Annual
Report
for the year ended
30 June 2020
ARMOUR ENERGY LIMITED ABN 60 141 198 414
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Corporate Directory
Directors
Nicholas Mather
Stephen Bizzell
Roland Sleeman
Eytan Uliel
Executive Chairman
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Company Secretary
Karl Schlobohm
Registered Office /
Principal Place of Business
Postal / Contact Address
Share Registry
Auditor
Solicitors
Level 27
111 Eagle Street
BRISBANE QLD 4000
GPO Box 5261
BRISBANE QLD 4001
Link Market Services Limited
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
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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Contents Page
Corporate Directory ..................................................................................................................................2
Chairman’s Report ......................................................................................................................................4
Operating and Financial Review ................................................................................................................. 6
Directors’ Report ....................................................................................................................................... 22
Financial Report ..................................................................................................................................... 49
Notes to the Financial Statements ....................................................................................................... 53
Independent Auditor’s Report ................................................................................................................. 103
Further information .................................................................................................................................. 107
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Chairman’s Report
Dear Shareholders
Whilst the last 12 months have presented Armour Energy with a range of challenges, I remain confident in the Company’s
future prospects, particularly in light of the appointment of Brad Lingo as the Company’s CEO in June 2020. Brad has had
has a long and successful career in the Australian Oil and Gas exploration and production industry, most notably credited
as the driving force in the growth of Drillsearch Energy to a market capitalisation in excess of A$700 million prior to its
acquisition by Beach Energy in 2016. I look forward to working with Brad to achieve a similar outcome for Armour Energy
over the coming years.
In Amour’s latest Investor Presentation “Primed for growth and focused on delivery”, the Company has outline five priorities
which are focused on delivering Armours growth Strategy. By delivering on these priorities, Armour is fully focussed on
delivering value for shareholders and will enable the Company to significantly strengthen its balance sheet giving it the
ability to demonstrate the value of its high quality assets in each of its core operating areas – the Surat, the Northern Basin
and the Cooper Basin.
To assist with funding for future work programs and to help accelerate the repayment of Amour debt position, the Company
is actively progressing further asset transactions, specifically farming out the Northern Territory acreage and exploring
options for generating significant value from the Newstead Gas Storage Facility as the only independent, operational gas
storage facility . Delivering a similar outcome to the joint venture farmout to Santos for the North Queensland and the
Northern Territory South Nicholson Basin exploration tenements and securing a significant joint venture partner or other
transaction on these assets, will enable the Company to significantly sstrengthen and unencumber the balance sheet
allowing maximum capital and business flexibility.
Recent asset transactions with Santos (JV deal on part of the Company’s northern Australian acreage - $21 million cash
payments received, carried on $65 million work program) and APLNG ($4 million sale of Armour’s 10% interest in the
Murrungama Block) have provided the Company with additional working capital and paved the way for accelerated debt
payments. In August 2020, the Company made accelerated principal amortisation payments for the Senior Secured
Amortising Bonds of $5.3 million bringing the total amortisation payments made on these bonds of approximately $10
million since inception in June 2019.
In June 2020 Armour announced a $10 million capital raise via an initial unconditional share placement of $3.36 million,
an underwritten Accelerated Non-Renounceable Entitlement Offer raising $4.53 million and an additional conditional
placement targeting raising $2.1 million. Due to overwhelming demand from existing and third-party investors, the Board
has upsized the conditional placement component to approximately $7 million, subject to necessary approvals, bring the
total capital raise to $15 million. The additional capital will allow Armour to accelerate 2020 and 2021 work programs and
is a clear indication of support the Company has generated from existing and new institutional shareholders.
Also, the Company agreed to acquire all Oilex’s Cooper-Eromanga Basins exploration acreage. The Oilex transaction will
give Armour, a significant exposure to the Cooper-Eromanga Basin. The Cooper Basin is one of Australia’s most prolific
producing oil and gas provinces, producing 1.5 billion barrels of oil equivalent and notably, the historic core of Santos’
onshore Australian production base. The Cooper assets comprise a substantial footprint of exploration and production
licences on the oil rich Western and Northern Flanks of the Cooper Basin. Upon completion of the acquisition, Armour will
hold and operate the largest net petroleum exploration position in the South Australian Cooper-Eromanga Basins.
