share
Diluted loss per share
Options are not considered dilutive due to losses made by the Group.
Options and conversion of convertible notes into equity may become dilutive in the future.
Accounting policy for earnings per share
Cents
Cents
(2.4)
(2.4)
(3.0)
(3.0)
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Armour Energy Limited, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Note 12. Current assets - Cash and cash equivalents
Cash on hand
Cash at bank and in hand
Other cash and cash equivalents
Consolidated
30 June
2019
$
30 June
2018
$
31,019
9,076,454
117,703
-
5,059,171
45,456
9,225,176
5,104,627
Other cash and cash equivalents includes bank accounts held by the Group as operator in joint operations in tenements.
72
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 12. Current assets - Cash and cash equivalents (continued)
Accounting policy for cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
Note 13. Cash flow information
Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax (expense)/benefit for the year
(11,683,748)
(11,557,788)
Consolidated
30 June
2019
$
30 June
2018
$
Adjustments for:
Depreciation and amortisation
Net loss on disposal of property, plant and equipment
Share-based payments
Write off of exploration and evaluation expenditure
Interest expense on borrowing facilities
Amortisation of borrowing facilities and issue costs
Unwinding of the discount on deferred consideration
Expenses classified as financing activities
Financing fees capitalised to loan
Cost of convertible note early redemption
Change in operating assets and liabilities (*):
(Increase) decrease in other current assets
Increase (Decrease) in trade and other payables
(Increase) in trade and other receivables
(Increase) decrease in deferred tax assets
(Increase) decrease in inventories
Increase (decrease) in provisions
Net cash used in operating activities
1,135,632
61,976
42,136
71,329
6,425,620
3,417,558
109,902
102,966
-
3,760,165
878,681
-
376,019
4,107
5,666,559
3,043,581
34,825
66,840
58,227
-
(374,030)
(2,640,558)
(380,707)
687,507
(648,881)
(1,073,505)
244,580
3,438,833
(2,086,816)
(556,202)
-
130,539
(986,638)
(258,015)
(*) Net of amounts relating to oil and gas, and exploration and evaluation assets
Equity settled share based payment transactions are disclosed in Note 29.
Apart from the above, there are no other non-cash financing and investing activities to disclose.
73
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 13. Cash flow information (continued)
(b) Reconciliation of liabilities arising from financing activities
Consolidated
Convertible
note liabilities
$
Convertible
note coupons
$
Lease
liabilities
$
Tribeca Loan
$
Corporate
Bonds
$
Total
$
Balance at 1 July 2017
Net cash from/(used in)
financing activities
Additions
Transaction costs
Equity settled
Amortisation
Accrued interest during the year
Capitalised interest
Other changes (*)
Balance at 30 June 2018
Net cash from/(used in)
financing activities
Transaction costs
Equity settled
Amortisation
Accrued interest during the year
Cost of convertible note early
redemptions
26,388,489
829,716
-
2,057,799
- 29,276,004
6,870,000
-
(412,200)
(457,627)
3,043,583
-
2,079,634
-
(2,872,609)
-
-
-
-
5,666,559
(2,079,634)
(566)
(146,983)
281,797
-
-
-
-
-
1,708
(1,000,000)
-
-
(1,116,026)
-
-
58,227
-
-
-
-
-
-
-
-
-
2,850,408
281,797
(412,200)
(1,573,653)
3,043,583
5,666,559
58,227
1,142
37,511,879
1,543,466
136,522
-
- 39,191,867
(43,388,436)
-
(154,126)
2,270,518
-
(6,205,956)
-
-
-
4,662,490
(69,355)
-
-
-
-
6,759,200
(137,219)
(2,893,012)
919,597
-
55,000,000
(2,350,866)
-
117,543
1,203,125
12,095,453
(2,488,085)
(3,047,138)
3,307,658
5,865,615
3,760,165
-
-
-
-
-
3,760,165
67,167
4,648,566 53,969,802 58,685,535
Balance at 30 June 2019
-
* Other changes from the year ending June 2017 include:
Convertible note coupon interest withheld from a noteholder due to no tax file number declared $566. Lease liabilities of
$1,708 represents the GST receivable due on payments.
Note 14. Current assets - Trade and other receivables
Trade receivables
Trade receivables - future receivables from JV parties
Other receivables
Withholding tax receivable
Consolidated
30 June
2019
$
30 June
2018
$
2,698,854
(30,676)
2,668,178
2,373,730
1,034
2,374,764
(3,432)
7,535
2,770
2,770
2,667,516
2,385,069
Allowance for expected credit losses
The Group has not recognised any expense in profit or loss in respect of the expected credit losses for the year ended 30
June 2019 (30 June 2018: Nil). Based on the historical recovery of receivables, the small number of customers and customer
payment obligations per gas sales agreements, the company considers that no allowance for expected credit losses is
appropriate for the Group.
74
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 14. Current assets - Trade and other receivables (continued)
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Consolidated
Not overdue
Expected credit loss rate
Carrying amount
Allowance for expected
credit losses
30 June
2019
%
30 June
2018
%
30 June
2019
$
30 June
2018
$
30 June
2019
$
30 June
2018
$
-
-
2,667,516
2,385,069
-
-
Accounting policy for trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30-
60 days.
Due to the short term nature of these receivables, their carrying value is assumed to approximate fair value. The maximum
exposure to credit risk is the carrying value of receivables. Collateral is not held as security, and the receivables are not
exposed to foreign exchange risk.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
As at 30 June 2019, included in trade receivables is one significant debtor accounting for approximately 72% (2018: 70%) of
the total trade receivables.
Note 15. Current assets - Inventories
Finished goods - at cost
Stock on hand - at cost
Consolidated
30 June
2019
$
30 June
2018
$
523,401
1,437,421
742,091
646,242
1,960,822
1,388,333
Accounting policy for inventories
Oil and Gas inventory is measured at the lower of cost and net realisable value. Net realisable value is the estimated selling
price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make
the sale.
The cost of Oil and Gas inventory includes direct materials, direct labour, transportation costs and variable and fixed overhead
costs related to production activities.
Consumable inventory on hand is stated at the lower of cost and net realisable value. Net realisable value is the estimated
recoverable price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary
to make the sale.
The cost of consumable inventory comprises purchase and delivery costs, net of rebates and discounts received or
receivable.
75
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 16. Current liabilities - Trade and other payables
Trade payables
Other tax liabilities
GST payable
Accrued expenses
Consolidated
30 June
2019
$
30 June
2018
$
2,613,838
33,827
114,576
1,378,071
5,596,251
566
41,751
1,982,729
4,140,312
7,621,297
Refer to note 28 for further information on financial risk management.
Accounting policy for trade and other payables
These amounts represent financial liabilities for goods and services provided to the Group prior to the end of the financial
year and which are unpaid.
Financial liabilities are carried at amortised cost and are initially measured at fair value including transaction costs. They are
subsequently measured at amortised cost using the effective interest rate method.
Details on how the fair value of financial instruments is determined are disclosed in note 27.
Trade payables are non-interest bearing and are generally on 30-60 days terms. Due to their short-term nature trade and
other payables are not discounted.
Note 17. Non-current assets - Exploration and evaluation assets
Consolidated
30 June
2019
$
30 June
2018
$
56,067,164 55,648,397
(6,745,271)
(6,790,424)
49,276,740 48,903,126
Consolidated
30 June
2019
$
30 June
2018
$
48,903,126 48,596,996
336,829
(26,592)
(4,107)
-
490,096
-
(71,329)
(45,153)
49,276,740 48,903,126
Exploration and evaluation assets
Less: Accumulated impairment
Movements in carrying amounts
Balance at the beginning of the year
Additions
Research & Development grants relating to exploration
Exploration expenditure written off
Provision for impairment
76
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 17. Non-current assets - Exploration and evaluation assets (continued)
Movements in the provision for impairment amounts
Balance at the beginning of the year
Provisions (raised)/ released
Provision for Impairment of Exploration and Evaluation assets
Consolidated
30 June
2019
$
30 June
2018
$
(6,745,271)
(45,153)
(6,745,271)
-
(6,790,424)
(6,745,271)
On 30 August 2016, the Victorian Government announced a permanent ban on the exploration and development of all
onshore unconventional gas in Victoria, including hydraulic fracturing and coal seam gas.
The Government also plans to legislate an extension of the current moratorium on the exploration and development of
conventional onshore gas until 30 June 2020, with hydraulic fracturing to remain banned. During this time, the Government
will undertake extensive scientific, technical and environmental studies on the risks, benefits and impacts of onshore gas.
Following this announcement, the Group carried out an impairment review of the Victorian exploration and evaluation assets,
and as a result, an impairment loss was recognised in the profit or loss in the year ended 30 June 2016. During the year an
additional provision of $45,153 was raised for capitalised Victorian exploration costs.
Key judgements - carrying value of exploration and evaluation assets
The Group performs regular reviews on each area of interest to determine the appropriateness of continuing to carry forward
costs in relation to that area of interest. These reviews are based on detailed surveys and analysis of drilling results performed
to balance date.