The Cooper-Eromanga Basins have historically high exploration success rates, low cost development pathways, and
remain under-explored and under-developed. Proven oil fairways transect and lie adjacent to the licence areas subject of
the proposed acquisition and the many nearby discoveries and fields provide analogues for future discoveries. I look
forward to bringing you results of the Company’s work programs in these new areas into the future.
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Over the next 12 months, Armour’s forward work program includes:
increasing its production at Kincora (Surat) through a six well stimulation program.
applying for production licences and field development plans approvals for Glyde, Cow Lagoon and Lamon Pass
in the Northern Territory, securing a JV partner for its remaining northern Australian acreage.
Undertaking minor above ground facility work to restart the Newstead Gas Storage Project and develop a plan to
substantially increase the Project’s storage injection and draw-down rates and expand the overall gas storage
capacity.
Kick-off exploration activity in the newly acquired Cooper-Eromanga Basins acreage with a view of high-grading
the current 3D seismic-controlled leads and prospects portfolio into an initial 3 to 5 well drill-ready exploration
program by CYE 2021.
Formulating an appraisal program for the Panning Tight Gas discovery in the newly acquired Cooper Basin
acreage and assessment of the overall development potential for this large, undeveloped tight gas discovery.
Kicking off this work program, Armour commenced the 2020 work program on the 10 September 2020, which is focused
on increasing production from existing well stock via a multi-well stimulation program. Phase 1 of the program will involve
a three-well stimulation campaign will be executed over the next 3 months (Horseshoe 4, Horseshoe 2, and Warroon 1)
with all three wells planned to be completed and flowing through Armour’s gas gathering system by early December 2020.
Phase 2 of the program will involve a further three-well stimulation program accelerated to the first of half of 2021.
In addition to adding new volumes of liquid rich gas, results are expected to support the de-risking of new drilling locations
and contribute to the reserves maturation plan. The Company has a deep portfolio of these production enhancement
projects in the Surat Basin and with the successful completion of this program is focussed on carrying these activities into
successive multi-well stimulation programs through to 2023 aimed at driving sales gas production up to a consistent 20
TJ/day.
Clearly, the impact of the COVID-19 pandemic on domestic Australian oil and gas prices has affected Armour’s operational
performance this year, with gas prices on the East Coast Gas Market (ECGM) diving during the first half of 2020. The
Company initiated a COVID Response Plan in April 2020 which included a range of capex deferrals and cost reduction
measures across its field and site operations as well as head office.
However, spot gas prices at Wallumbilla have started rising off recent lows and Armour remain confident that prices will
continue to recover. Based on current industry supplied data, the Australian Energy Market Operator (AEMO) – 2020
Gas Statement of Opportunities projects that the Eastern Australian domestic gas market is likely to substantially tighten
and is only expected to meet demand until 2023 so long as LNG exports are redirected into the domestic market. Gas
supply uncertainty and variability have substantially increased since the 2019 report, especially between 2022 and 2024.
This bodes well for Armour’s future and the Company is exceptionally well positioned to capture opportunities created
by this uncertainty in both terms of price and sales volumes through a combination of successful production
enhancement projects and maximizing the value of the unique position of the Newstead Gas Storage Project.
Again, I welcome Brad Lingo on board as CEO and look forward to working with him to deliver the above priorities. I would
like to thank my fellow Board members and the Company’s dedicated work force for another year of hard work. I also want
to thank the Company’s shareholders and external stakeholders for their continued support and patience during this time.
Together, we will transform Armour Energy into one of Australia’s premier oil and gas exploration and production
companies recognised for its keen eye on quality assets and commitment to delivering for shareholders.
Yours sincerely
Nicholas Mather
Chairman
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Operating and Financial Review
Executive Summary
Armour Energy Limited (the Company) and its controlled entities (Armour) is focused on the exploration and production of
gas and associated liquids resources. The Company’s prior and current work programs aim to increase liquid rich gas
production and revenues while focussing on becoming one of Eastern Australia’s most prominent onshore Oil and Gas
explorers and producers.
Figure 1 – Summary of Armour’s assets and locations
Key Achievements
Surat Basin - Kincora
Material increase in the Company’s 2P sales gas reserves to 150 PJs – a 22% increase.
Annual revenue of $21.1m, a decrease of 24.1% from $27.8m in the previous financial year driven primarily
by weakening gas prices (0.7%) and sales gas production declines (20.4%).