The directors have assessed that for the exploration and evaluation assets recognised at 30 June 2019, the facts and
circumstances do not suggest that the carrying amount of an asset may exceed its recoverable amount. In considering this
the Directors have had regard to the facts and circumstances that indicate a need for impairment as noted in Accounting
Standard AASB 6 “Exploration for and Evaluation of Mineral Resources”.
Accounting policy for exploration and evaluation assets
Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. Such
expenditures comprise net direct costs and an appropriate portion of related overhead expenditure but do not include
overheads or administration expenditure not having a specific nexus with a particular area of interest. These costs are only
carried forward to the extent that they are expected to be recouped through the successful development of the area or where
activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically
recoverable reserves and active or significant operations in relation to the area are continuing.
A regular review has been undertaken on each area of interest to determine the appropriateness of continuing to carry
forward costs in relation to that area of interest.
A provision is raised against exploration and evaluation expenditure where the Directors are of the opinion that the carried
forward net cost may not be recoverable or the right of tenure in the area lapses. The increase in the provision is charged
against the results for the year. Accumulated costs in relation to an abandoned area are written off in full against profit in the
year in which the decision to abandon the area is made.
When production commences, the accumulated costs for the relevant area of interest are transferred to oil and gas assets,
and amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.
77
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 18. Non-current assets - Oil and gas assets
Oil & gas assets - at cost
Less: Accumulated amortisation
Less: R&D grants relating to Oil & gas assets
Less: GAP grants relating to Oil & gas assets
Movements in carrying amounts
Balance at the beginning of the year
Additions
Disposals
Depreciation charge
R&D grants relating to Oil and Gas assets
Gas Acceleration Program grants relating to Oil and Gas assets
Consolidated
30 June
2019
$
30 June
2018
$
53,072,117 37,537,394
(1,814,145)
50,199,210 35,723,249
(2,872,907)
(2,416,043)
(5,438,836)
(7,854,879)
(2,416,043)
(2,319,595)
(4,735,638)
42,344,331 30,987,611
Consolidated
30 June
2019
$
30 June
2018
$
30,987,611 23,670,848
15,666,066 12,453,368
-
(858,484)
(1,958,526)
(2,319,595)
(73,237)
(1,116,869)
-
(3,119,240)
42,344,331 30,987,611
Accounting policy for oil and gas assets
Capitalised oil and gas assets are development costs and expenditures incurred to develop new wells; to define further
moveable hydrocarbons in existing tenement areas; to expand the capacity of the project and to maintain production.
Development costs also includes costs transferred from the exploration and evaluation phase once production commences
in the area of interest.
Amortisation of oil and gas assets is computed by the units of production basis over the estimated proved and probable
reserves. Proved and probable reserves reflect estimated quantities of economically recoverable reserves which can be
recovered in the future from known mineral deposits. These reserves are amortised from the date on which production
commences. The amortisation is calculated from recoverable proven and probable reserves and a predetermined percentage
of the recoverable measured, indicated and inferred resource. This percentage is reviewed annually.
Restoration costs expected to be incurred are provided for as part of development phase that give rise to the need for
restoration. These costs are amortised along with other capitalised oil and gas expenditures as described above.
78
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 18. Non-current assets - Oil and gas assets (continued)
Key judgement - oil and gas assets
The Group assesses impairment of oil and gas assets at each reporting date by evaluating conditions specific to the Group
that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined.
Where applicable, value-in-use calculations performed in assessing recoverable amounts incorporate a number of key
estimates.
Key judgement - government grants
The Group was a successful applicant under the Federal Government Gas Acceleration Program (GAP), which is designed
to provide businesses with funding grants to accelerate the responsible development of onshore natural gas for domestic
gas consumers. The GAP grant will enable the Group to accelerate development of its Kincora Project reserves by
accelerating the delivery of 3 production wells in the 2018/2019 drilling program. The Group received the first tranche of
funding in June 2018.
AASB 120 - Accounting for Government Grants and Disclosure of Government Assistance defines grants related to assets
as government grants whose primary condition is that an entity qualifying for them should purchase, construct or otherwise
acquire long-term assets. Subsidiary conditions may also be attached restricting the type or location of the assets or the
periods during which they are to be acquired or held. In accordance with AASB 120, Management has determined that it is
appropriate to deduct any grant monies received from the carrying amount of the asset, which is accounted for as an
exploration and evaluation asset where it meets the relevant recognition criteria.
Note 19. Non-current assets - Other financial assets
Financial assets at fair value through other comprehensive income
Financial assurances
Security deposits
Movements in financial assets at fair value through Other Comprehensive Income
Opening balance at 1 July
Fair Value adjustments through Other Comprehensive Income
Consolidated
30 June
2019
$
30 June
2018
$
2,125,010
6,988,181
1,403,594
4,252,000
6,952,907
1,355,594
10,516,785 12,560,501
Consolidated
30 June
2019
30 June
2018
4,252,000
(2,126,990)
2,127,000
2,125,000
2,125,010
4,252,000
Financial assets at fair value through other comprehensive income comprise investments in the ordinary capital of Lakes Oil
NL and Aus Tin Mining Limited, listed on the Australian Securities Exchange.
Financial assurances are cash backed bank guarantees.
Accounting policy for other financial assets
For equity securities that are not held for trading, the Group has made an irrevocable election at initial recognition to recognise
changes in fair value through other comprehensive income rather than profit or loss.
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair
value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset.
Financial assets with embedded derivatives are considered in their entirety when determining whether cash flows are solely
payment of principal and interest. Refer to Note 27 detail of the Group's fair value accounting policy.
79
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 19. Non-current assets - Other financial assets (continued)
Security deposits and financial assurances are measured at amortised cost.
Note 20. Non-current liabilities - Provision for restoration and abandonment
Restoration and abandonment
Restoration and abandonment
Movements in the carrying amount
Opening balance at 1 July
Increase in provision
Key judgement - provision for rehabilitation
Consolidated
30 June
2019
$
30 June
2018
$
6,688,065
6,688,065
Consolidated
30 June
2019
$
30 June
2018
$
6,688,065
-
6,603,722
84,343
6,688,065
6,688,065
The Group's restoration and abandonment obligations for the Surat Basin processing plant and associated exploration and
production fields is treated as a non-current liability in accordance with AASB 137 - Provisions, Contingent Liabilities and
Contingent Assets. The restoration and abandonment liability is valued by an independent expert in accordance with
legislative requirements, and is reviewed at each reporting period. For the provision recognised at 30 June 2019, the facts
and circumstances do not suggest that the carrying amount of the provision has changed.
Accounting policy for restoration provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is
probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present
obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments
of the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of
time is recognised in finance costs.
Provisions for rehabilitation and abandonment of Oil and Gas assets are measured at the cost of legal and constructive
obligations to restore operating locations in the period in which the obligation arises. The nature of rehabilitation activities
includes the removal of facilities, abandonment of wells and restoration of affected areas. Typically, the obligation arises
when the asset is installed at the production location.
A provision has been recognised for the costs to be incurred for the restoration and abandonment of the Surat Basin
processing plant and associated exploration and production fields, used for the production of oil, gas, LPG and condensate.
It is anticipated that the sites will require restoration in approximately 20 years.
80
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 21. Current liabilities - Deferred consideration
Deferred consideration payable
Accounting policy for deferred consideration
Consolidated
30 June
2019
$
30 June
2018
$
1,000,000
1,000,000
On 1 September 2015 Armour Energy (Surat Basin) Pty Ltd, a subsidiary of Armour Energy Ltd, entered into agreements to
acquire the Kincora Project from Oil Investments Pty Ltd (Origin Energy). The combined agreements totalled a cash purchase
price of $10 million plus $3 million deferred consideration, which was contingent on first gas. The Group achieved first gas in
September 2017, and the deferred consideration became due.
The deferred element consists of three $1m payments to be made on the 1st, 2nd and 3rd anniversary of first gas. The
second payment is due in September 2019 and $1m has been classified as a current liability.
Note 22. Non-current liabilities - Deferred consideration
Deferred consideration
Movement in provision
Non-current deferred consideration:
Opening balance
Increase in the discounted amount arising due to time and the effect of any change in the
discount rate
Transfers to current liabilities
Closing balance
Accounting policy for deferred consideration
Consolidated
30 June
2019
$
30 June
2018
$
919,143
1,809,240
Consolidated
30 June
2019
$
30 June
2018
$
1,809,240
2,774,415
109,903
(1,000,000)
34,825
(1,000,000)
919,143
1,809,240
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is
probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present
obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments
of the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of
time is recognised in finance costs.