Successful hydraulic stimulation of Myall Creek 5A was completed and connected in December 2019 across
the Lower Bandana and Upper Tinowon formations. Flowback operations commenced and achieved an initial
production wellhead rate (IP30), of 3.2 TJ per day.
Drilling of two development wells, Myall Creek North #1 and Horseshoe 4.
Exploration – Farmin Agreement
During the year, a farmin agreement was executed between Armour and Santos QNT Limited (Santos) for 70%
of the South Nicholson Basin tenements.
As part of this agreement the Armour has received $21 million in cash payments and a 4-year free carry for a
$65 million exploration program.
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Exploration Block - ATP2046
Petroleum Lease No. 1084 (PL1084) granted to Armour Energy and Australia Pacific LNG Pty Ltd (APLNG).
An agreement was completed with APLNG for the sale of Armour’s 10% interest in Petroleum Lease 1084
known as the “Murrungama block” in the Surat Basin Queensland for a total of $4 million.
Cooper Basin
On 15 June 2020, the Company entered into a definitive agreement to acquire all of Oilex Limited’s Cooper
Basin exploration tenements – PELs 112, 444 and PELA 677 and 27 PRLs in the South Australian Cooper-
Eromanga Basins - covering over 5,200 km2 making the Company the operator of the 4th largest exploration
acreage holder in the South Australian Cooper Basin after Santos Ltd, Beach Energy and Senex Energy.
Uganda
Application for renewal of the block was submitted and approved providing 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
The Government Gas Acceleration Program (GAP) was completed in October 2019 with Armour receiving a
total of $6.1 million in funds.
In September 2019, raised $4 million via private placement.
Launched an underwritten equity capital raising for $8 million in June 2020, and due to strong investor demand
the conditional placement was increased to $7 million, subject to required approvals, bringing the total raise to
$15 million.
The second full year of Operations at Kincora saw 91% (2019: 91%) operational time achieved. Despite being affected by
COVID-19 the Kincora wells have been producing steadily and delivered an average of approximately 7.9 TJ/day (2019:
9 TJ/day) of sales gas plus associated liquids, with a peak sales gas production rate of approximately 8 TJ/day (2019: 12
TJ/day) during the year.
Production rates
Oi l (BBL)
Ga s (TJ)
LPG (T)
Condens a te (BBL)
FY2020
11,583.67
2,601.76
4,611.83
38,851.62
FY2019
14,072.00
3,267.00
4,475.00
42,163.00
Change
(17.7%)
(20.4%)
3.1%
(7.9%)
The Kincora Gas Plant has been fully operational for the year with 91% availability (2019: 91%).
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In addition to the 7–7.5 TJ/day currently being produced from Armour’s Kincora, Armour is also producing on average
approximately 138 barrels (2019: 170 barrels) of oil and condensate per day, and approximately 13 tons (2019: 14 tons)
per day of Liquid Petroleum Gas (LPG). Oil and condensate are sold ex-Kincora and transported to local Queensland
refineries. LPG is also sold at the Kincora Gas Plant and on-sold mostly in Queensland, New South Wales, and South
Australia, providing energy for transport, heating, and agricultural enterprises.
In addition to the 7–7.5 TJ/day currently being produced from Armour’s Kincora, Armour is also producing on average
approximately 138 barrels (2019: 170 barrels) of oil and condensate per day, and approximately 13 tons (2019: 14 tons)
per day of Liquid Petroleum Gas (LPG). Oil and condensate are sold ex-Kincora and transported to local Queensland
refineries. LPG is also sold at the Kincora Gas Plant and on-sold mostly in Queensland, New South Wales, and South
Australia, providing energy for transport, heating, and agricultural enterprises.
Armour, like many other companies has been affected operationally and financially by COVID-19. Global and domestic
oil prices have dropped on average by around 36% compared to last year. In keeping with both Governmental restrictions
and an overall focus on the health and safety of Armour personnel and contractors, the ability to execute work programs
has been challenging move equipment and labour while abiding to government regulations is challenging. Both of these
COVID-19 related issues have had a material impact on Armour’s 2020 work program.
Measures were taken to directly address the impacts of reduced production resulting from the deferral of work programs
in prior and current periods. These deferrals have resulted in the Company falling below its forecast production levels for
FY20, however, with the commencement of a 6-well stimulation program which commenced in early September and other
planned well production optimisation activities, Armour expects to improve production over the coming year.
The first stage of the 6-well stimulation program – the Horseshoe-4, Horshoe-2 and Warroon-1 well stimulations – are
expected to be completed and flowing increased sales gas volumes by mid-December 2020. Collectively this first 3-well
program is expected to deliver initial increase in gas production of 3.5 to 4.0 TJ/day (30-day IP rates) with additional
production optimisation works delivering another 0.75 to 1.5 TJ/day. As Armour delivers this program and plans its 2021
work program, Armour will continue execute on Phase 3 and Phase 4 of the growth strategy aiming to grow Surat Basin
sales gas production to 20 TJ/day over the next 18 to 24 months.
Potential Transactions and a Focus on Debt Reduction
Additionally, Armour are actively progressing a number of additional asset transactions, which will enable the Company to
both fund upcoming near-term production and development work programs, expanded exploration programs and further
accelerate amortisation of Armour debt position. Specifically, the Company is focussed on securing a farmin joint venture
partner for the Company’s Northern Territory McArthur Basin Project area and realizing significant value through the restart
and potential upgrade and expansion of the Newstead Gas Storage Project.
The Company believes that through both of these initiatives that significant capital can be realised that can be directed to
the reduction of the current outstanding long-term debt. The aim of these transactions is to deliver a significantly
strengthened and unencumbered balance sheet providing the Company with maximum capital flexibility to invest in high
return. High growth projects within the current project portfolio.
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Chief Executive Officer
Mr Brad Lingo joined Armour in June 2020. Mr Lingo has had a
distinguished career spanning over 30 years in a diverse range of oil and
gas leadership roles, including business development, new ventures,
mergers and acquisitions, and corporate finance.
Mr. Lingo has been actively involved in oil and gas exploration,
development, and production activities in the Cooper Basin since 1993. He
was Managing Director and CEO of Drillsearch Energy Ltd for 6 years
building the company from a 200BOPD oil producer to a leading S&P/ASX
200 index Cooper Basin focused oil and gas company. During his time at
Drillsearch, the market capitalisation of the company increased from
~$40m to ~$800m.
Mr. Lingo has received recognition as an oil and gas industry leader
winning the S&P/ASX200 Energy Best CEO of the Year award in 2014 in
the annual SMH/East Coles awards. Prior to taking on the role at
Drillsearch, he was Head of Oil and Gas for the Commonwealth Bank of Australia. Mr. Lingo started his career in the
Cooper Basin as VP and Head of Business Development for Tenneco Energy and following the acquisition of Tenneco
by El Paso Corporation, he was a co
founder of Epic Energy which became one of Australia’s leading developer, owner
and operator of natural gas infrastructure.
‐
COVID-19 Response Measures
Cost Reductions
Armour is taking steps to reduce corporate costs by a minimum of 35%. This includes all head office staff reducing
remuneration by 20% and unfortunately includes a number of redundancies. The Executive Chairman and Non-
Executive Directors have also reduced their fees by 20%. Future consideration will be given to the partial payment of
Director fees in shares, subject to any necessary shareholder and regulatory approvals.
In addition, Armour is seeking to reduce to the full extent possible all other overheads including contractor hours and
rates, administration costs and office rent. These remuneration reductions are anticipated to remain in place for at least
a six-month period and will be reviewed and updated as and when required.
Armour is also aiming to reduce operating expenditure at its Kincora Gas Project by approximately 20%, while
maintaining its ability to reliably maintain production in a safe and environmentally compliant manner. This will include
revised staff rostering and schedules.
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Strategy
Armour continues to progress its 4-Phase growth strategy.