81
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 23. Current liabilities - Convertible notes
Convertible note coupons payable (secured)
Convertible note coupons payable
Movements in carrying amounts
Opening balance at 1 July
Coupon interest accrued
Coupons repaid in cash
Coupons capitalised into notes
Amounts withheld from payments due to no TFN declarations
Convertible notes
Movements in carrying amounts
Reclassification of convertible note liability from non-current to current
Amortisation of convertible notes
Amortisation of issue costs
Conversion of debt into equity
Cost of early redemption of convertible notes
Repayment of convertible notes
Consolidated
30 June
2019
$
30 June
2018
$
-
1,543,466
Consolidated
30 June
2019
$
30 June
2018
$
1,543,466
4,662,490
(6,205,956)
-
-
829,716
5,666,559
(2,872,609)
(2,079,634)
(566)
-
1,543,466
Consolidated
30 June
2019
$
30 June
2018
$
37,511,879
1,755,204
515,314
(154,126)
3,760,165
(43,388,436)
-
-
-
-
-
-
-
-
Terms and security disclosures
Prior to redemption on 29 March 2019, the convertible notes were secured with a first ranking security over all the assets of
Armour Energy Ltd.
The principal terms of the Convertible notes were as follows:
●
●
●
Number of notes issued - 375,200,950 (as at 30 June 2018)
Face value of $0.11 per convertible note
Interest paid half yearly in arrears and the interest may be paid in certain circumstances at Armour's election by the
issue of further convertible notes
Maturity Date of 30 September 2019
Conversion at any time at the convertible note holder's election into one ordinary share in Armour subject to usual
adjustment mechanisms in certain circumstances
●
●
Early redemption of convertible notes
On 29 March 2019 the Group announced repayment of all outstanding convertible notes, together with an agreed early
termination amount, through a refinancing transaction involving the issue of $55 million of new corporate bonds.
All outstanding notes were redeemed for an amount of 103.25% of their face value (with the exception of one noteholder,
M.H. Carnegie who had 110% of their face value redeemed), along with all accrued but unpaid interest calculated up to the
date of redemption. The difference between the fair value of the convertible notes at the redemption date and the amortised
cost at redemption date, is shown in the statement of profit or loss as a finance cost.
82
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 23. Current liabilities - Convertible notes (continued)
Accounting policy for convertible notes
Financial liabilities carried at amortised cost are initially measured at fair value including transaction costs. They are
subsequently measured at amortised cost using the effective interest rate method.
The Group’s convertible notes have been treated as non-derivative financial liability carried at amortised cost. On initial
recognition of the convertible note, the liability and equity components are identified and separately measured.
The fair value of the liability component of the convertible notes is deducted from the fair value of the instrument as a whole,
and the residual amount is recognised as an equity conversion right and not subsequent remeasured. The liability is
subsequently recognised on an amortised cost basis until extinguished on conversion or maturity of the notes.
Details on how the fair value of financial instruments is determined are disclosed in note 27.
Key judgement - convertible notes
The Group's convertible notes have been treated as a financial liability, in accordance with the principles set out in AASB 9.
The key criterion for liability classification is whether there is an unconditional right to avoid delivery of cash for another
financial asset to settle the contractual obligation. The terms and conditions applicable to the convertible notes require the
Group to settle the obligation in either cash, or in the Company's own shares.
In the prior year the convertible notes were convertible into ordinary shares of the parent entity, at the option of the holder,
or repayable on 30 September 2019. The conversion rate is one share for each note held, but subject to adjustments for
reconstructions of equity. Management determined that these terms give rise to a compound financial instrument having
characteristics of both equity and liability. The initial fair value of the liability portion of the notes was determined using a
market interest rate for an equivalent non-convertible note at the issue date. The liability is subsequently recognised on an
amortised cost basis until extinguished on conversion or maturity of the notes. The remainder of the proceeds is allocated to
the conversion option and recognised in shareholders’ equity, net of income tax, and not subsequently remeasured.
Note 24. Current liabilities - Borrowings
FIIG Corporate Bond (accrued interest)
Current lease liability
Note 25. Non-current liabilities - Borrowings
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Consolidated
30 June
2019
$
30 June
2018
$
1,203,125
38,381
-
69,355
1,241,506
69,355
83
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 25. Non-current liabilities - Borrowings (continued)
Tribeca Loan Facility
FIIG Corporate Bonds
FIIG Corporate Bonds - issue costs
Lease liability
Consolidated
30 June
2019
$
30 June
2018
$
4,648,566
55,000,000
(2,233,323)
28,786
-
-
-
67,167
57,444,029
67,167
Refer to note 28 for further information on financial risk management.
The Group complied with all covenant requirements of the Tribeca loan facility and FIIG Corporate bonds during the year.
Corporate Bond facility
Movement in carrying amounts:
Face value of corporate bond facility
Issue costs of corporate bond facility
Amortisation of bond facility costs
Tribeca loan facility
Movement in carrying amounts
Face value of loan facility
Issue costs of loan facility
Other equity securities - value of conversion rights, net of issue costs
Amortisation of loan facility
Amortisation of issue costs
Consolidated
30 June
2019
$
30 June
2018
$
55,000,000
(2,350,866)
117,543
52,766,677
-
-
-
-
Consolidated
30 June
2019
$
30 June
2018
$
6,759,200
(137,218)
(2,893,012)
895,986
23,610
4,648,566
-
-
-
-
-
-
Facility terms and security disclosures
Corporate bond facility
On 29 March 2019, Armour Energy Limited announced settlement of a new $55 million corporate bond facility, refinancing
all outstanding convertible notes on issue, which were due for redemption in September 2019. The bond also provided
additional funding for exploration and general working capital.
The main terms of the new corporate bond are as follows:-
●
Issue date of 29 March 2019, with 55,000 new $1,000 corporate bond notes issued raising a total of $55,000,000, before
costs;
Notes will amortise by 52% from 29 March 2021 until and including the day immediately prior to the Maturity Date;
The notes are secured over all of the assets of the Group (other than its shares in Armour Energy International Pty Ltd);
Coupon rate attached is 8.75% per annum, payable quarterly in arrears;
The Maturity Date for the notes is five years from issue date.
●
●
●
●
84
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 25. Non-current liabilities - Borrowings (continued)
Tribeca loan facility
On 26 July 2018, Armour Energy Limited and its subsidiary, Armour Energy (Surat Basin) Pty Ltd (Armour Surat) had entered
into a credit facility agreement (Tribeca Facility Agreement) with Equity Trustees Limited (in its capacity as the trustee of the
Tribeca Global Natural Resources Credit Fund) and Tribeca Global Natural Resources Credit Master Fund (together Tribeca)
for the provision by Tribeca of an environmental bonding finance facility to Armour Surat (the Tribeca Facility). The Tribeca
Facility is secured by a guarantee from the Company, a second ranking specific security over two (2) bank accounts controlled
by Westpac Banking Corporation (the Credit Accounts) in the name of Armour Surat, and a second ranking featherweight
security interest over all the present and after-acquired property of Armour Surat.
The Tribeca Facility has a 9% per annum coupon rate payable by Armour Surat quarterly in arrears on amounts drawn and
in addition, the Company granted 41,000,000 unlisted options to Tribeca to subscribe for ordinary shares (Options) with an
exercise price of A$0.166. The Options will expire on the third anniversary of the first drawdown date under the Tribeca
Facility. A Black-Scholes model was used to determine the fair value of the share options issued at grant date. The following
assumptions were used to determine the fair value of each option:
Underlying share price
Volatility
Risk free rate
Expiry
Vesting
Dividend yield
Exercise price
The value of each option was determined to be $0.0485 per option.
$0.10
92.045%
2.10%
31 July 2021
Immediate
0%
$0.161
Accounting policy for borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
Note 26. Finance costs
Interest expense
Financing fees
Amortisation of debt facilities and associated issue costs
Unwinding of provision for contingent consideration
Gain (loss) on conversion of convertible notes to shares
Cost of convertible note early redemption
Consolidated
30 June
2019
$
30 June
2018
$
6,425,620
73,484
3,307,656
109,903
(20,519)
3,760,165
5,666,760
115,242
3,110,422
34,825
-
-
13,656,309
8,927,249
85
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 27. Fair value measurement
Fair value hierarchy
The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three level hierarchy,
based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated - 30 June 2019
Financial assets (liabilities) at fair value through other
comprehensive income
Total assets
Consolidated - 30 June 2018
Financial assets (liabilities) at fair value through other
comprehensive income
Total assets
Level 1
$
Level 2
$
Level 3
$
Total
$
2,125,010
2,125,010
-
-
-
-
2,125,010
2,125,010
Level 1
$
Level 2
$
Level 3
$
Total
$
4,252,000
4,252,000
-
-
-
-
4,252,000
4,252,000
With the exception of corporate bonds, the fair values of all other financial assets and liabilities approximate their carrying
amounts principally due to their short-term nature or the fact that they are measured and recognised at fair value.
The fair value of the corporate bond liability is based on the borrowing rate of 8.75%. Given that the corporate bond facility
settled in March 2019, the bond borrowing rate reflects current market interest rates.
Financial assets at fair value through other comprehensive income are measured based on quoted securities.
Accounting policy for fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair
value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes that the transaction will take place either: in the principal
market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming
they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and
best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable
inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers
between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value
measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not
available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and
reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is
undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where
applicable, with external sources of data.
86
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 28. Financial risk management
General Objectives, Policies and Processes
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them.
Further quantitative information in respect of these risks is presented throughout these financial statements.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure them from previous years unless otherwise stated in
this note.
The Group's financial instruments consists of deposits with banks, receivables, other financial assets, payables, borrowings
and corporate bonds.
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure
the effective implementation of the objectives and policies to the Group’s finance function.
The overall objective of the Board is to set polices that seek to reduce risk as far as possible without unduly affecting the
Group’s competitiveness and flexibility.
Risk management is carried out by senior finance executives ('finance') under policies approved by the board. These policies
include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits.
Finance identifies, evaluates and manages financial risks within the Group's operating units. Finance reports to the Board on
a monthly basis.
Further details regarding these policies are set out below.
Market risk
Market risk arises from the use of interest bearing, tradable and foreign currency financial instruments and investments in
listed securities. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (other price risk).
The Group is exposed to market risk on investments in equity securities, and these investments are measured at fair value
based on quoted market rates. Management considers market risk on this class of assets to be minor given the low value of
the assets, and stability of long term market rates.
The Group does not have any material exposure to market risk other than interest rate risk and price risk on available for
sale financial assets.
Price risk
The Group has short-term and longer term commercial contracts for the sale of its oil and gas products, some of which
contain pricing which is adjustable annually for the Consumer Price Index (CPI) and some of which are set with reference to
the variable Australian domestic gas price.
To manage these exposures, forward Australian domestic price forecasts are monitored regularly and reported to the board.
Commodity price risk
The Group is exposed to the risk of fluctuations in prevailing market commodity prices on the gas and associated liquid
products it produces. The Group is not of a size to have influence on gas or other petroleum product prices and is therefore
a price-taker in general terms. The Group manages this risk by continuously monitoring actual and forecast commodity prices
and analysing the impact these changes will have on profitability and cashflow.
Interest rate risk
Interest rate risk arises principally from cash and cash equivalents. The Company's corporate bond has a fixed coupon rate,
and thus no variable interest rate exposures. The objective of interest rate risk management is to manage and control interest
rate risk exposures within acceptable parameters while optimising the return.
For further details on interest rate risk refer to the tables below.
As at the reporting date, the Group had no variable rate borrowings outstanding.
87
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 28. Financial risk management (continued)
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.
The Group has a strict code of credit, including obtaining agency credit information, confirming references and setting
appropriate credit limits. The Group obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to
credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of
those assets, as disclosed in the statement of financial position and notes to the financial statements. The Group does not
hold any collateral.
Credit risk is reviewed regularly by the Board. It arises from exposure to receivables as well as through deposits with financial
institutions.
The Group's cash at bank is spread across multiple Australian financial institutions to mitigate credit risk, such as Macquarie
Bank (local currency short term rating A-2), ANZ (local currency short term rating A-1+) and Westpac (local currency short
term rating A-1+).
Financial assurances are held with both Westpac and Macquarie Bank.
Refer to note 14 for credit risk exposure of trade and other receivables.
Liquidity risk
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents)
and available borrowing facilities to be able to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously
monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Liquidity risk is the risk that the Group may encounter difficulties raising funds to meet financial obligations as they fall due.
The objective of managing liquidity risk is to ensure, as far as possible, that the Group will always have sufficient liquidity to
meets its liabilities when they fall due, under both normal and stressed conditions.
Liquidity risk is reviewed regularly by the Board.
For further details on liquidity risk refer to the tables below.
Financing arrangements
The Group had no access to undrawn borrowing facilities at the end of the reporting period (2018: nil).
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial
liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual
maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
88
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 28. Financial risk management (continued)
Consolidated - 30 June
2019
Non-derivatives
Non-interest bearing
Trade payables
Deferred consideration
Interest-bearing - fixed rate
Tribeca facility
Corporate bonds
Lease liability
Total non-derivatives
Consolidated - 30 June
2018
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Deferred consideration
Interest-bearing - fixed rate
Convertible notes payable
Lease liability
Total non-derivatives
Weighted
average
interest rate
1 year or less
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
%
$
$
$
-
-
4,025,736
1,000,000
-
-
-
1,000,000
$
-
-
Remaining
contractual
maturities
$
4,025,736
2,000,000
9.00%
8.75%
8.25%
608,328
-
7,412,528
4,812,500 21,607,265 47,637,735
-
10,484,945 29,048,579 48,637,735
28,786
38,381
-
8,020,856
- 74,057,500
-
67,167
- 88,171,259
Weighted
average
interest rate
1 year or less
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
%
$
$
$
-
-
-
7,621,297
178,808
1,000,000
-
-
1,000,000
-
-
1,000,000
$
-
-
-
Remaining
contractual
maturities
$
7,621,297
178,808
3,000,000
15.00%
8.25%
1,543,466 37,511,879
67,167
10,412,926 38,579,046
69,355
-
-
1,000,000
- 39,055,345
-
136,522
- 49,991,972
Interest payable on the corporate bonds is quarterly in arrears. The corporate bonds mature on 29 March 2024.The Group
manages liquidity risk by monitoring forecast cash flows and liquidity ratios such as working capital.
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Financial assets at fair value through other comprehensive income are measured based on quoted securities.
Note 29. Equity - Issued capital
Issued and paid up capital
30 June
2019
Shares
30 June
2018
Shares
30 June
2019
$
30 June
2018
$
Consolidated
Ordinary shares - fully paid
Share issue costs
Recognition of deferred tax asset relating to share issue costs
509,437,570
-
-
405,175,941 112,815,145 102,395,244
(8,291,395)
(7,993,030)
2,015,078
1,965,668
-
-
509,437,570
405,175,941 106,538,828 96,367,882
89
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 29. Equity - Issued capital (continued)
Movements in ordinary share capital
Details
Date
Shares
Issue price
$
Balance
Shares issued for cash ($0.076 per share -
Entitlement offer)
Shares issued for cash ($0.076 per share -
Placement)
DGR Loan amounts converted to shares ($0.076 per
share)
Trade payables converted into shares ($0.076 per
share)
Shares issued for cash received in prior year ($0.076
per share)
Share issue costs
Recognition of deferred tax asset relating to share
issue costs
Balance
Shares issued for cash (Entitlement Offer)
Shares issued under employment contracts
Conversion of convertible notes into shares
Conversion of convertible notes into shares (1 note
for 1.0047 ordinary shares)
Shares issued under employment contracts ($0.084
per share)
Shares issued under employment contracts ($0.096
per share)
Shares issued under employment contracts ($0.074
per share)
Share issue costs
Recognition of deferred tax assets relating to share
issue costs
1 July 2017
336,015,998
91,301,423
20 October 2017
20 October 2017-19
December 2017
36,624,559
$0.076
2,783,467
12,747,895
$0.076
968,840
14,684,560
$0.076
1,116,026
2,093,269
$0.076
159,089
3,009,660
-
$0.076
$0.000
228,734
(270,995)
-
$0.000
81,298
30 June 2018
10 August - 8
November 2018
7 November 2018
28 August 2018
405,175,941
96,367,882
101,384,299
209,425
980,176
$0.100
$0.100
$0.110
10,138,395
20,942
107,315
27 November 2018
427,555
$0.110
46,811
18 January 2019
543,040
$0.084
45,615
1 May 2019
352,564
$0.096
33,846
24 June 2019
364,570
-
$0.074
$0.000
26,978
(298,366)
-
$0.000
49,410
Balance
30 June 2019
509,437,570
106,538,828
Ordinary shares
Ordinary shares participate in dividends and the proceeds on winding up of Armour Energy Ltd. At shareholder meetings
each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on show of hands.
Options
The following share options were on issue at balance date.
90
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 29. Equity - Issued capital (continued)
Grant Date
29/03/2016
29/03/2016
29/03/2016
19/12/2016
19/12/2016
19/12/2016
29/05/2017
29/05/2017
29/05/2017
31/07/2017
31/07/2017
31/07/2017
31/07/2018
Expiry Date
29/03/2021
29/03/2021
29/03/2021
14/12/2019
14/12/2019
14/12/2019
29/05/2020
29/05/2020
29/05/2020
14/12/2019
14/12/2019
14/12/2019
31/07/2021
Number
Issue price
% vested
3,150,000
3,150,000
2,250,000
1,250,000
1,250,000
1,250,000
666,666
666,667
666,667
1,691,664
1,691,668
1,691,668
41,000,000
60,375,000
$0.195
$0.345
$0.495
$0.215
$0.265
$0.315
$0.215
$0.265
$0.315
$0.215
$0.265
$0.315
$0.161
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Capital risk management
The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide
returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost
of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce debt.
The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding
relative to the current Company's share price at the time of the investment. The Group is not actively pursuing additional
investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies.
The Group is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk
management decisions. There have been no events of default on the financing arrangements during the financial year.
Accounting policy for issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Note 30. Equity - Reserves
Financial assets at fair value through other comprehensive income reserve
Share-based payments option reserve
Performance rights reserve
Convertible note reserve
Tribeca Loan Option Reserve
91
Consolidated
30 June
2019
$
30 June
2018
$
(4,298,693)
4,674,376
-
-
2,893,012
(2,809,800)
4,632,240
250,000
5,402,322
-
3,268,695
7,474,762
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 30. Equity - Reserves (continued)
Financial assets at fair value through other comprehensive income reserve
The reserve is used to recognise increments and decrements in the fair value of financial assets at fair value through other
comprehensive income.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and Directors as part of their
remuneration, and other parties as part of their compensation for services.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Financial
assets at
fair value
through OCI
$
Share-
based
payments
option
reserve
$
Performanc
e rights
reserve
$
Performanc
e shares
reserve
$
Convertible
note
reserve
$
Equity
conversion
right -
Tribeca
Loan
$
Total
$
(4,297,300) 4,291,222
-
2,125,000
-
(637,500)
341,018
-
125,000
-
-
-
125,000 4,944,695
-
-
-
-
-
-
- 5,188,617
- 2,125,000
-
(637,500)
-
341,018
-
-
-
-
457,627
-
457,627
Consolidated
Balance at 1 July 2017
Revaluation - gross
Deferred tax
Share-based payments
Value of conversion rights -
convertible notes, net of issue
costs
Balance at 30 June 2018
Revaluation - gross
Deferred tax
Share-based payments
Value of conversion rights -
convertible notes, net of issue
costs
Value of conversion rights -
Tribeca loan, net of issue costs
Reserve transfer- expired
share-based payments
Transfer of conversion rights
on redemption of convertible
notes
(2,809,800) 4,632,240
-
(2,126,990)
-
638,097
42,136
-
-
-
-
-
-
-
-
-
Balance at 30 June 2019
(4,298,693) 4,674,376
125,000
-
-
-
125,000 5,402,322
-
-
-
-
-
-
- 7,474,762
- (2,126,990)
-
638,097
-
42,136
-
-
-
-
(125,000)
(125,000)
(20,520)
-
(20,520)
-
-
2,893,012
2,893,012
-
(250,000)
-
-
-
(5,381,802)
-
(5,381,802)
-
- 2,893,012 3,268,695
92
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 31. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 3:
Name
Ripple Resources Pty Ltd
Armour Energy (Victoria) Pty Ltd
Armour Energy (Surat Basin) Pty Ltd
Armour Energy (Queensland) Pty Ltd
Principal place of business /
Country of incorporation
Northern Australia / Australia
Victoria / Australia
Queensland / Australia
Queensland / Australia
Ownership interest
30 June
2019
%
30 June
2018
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
AEPGAS Pty Ltd was deregistered on 14 January 2018, and was incorrectly shown in the table above in the 2018 annual
report.
Note 32. Interests in joint operations
Information relating to joint operations that are material to the Group are set out below:
Name
ATP 2046 Sykes Block
ATP119P South - Waldegrave
ATP119P South - Snake Creek East
ATP212P - PL30
ATP212P - PL512, PPL22
Weribone Pooling Area
ATP 145P Bainbilla Block
ATP 754P
PEP 169
PEP 166
Kanywataba Block
Principal place of business /
Country of incorporation
Queensland, Australia
Queensland, Australia
Queensland, Australia
Queensland, Australia
Queensland, Australia
Queensland, Australia
Queensland, Australia
Queensland, Australia
Victoria, Australia
Victoria, Australia
Uganda
Ownership interest
30 June
2019
%
30 June
2018
%
10.00%
46.25%
25.00%
90.00%
84.00%
50.64%
24.75%
50.00%
51.00%
25.00%
16.82%
-
46.25%
25.00%
90.00%
84.00%
50.64%
24.75%
50.00%
51.00%
25.00%
16.82%
Accounting policy for joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the
assets, and obligations for the liabilities, relating to the arrangement. The Group entered into joint arrangement with various
parties for interest in exploration tenements as disclosed above. Exploration expenditures incurred in relation to these joint
operations have been capitalised in accordance with AASB 6 Exploration for and Evaluation of Mineral Resources.
93
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 33. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Other comprehensive income for the year, net of tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Financial assets at fair value through other comprehensive income reserve
Share-based payments option reserve
Performance rights reserve
Convertible note reserve
Tribeca Loan Option Reserve
Accumulated losses
Total equity
Parent
30 June
2019
$
30 June
2018
$
(18,597,163)
(15,037,944)
(1,488,893)
1,487,500
(20,086,056)
(13,550,444)
Parent
30 June
2019
$
30 June
2018
$
6,250,472
799,646
99,710,194 92,296,887
2,474,046
3,316,889
55,291,576 40,879,781
106,538,817 96,367,871
(2,809,800)
4,632,240
250,000
5,402,322
-
(52,425,527)
(4,296,703)
4,674,376
-
-
2,893,012
(65,390,883)
44,418,619 51,417,106
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
As at 30 June 2019, the parent entity is a guarantor for its subsidiary Armour Energy (Surat Basin) Pty Ltd for debts relating
to the Tribeca loan facility (2018: nil).
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 30 June 2018.
Note 34. Related party transactions
Parent entity
Armour Energy Limited is the parent entity of the Group, and listed on the ASX on 26 April 2012.
94
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 34. Related party transactions (continued)
Subsidiaries
Interests in subsidiaries are set out in note 31.
Joint Operations
Interests in joint ventures are set out in note 32.
Key management personnel
Disclosures relating to key management personnel are set out in note 35 and the remuneration report included in the
Directors' report.
Transactions with related parties
The following transactions occurred with related parties during the reporting period:
Payment for goods and services:
Payment for services from entity with significant influence - DGR Global Ltd (i)
Payment for services from other related party - Bizzell Capital Partners (ii)
Consolidated
30 June
2019
$
30 June
2018
$
456,000
144,500
456,000
704,100
(i) The Group has a commercial arrangement with DGR Global Ltd (a major shareholder) for the provision of various services,
whereby DGR Global provides resources and services including the provision of its administration staff, its premises (for the
purposes of conducting the Group's business operation), use of existing office furniture, equipment and certain stationery,
together with general telephone, reception and other office facilities ("Services").
In consideration for the provision of the Services, the Group pays DGR Global a monthly management fee of $38,000 (2018:
$38,000). For the year ended 30 June 2018 $456,000 (2018: $456,000) was paid or payable to DGR Global for the provision
of the Services. The total amount outstanding at year end was $88,930 (2018: $273,833). During the year, DGR Global held
95,809,298 convertible notes which were redeemed for cash on 29 March 2019 for a total of $11,661,140 (of which $10
million was reinvested into Corporate bonds). During the year, DGR Global was also paid interest on their convertible notes
of $1,572,191. As at 30 June 2019 DGR Global held 8,750 corporate bonds totalling $8,750,000, purchased on the same
terms and conditions as other bondholders.
(ii) Mr Stephen Bizzell (a Director) is the Chairman of boutique corporate advisory and funds management group Bizzell
Capital Partners Pty Ltd. The Group entered into an agreement with Bizzell Capital Partners Pty Ltd as Lead Manager for
the capital raising program detailed in an ASX announcement on 16 December 2016. Under the agreement, a management
fee was payable of one (1) percent of the funds raised under the offer, a placement fee of five (5) percent of all new shares
issued, an underwriting fee of five (5) percent of the value of shares underwritten in the entitlement offer, and an option fee
of five (5) million options were issued.
During the year, Bizzell Capital Partners held 5,000,000 underwriting options which expired on 30 August 2018, as well as
10,130,239 convertible notes which were redeemed for cash on 29 March 2019 for a total of $1,275,610. During the year,
Bizzell Capital Partners was also paid interest on their convertible notes of $164,859. On 29 March 2019, Bizzell Capital
Partners purchased 100 $1,000 corporate bonds in the FIIG refinance (refer to borrowing disclosures). As at 30 June 2019,
Bizzell Capital Partners held nil options, nil convertible notes, and 100 corporate bonds (2018: 5,000,000 underwriting
options, 10,130,239 convertible notes, and nil corporate bonds). The corporate bonds were purchased on the same terms
and conditions as all other bondholders.
As detailed in 'Events after the reporting period', Armour Energy completed a private placement which raised gross proceeds
of $4 million via the allotment of 80 million shares, with attaching unlisted options. Bizzell Capital Partners managed the
private placement and is entitled to a capital raising fee on arm's length terms. Bizzell Capital Partners is also entitled to
receive an allotment of 8 million unlisted options exercisable at 8 cents through to 30 September 2023, subject to a resolution
to be put to shareholders at the Company's November 2019 Annual General Meeting.
During the year ended 30 June 2019, the Group also paid Bizzell Capital Partners corporate advisory fees of $55,625 for his
involvement in the 2018 entitlement offer, and 2019 refinance of convertible notes (2018: nil).
95
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 34. Related party transactions (continued)
Samuel Holdings Pty Ltd
Samuel Holdings Pty Ltd is an entity associated with the Company's Chairman, Nicholas Mather. Samuel Holdings held
9,813,550 convertible notes which were redeemed for cash on 29 March 2019 for a total of $1,194,427. During the year,
Samuel Holdings was also paid interest on their convertible notes of $159,705.
Samuel Holdings Pty Ltd and Bizzell Capital Partners
In August 2019, Armour completed a entitlement offer fully underwritten by Samuel Holdings Pty Ltd (as trustee) .Samuel
Holdings was paid a $1 underwriting fee, and a 3% sub-underwriting fee was payable by Armour on written sub-underwriting
commitments. Bizzell Capital Partners held a sub-underwriting agreement and was responsible for any selling fees, stamping
fees and sub-underwriting fees it had to pay out of the fees to other brokers or to sub-underwriters of the offers. The gross
fees paid under this agreement to Bizzell Capital Partners for the year ended 30 June 2019 was $144,500 (2018: $704,100).
Company debt instruments held by key management personnel
The number of convertible notes in the Company held during the financial year by each director and other members of key
management personnel of the Group, including their personally related parties, is set out below:
Convertible Note holdings
Nicholas Mather
Stephen Bizzell
Roger Cressey
Karl Schlobohm
Priy Jayasuriya
Received as
Balance at
the
start of the
year
9,813,550
10,130,239
2,594,911
632,951
527,460
23,699,111
part of
Disposals/
remuneration
Additions
other (*)
Balance at
the
end of the
year
-
-
-
-
-
-
-
-
-
-
-
(9,813,550)
(10,130,239)
(2,594,911)
(632,951)
(527,460)
-
(23,699,111)
-
-
-
-
-
-
* The Company refinanced the convertible notes on issue on 29 March 2019 and the notes were redeemed at their face
value. Refer to Note 23 for further details.
Early
Redemption
premium
$
Disposal
of convertible
notes
$
Interest
$
Total paid
during 2019
$
Convertible Note payments
Nicholas Mather
Stephen Bizzell
Roger Cressey
Karl Schlobohm
Priy Jayasuriya
161,037
166,233
21,467
42,582
8,655
35,083
36,216
9,277
2,263
1,886
1,079,490
1,114,326
285,440
69,625
58,021
1,275,610
1,316,775
316,184
114,470
68,562
399,974
84,725
2,606,902
3,091,601
Corporate bond holdings
Stephen Bizzell
Balance at
the start of
the year
Received as
part of
remuneration
Additions
(*)
Disposals/
Other
Balance at
the end of
the year
-
-
100
- 100
* On 29 March 2019 the Company issued 55,000 new $1,000 corporate bonds, some of which were subscribed for by key
management personnel. Refer to Note 23 for further details.
96
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 34. Related party transactions (continued)
Corporate bond payments
Stephen Bizzell
Interest
$
Additions
$
Disposals
$
Total paid
during 2019
$
2,127
-
-
2,127
All other directors and key management personnel, did not hold any debt instruments in the Company at the start, during or
at the end of the year.
Note 35. Key management personnel disclosures
Compensation
The aggregate compensation made to Directors and other members of key management personnel of the Group is set out
below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Short-term non-monetary benefits
Note 36. Current liabilities - Employee benefits
Employee benefit obligations
Accounting policy for employee benefits
Consolidated
30 June
2019
$
30 June
2018
$
1,607,495
75,796
22,019
66,956
1,722,891
99,971
228,652
-
1,772,266
2,051,514
Consolidated
30 June
2019
$
30 June
2018
$
309,040
130,249
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be
settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities
are settled. Expenses for non-accumulating sick leave are recognised when the leave is taken and measured at the rates
paid or payable
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
97
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 36. Current liabilities – Employee benefits (continued)
Long service leave
Employee benefits
Accounting policy for employee benefits
Consolidated
30 June
2019
$
30 June
2018
$
-
51,371
55,972
-
51,371
55,972
The liability for long service leave not expected to be settled within 12 months of the reporting date are recognised in non-
current liabilities, provided there is an unconditional right to defer settlement of the liability. The liability is measured as the
present value of expected future payments to be made in respect of services provided by employees up to the reporting date
using the projected unit credit method. Consideration is given to expected future wages and salary levels, experience of
employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting
date on Australian corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated
future cash outflows.
Note 38. Share-based payments
Types of share based payments
Employee Share Option Plan (ESOP)
Share options are granted to employees. The employee share option is designed to align participants' interests with those of
shareholders by increasing the value of the Armour Energy Ltd.’s shares.
When a participant ceases employment prior to the vesting of their share options, the share options are forfeited after 90
days unless cessation of employment is due to termination for cause, whereupon they are forfeited immediately or death.
The Group prohibits KMP's from entering into arrangements to protect the value of unvested ESOP awards.
The contractual life of each option granted is generally three (3) years. There are no cash settlement alternatives. Each
option can be exercised from vesting date to expiry date for one share with the exercise price payable in cash.
Summary of share based payment plans
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share based
payment share options granted during the year under the employee share option plan.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Expired during the year
2019
WAEP
2019
Number
2018
WAEP
2018
Number
$0.29 22,875,000
$0.00
-
(5,500,000)
$0.27
-
$0.00
$0.16 15,250,000
$0.27
9,075,000
$0.50
(900,000)
$0.30
(550,000)
Outstanding and exercisable at the end of the year
17,375,000
22,875,000
There were no options issues to employees and Directors under the Armour Energy Employee Share Option Plan during
2019 (2018: 9,075,000). The options outstanding as at 30 June 2019 have a weighted average remaining contractual life of
1.09 years and exercise price of $0.30.
98
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 38. Share-based payments (continued)
Other option issues
The following table illustrates the number of, and movements in, other options issued for commercial consideration during
the year.
Balance at the start of the year (i)
Granted during the year (ii)
Expired during the year
Consolidated
30 June
2019
$
30 June
2018
$
7,000,000
41,000,000
(5,000,000)
-
7,000,000
-
43,000,000
7,000,000
(i) The opening balance of options were issued in 2017 in two tranches:
- 5,000,000 unlisted options to take up one ordinary share in Armour Energy Limited at an exercise price of $0.20. The
options were granted to Bizzell Capital Partners as an underwriting fee for nil cash consideration pursuant to a capital raising
mandate dated 23 August 2016. These options expired during the year.
- 2,000,000 unlisted options to take up one ordinary share in Armour Energy Limited at various prices. The options were
granted to MH Carnegie in lieu of any fees for their consent for the issue of further convertible notes, to change redemption
rights and in lieu of the requirement for the Company to issue options for a further MH Carnegie nominee to the Board.
(ii) On 31 July 2018 the Company issued 41,000,000 options to Tribeca Global Resources Credit Master Fund (Tribeca) at
an exercise price of $0.166 per ordinary share (adjusted to $0.161 per ordinary share following the 2018 entitlement issue).
The options were issued as part of the agreement for Tribeca to provide a $6.8 million environmental bonding funding facility
(see the financial liabilities note for further details).
Share based payment expense
Consolidated
30 June
2019
$
30 June
2018
$
Option expense
Employee share option expense recognised in the statement of profit or loss and other
comprehensive income
42,136
236,768
Accounting policy for share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the
rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash
is determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using
the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution,
the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk
free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group
receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting
period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate
of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit
or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous
periods.
99
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 39. Commitments
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Oil and Gas assets
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Lease commitments - finance
Committed at the reporting date and recognised as liabilities, payable:
Within one year
One to five years
Total commitment
Less: Future finance charges
Net commitment recognised as liabilities
Representing:
Lease liability - current (note 23)
Lease liability - non-current (note 25)
Exploration Expenditure Commitments
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
Consolidated
30 June
2019
$
30 June
2018
$
6,333,398 13,234,796
207,873
150,871
169,610
274,573
358,744
444,183
38,381
28,786
69,355
67,167
67,167
-
136,522
-
67,167
136,522
-
28,786
-
67,167
28,786
67,167
18,442,987 95,964,000
37,477,283
3,649,478
1,810
-
55,922,080 99,613,478
Capital Commitments
The capital commitments relate to executed Gas Acceleration Program (GAP) with the federal government, which aims to
increase gas supply to the domestic gas market. The agreed work program consists of accelerating one production well and
drilling three additional production wells at the Group's Kincora Project.
Operating Lease Commitments
The operating lease is for nine motor vehicles, commenced in 2018 and is a 3-year lease with payments monthly in advance.
Either party may terminate the Master Facility Agreement by giving thirty (30) days’ written notice to the other party.
Finance Lease Commitments
Finance lease commitments relate to geological software licences. The liabilities compromise a 12 and 36 month lease. Upon
completion of the 12 and 36 month terms, a final payment of $1.00 will be required to finalise the conversion to a Perpetual
Licence.
100
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 39. Commitments (continued)
Exploration Commitments
The Group has certain obligations to expend minimum amounts on exploration in tenement areas. These obligations may be
varied from time to time and are expected to be fulfilled in the normal course of operations of the Group. The commitments
are as follows:
As at 30 June 2018, $93 million of the exploration commitments that were due within 12 months related to the Group's
Queensland tenement, ATP 1087. The Group lodged a special amendment with the Department of Natural Resources, Mines
& Energy to retain ATP 1087 and surrender a portion of the tenement, with a new term and work program. The special
amendment was successful, and the remaining $93 million of short-term commitments relating to the previous work program
was not required. The tenement was renewed with a new 4 year term and $5 million work program.
To keep tenements in good standing, work programs should meet certain minimum expenditure requirements. If the minimum
expenditure requirements are not met, the Group has the option to negotiate new terms or relinquish the tenements. The
Group also has the ability to meet expenditure requirements by joint venture or farm-in agreements.
Note 40. Contingent liabilities
Exploration Liabilities
Under the Company's native title agreement over EP 171 and EP 176, the Company is required to pay the greater of either
$10,000 or 3% of exploration costs on each anniversary date.
Under the Company's native title agreement over EP 174, EP 190, EP 191 and EP 192, the Company is required to pay the
greater of either $5,000 or 3% of exploration costs on each anniversary date.
Under the Company's native title agreement over ATP 1087, the Company is required to pay the greater of either
$50,000, or:
• 3% of exploration costs within the preceding financial year; and
• 1.5% of the exploration costs incurred in the Shared Area within the preceding financial year.
Other than the above, the Group had no other contingent assets or liabilities at 30 June 2019.
Note 41. Events after the reporting period
Authority to Prospect ATP2046 Formally Awarded to Armour Energy Limited and Australia Pacific LNG Pty Ltd Joint Venture
As announced on 18 July 2019, the Queensland Department of Natural Resources, Mines and Energy (DNRME) formally
awarded the Authority to Prospect – ATP2046 to a Joint Venture between Armour Energy Limited (10%) and Australia Pacific
LNG Pty Ltd (APLNG) (90% and Operator).
ATP2046 is an 18km2 coal seam exploration tenure located 22km south-west of Chinchilla and adjoins APLNG’s Talinga
Project. The block was part of the first national tender where gas has been designated to be supplied exclusively to Australian
domestic manufacturers, an initiative by the Queensland Government.
Resignation of CEO
Mr Roger Cressey, CEO of Armour Energy Limited resigned on 24 July 2019.
2019 Well Program
As announced on 19 August 2019, the Group has entered into a contract for the drilling of two development wells for the
Group's 100% owned Kincora Gas Project. This work program is a continuation of the 2018-2019 Phase 3 growth strategy
which includes drilling of new wells and workover and stimulation of existing wells. These activities, together with any
necessary further work on the Kincora Gas Plant, will assist Armour in progressing to its targeted 20 TJ/day gas sales.
101
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 41. Events after the reporting period (continued)
The wells have been designed to a depth of approximately 2,100-meters (measured depth) and will target liquid-rich,
overpressured Permian and Triassic conventional and tight gas sandstones. The first well, Myall Creek North 1 was spudded
on 23 September 2019.
Capital raising
On 23 September 2019 the Company announced the successful close of a $4 million private placement via the allotment of
80 million shares at a price of 5 cents per share. Investors will also receive one (1) unlisted option exercisable at 8 cents per
share (through to 30 September 2023) for every two (2) shares subscribed for in the placement. The proceeds of the private
placement will be used by the Company to progress its Kincora Project field program, meet the costs of the raising, and for
general working capital purposes.
The Company proposes to undertake an entitlement offer to existing shareholders on the same terms as the placement, and
will release full details in due course.
No other matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect the
Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Note 42. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by BDO Audit Pty Ltd and related
entities.
Audit services - BDO Audit Pty Ltd
Audit or review of the financial statements
Other services - BDO Audit Pty Ltd and related entities
Financial Modelling services
Grant funding audit
Consolidated
30 June
2019
$
30 June
2018
$
87,552
74,000
16,001
3,200
10,000
-
19,201
10,000
106,753
84,000
Note 43. Accounting Policies
New and Revised Accounting Standards and Interpretations
(a) Adoption of new and revised accounting standards
The accounting policies adopted are consistent with those of the previous financial year except as follows:
The impact on adoption of AASB16 from 1 July 2019 is set out below.
102
Armour Energy Limited
Notes to the consolidated financial statements
30 June 2019
Note 43. Accounting Policies (continued)
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB
117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions,
a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of the unavoidable
future lease payments to be made over the lease term. A liability corresponding to the capitalised lease will also be
recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any
future restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be replaced with a
depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised lease
liability (included in finance costs).
Upon recognition on 1 July 2019, a 'right-of-use' asset of $540,078 will be capitalised in the statement of financial position,
with accumulated depreciation of $212,402. A corresponding lease liability will be recognised, comprising $174,728 current
and $115,905 non-current. The balance of $37,042 will be taken up in accumulated losses, which represents the difference
between operating lease payments and the finance amortisation for the leases for the previous financial years.
Australian Accounting Standards and Interpretations that have been recently issued or amended but are not yet effective
have not been adopted by the Group for the annual reporting period ended 30 June 2019. On evaluating these standards
and interpretations, management do not expect a material impact upon the financial statements on their adoption.
The Group anticipates that all of the relevant pronouncements will be adopted in the Group’s accounting policies for the first
period beginning after the effective date of the pronouncement. Information of new standards, amendments and
interpretations that are expected to be relevant to the Group’s financial statements is provided below.
New Accounting Standards and Interpretations
Effective date for Standard /
Group
AASB 2017-4 Amendments to Australian Accounting Standards – Uncertainty over Income
Tax Treatments
Interpretation 23 Uncertainty Over Income Tax Treatments
1 Jan 2019 / 1 July 2019
1 Jan 2019 / 1 July 2019
The adoption of the remaining standards and interpretations in the above table has been assessed and will not have any
material impact on the current or any prior period and is not likely to materially affect future periods.
103
Armour Energy Limited
Directors' declaration
30 June 2019
The Directors' of the Group declare that:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 3 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June 2019
and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the Directors
___________________________
Nicholas Mather
Chairman
27 September 2019
Brisbane
104
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Armour Energy Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Armour Energy Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2019, the
consolidated statement of profit and loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial report, including a summary of significant accounting policies and the directors’
declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
a) Giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial
performance for the year ended on that date; and
b) Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Material uncertainty related to going concern
We draw attention to Note 4 in the financial report which describes the events and/or conditions which
give rise to the existence of a material uncertainty that may cast significant doubt about the group’s
ability to continue as a going concern and therefore the group may be unable to realise its assets and
discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this
matter.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation.
105
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. In addition to the matter described in the Material uncertainty
related to going concern section, we have determined the matters described below to be the key audit
matters to be communicated in our report.
Carrying value of oil and gas assets
Key audit matter
How the matter was addressed in our audit
Refer to Note 18 in the financial report.
Our procedures, amongst others, included:
The Group has significant oil and gas assets
following the restart and commissioning of
the Kincora Gas Plant in Surat Basin,
Queensland.
Due to the quantum of this asset and the
subjectivity involved in assessing the asset
for impairment, we have determined this
is a key audit matter.
•
•
•
•
•
•
Evaluating management’s assessment if any
impairment indicators in accordance with AASB 136
Impairment of Assets have been identified across the
Group’s oil and gas projects.
Comparing oil and gas price assumptions against
third-party forecasts, peer information and relevant
market data to determine whether the Group’s
forecasts were within the range.
Reviewing contracts and agreements with the
Group’s external customers to understand the
existing level of contracted oil and gas sales.
Reviewing the Group’s reserve estimation against
reports provided by external experts and assessing
their scope of work and findings.
Performing sensitivity analysis on key assumptions
used by the Group to assess the impact on
forecasted cash flows.
Selecting a sample of capitalised expenditure
additions and agreeing to supporting documentation,
as well as ensuring they qualify for recognition as
assets under AASB 116 Property, Plant and
Equipment.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation.
106
Carrying value of exploration and evaluation assets
Key audit matter
How the matter was addressed in our audit
Refer to Note 17 in the financial report.
Our procedures, amongst others, included:
The carrying value of the Group’s
exploration and evaluation asset is
impacted by the Group’s ability, and
intention, to continue to explore.
The carrying value of the exploration and
evaluation assets was a key audit mater
due to:
•
•
The significance of the total balance
The level of procedures undertaken
to evaluate managements
application of the requirements of
AASB 6 Exploration for the
Evaluation of Mineral Resources
(‘AASB 6’) in light of any indicators
of impairment that may be present.
•
•
•
•
Obtaining from management a schedule of areas of
interest held by the Group and selecting a sample of
tenements and assessing as to whether the Group had
rights to tenure over the relevant exploration areas by
obtaining supporting documentation such as license
agreements and also considering whether the Group
maintains the tenements in good standing.
Reviewing budgets and evaluating assumptions made
by the Group to ensure that substantive expenditure
on further exploration for and evaluation of the
mineral resources in the areas of interest were
planned.
Assessing management's determination that
exploration activities have not yet progressed to the
point where the existence or otherwise of an
economically recoverable mineral resource may be
determined through discussions with management,
and review of the Group's ASX announcements and
minutes of directors’ meetings.
Reviewing the directors' assessment of the carrying
value of the exploration and evaluation costs,
ensuring that management have considered the effect
of potential impairment indicators, commodity prices
and the stage of the Group's project against AASB 6.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation.
107
Accounting for early redemption of convertible notes
Key audit matter
How the matter was addressed in our audit
Refer to Note 23 in the financial report.
Our procedures, amongst others, included:
On 29 March 2019, the Group early
redeemed all outstanding convertible
notes, through a refinancing transaction
involving the issue of $55 million of new
corporate bonds.
The early redemption premium paid was
accounted for as a substantial modification
of the terms, as a result the difference
between the carrying amount extinguished
and the consideration paid was recognised
in the profit or loss.
This was a key audit matter because of the
non-routine nature and the fact that the
determination of whether a substantial
modification exists was complex.
•
•
•
•
•
•
•
Inspecting board minutes and other appropriate
documentation of authorisation to assess whether
the transaction was properly authorised.
Reading the convertible note agreement, early
redemption notice, special resolution and note deed
to understand the terms and conditions of early
redemption.
Reviewing management’s assessment whether the
inclusion of issuer’s right to early redeem and
payment of early redemption premium constitute a
substantial modification to the terms of convertible
notes under AASB 9 Financial Instruments.
Engaging our internal accounting specialist to
confirm management’s accounting treatment is in
accordance with AASB 9.
Agreeing the payment as a result of early
redemption to supporting bank statements.
Recalculating the loss on early redemption of
convertible notes by comparing the carrying amount
of convertible notes extinguished and the
consideration paid.
Reviewing the adequacy of disclosures in the
financial statements.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2019, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation.
108
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_files/ar2.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 39 to 51 of the directors’ report for the
year ended 30 June 2019.
In our opinion, the Remuneration Report of Armour Energy Limited, for the year ended 30 June 2019,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit Pty Ltd
T J Kendall
Director
Brisbane, 27 September 2019
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation.
109
Armour Energy Limited
Tenement listing
30 June 2019
As at the date of this report, the Group has an interest in the following tenements:
OWNER
INTEREST
TYPE
PL14
PL 53
PL 70
PL 511
PL 227
PPL 3
PPL 20
PPL 63
Newstead Gas storage
PL 28
PL 69
PL 89
PL 320
PL 11 Waldegrave
PL 12 West
PL 11 Snake Creek East Exclusion Zone
PL 21
PL 22
PL 27
PL 71
PL 264
PL 30
PL 512
PPL 22
ATP 647
ATP 1190 (PCA157, Weribone Block)
ATP 1190 (PCA157, Bainbilla Block)
ATP 2028
ATP 2029
ATP 2030
ATP 2032
ATP 2034
ATP 2035
ATP 2041
PL2018‐1B* (now ATP2046)
ATP 1087
EP 171
EP 174
LOCATION
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
AE (SB) P/L
Armour Energy Ltd
100%
100%
100%
100%
100%
100%
100%
100%
100%
46.25%
46.25%
46.25%
46.25%
46.25%
46.25%
25%
100%
100%
100%
100%
100%
90%
84%
84%
100%
50.64%
24.75%
50%
100%
100%
100%
100%
100%
100%
10%
100%
100%
100%
Queensland
Northern Territory
Northern Territory
Armour Energy Ltd
Armour Energy Ltd
Armour Energy Ltd
110
TYPE
EP 176
EP 190
EP 191
EP 192
PEP 169
PEP 166
PRL2
EL 30817
EL 30818
EL 30494
EL 31012
EPM 19833
EPM 19835
EPM 19836
EPM 25504
EPM 25505
EPM 26018
EPM 26020
EPM 26022
EPM 25802
LOCATION
Northern Territory
Northern Territory
Northern Territory
Northern Territory
Victoria
Victoria
Victoria
Northern Territory
Northern Territory
Northern Territory
Northern Territory
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
Queensland
OWNER
INTEREST
100%
Armour Energy Ltd
100%
Armour Energy Ltd
100%
Armour Energy Ltd
Armour Energy Ltd
100%
Armour Energy Ltd 51%
Armour Energy Ltd 25%
Armour Energy Ltd 15%
100%
Ripple Resources P/L
Ripple Resources P/L
Ripple Resources P/L
Ripple Resources P/L
Ripple Resources P/L
Ripple Resources P/L
Ripple Resources P/L
Ripple Resources P/L
Ripple Resources P/L
Ripple Resources P/L
Ripple Resources P/L
Ripple Resources P/L
Ripple Resources P/L
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
*This was formally awarded as ATP2046 on 18th July 2018.
AE (SB) P/L =
Energy (Surat Basin) Pty Ltd EPM
Armour
Exploration
Permit ‐ Minerals
EL
EPP
ATP
PCA
PEP
PL
PPL
PRL
Exploration Licence
Exploration Permit ‐ Petroleum
Authority to Prospect
Potential Commercial Area
Petroleum Exploration Permit
Petroleum Lease
Petroleum Pipeline Licence
Petroleum Retention Lease
111
Armour Energy Limited
Shareholder information
30 June 2019
Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report is as
follows. The information is current as at 25 September 2019.
A. Distribution Schedule
Ordinary shares
Unlisted options
exercisable at
$0.195 on or before
29 March 2021
Number of
holders
Number of
shares
Number of
holders
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001+
Total
7,872
53
425,814
119
208
1,705,311
806 31,266,542
390 476,032,121
1,576 509,437,570
-
-
-
-
7
7
Number
of
options
-
-
-
-
3,150,00
0
3,150,00
0
Unlisted options
exercisable at $0.215
on various dates
Unlisted options
exercisable at $0.265
on various dates
Unlisted options
exercisable at $0.315 on
various dates
Number of
holders
Number of
options
Number of
holders
Number of
options
Number of
holders
Number of
options
-
-
-
11
8
19
-
-
-
591,666
3,016,664
3,608,330
-
-
-
11
8
19
-
-
-
591,667
3,016,668
3,608,335
-
-
-
11
8
19
-
-
-
591,667
3,016,668
3,608,335
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001+
Total
Unlisted options
exercisable at $0.345 on
or before 29 March 2021
Unlisted options
exercisable at $0.495 on
or before 29 March 2021
Unlisted options
exercisable at $0.161 on or
before 31 July 2021
Number of
holders
Number of
options
Number of Number of
holders
options
Number of
holders
Number of
options
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001+
Total
-
-
-
-
-
-
-
-
7 3,150,00
7 3,150,00
-
-
-
-
6
6
-
-
-
-
2,250,000
2,250,000
-
-
-
-
1
1
-
-
-
-
41,000,000
41,000,000
The number of security investors holding less than a marketable parcel of shares is 267 and they hold 1,063,551
securities.
112
Armour Energy Limited
Shareholder information
30 June 2019
B. Twenty Largest Holders
Ordinary shares
Number
held
111,899,712
34,803,530
30,440,000
22,275,072
15,695,862
14,552,601
9,794,933
7,055,905
7,000,000
6,907,895
6,894,520
6,238,301
5,094,773
5,000,000
4,630,147
4,605,000
4,319,000
4,169,000
4,149,273
3,598,376
309,123,900
509,437,570
% of
issued
shares
21.97
6.83
5.98
4.37
3.08
2.86
1.92
1.39
1.37
1.36
1.35
1.22
1.00
0.98
0.91
0.90
0.85
0.82
0.81
0.71
60.68
100.00
Ordinary shares
Number
held
111,899,712
34,803,530
30,440,000
% of
issued
shares
21.97
6.83
5.98
Name
DGR GLOBAL LIMITED
ROOKHARP CAPITAL PTY LIMITED
MR PAUL COZZI
TENSTAR TRADING LIMITED
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP
UBS NOMINEES PTY LTD
K J HAYES CORPORATION PTY LTD
ROOKHARP INVESTMENTS PTY LTD
TENSTAR TRADING LIMITED
CF2 PTY LTD
CPS CONTROL SYSTEMS PTY LIMITED
HAYES PASTORAL CORPORATION PTY LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
MR RONALD GEOFFREY PHILLIPS
J BARLOW CONSULTANTS PTY LTD
LGL TRUSTEES LIMITED
CHOICE INVESTMENTS DUBBO PTY LTD
SIXTH ERRA PTY LTD
Total of twenty Largest Holders
Total Shares Held
C. Substantial holders
The Company is aware of the following substantial holdings:
Name
DGR Global Limited
Rookharp Capital Pty Ltd
Mr Paul Cozzi
D. Voting rights
All ordinary shares carry one vote per share without restriction.
E. Restricted Securities
There are no restrictions over any security holdings as at 30 June 2019.
113