Figure 2: Armour’s 4 Phase Growth Strategy
To support Armour’s Growth Strategy, the Company has targeted five priorities for the next 12 months to bring Phase 3
to a conclusion and position Armour for Phase 4. These priorities are:
Action
Deliverables
Priority 1 Deliver sales production increase of 4-6
Generate sufficient free cash flow to cover all operating and
TJ/day from 2021 Surat development work
program on time and within budget
Priority 2
Secure exploration and development farmin
joint venture partner for NT McArthur Basin
Project
Priority 3
Extract value through commercialisation of
under-utilised assets (e.g. Newstead Gas
Storage)
Priority 4 Materially reduce debt
corporate costs
Provide reinvestment capital for further development and
exploration expenditure
Recover full historical investment
Reduction of debt/working capital for exploration and
development
Secure free carry for development of existing conventional
gas discoveries and comprehensive multi-year exploration
work program
Release/recover invested capital to reduce debt
Support investment in high return growth projects
Strengthened, unencumbered balance sheet allowing
maximum capital and business flexibility
Priority 5 Consolidate core operating focus areas and
projects and rationalise non-core assets
(high grading of asset portfolio)
Focus work programs, people resources and capital on high-
return, high growth opportunities with reinvigorated focus on
exploration
The Eastern Australia Gas Market (AEGM) is starting to recover of recent lows brought on by Covid-19 and the correction
in the oil price. The Australian Energy Market Operator (AEMO) – 2020 Gas Statement of Opportunities projects that
the AEGM is, based on current industry supplied data, tightening and is expected to meet demand until 2023 so long
as LNG exports are redirected to the domestic market (see Figure 3).
The uncertainty and variability have increased since the 2019 report, especially between 2022 and 2024. 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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Figure 3 – Gas demand vs supply forecast - AEMO 2020 Gas Statement of Opportunity
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 contingent resources
(2C) and Prospective resources (3C) to reserves. This will require an increase in exploration expenditure and funding.
Again, Armours exploration acreage associated with the Roma Shelf, Cooper Basin, North Queensland and Northern
Territory will potentially have greater significance to the domestic market.
Armour is in the right location, with the right infrastructure to take advantage of the projected supply shortfall. In seeking
to maximise this opportunity, Armour is proposing the following work program in 2021:
Development and Production
Exploration
Surat
Stage 1 – 3 well fracture stimulation
Northern
Basins
program (Dec 20 quarter).
Stage 2 – 3 well fracture stimulation
program (June 21 quarter).
Production enhancement projects –
multiple well workovers (Sept 2020).
Applying for Production Licenses and field
development plan approvals for Glyde,
Cow Lagoon and Lamont Pass
conventional gas discoveries.
Commence gas marketing for up to
9TJ/day.
Sales gas production potential as early as
2022.
Cooper
Basin
Assessment of appraisal program for the
Panning Tight Gas discovery and
assessment of development potential.
Commence 3D seismic location planning based on
AEM-PTP Airborne Geophysical Survey (completed
late 2019) across key Surat Basin exploration
assets.
Develop 3-5 drill-ready prospects for potential CYE
2021 drilling program.
McArthur Basin – Conduct AEM-PTP Airborne
Geophysical Survey to identify REDOX activity
indicating possible hydrocarbon zones.
McArthur Basin - Commence 2D/3D seismic
location planning based on AEM-PTP Airborne
Geophysical Survey results.
South Nicholson Basin – Santos to prepare for and
acquire new 2D seismic and execute targeted
drilling activity.
Detailed 3D seismic reinterpretation of Northern
Fairway PRLs utilizing Total Depth Seisnetics 3D
seismic next generation AI evaluation tool.
Conduct AEM-PTP Airborne Geophysical Survey to
identify REDOX activity indicating possible
hydrocarbon zones.
High-grade leads and prospect inventory to
generate drill-ready exploration targets for 2021
drilling program.
Develop 3-5 drill-ready prospects for potential CYE
2021 drilling program.
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Funds raised in the September 2020 capital raise will enable the Company to accelerate Stage 2 of the Surat stimulation
growth program, Cooper Basin exploration and Newstead Gas storage surface works. Additionally, Armour has a number
of asset transactions being actively progressed which will enable the Company to both fund upcoming near-term production
and development work programs, expanded exploration programs and further accelerate amortisation of Armour debt
position.
Operations Review
Surat Basin Assets
Kincora Production Drilling
During the financial year Armour Energy drilled two new production well, Myall Creek North #1 and Horseshoe #4. Myall
Creek North #1 was completed in both the Tinowon A and the Tinowon C. The Tinowon C interval was found to be wet
and it is believed that water cross flow into the Tinowon A has impeded gas flow from this sand. A further intervention
and workover are currently being considered.
Horseshoe #4 was conventionally completed in both Triassic and Permian sands, tied in and sustained an initial
production wellhead rate (IP30) of 0.31 TJ/d. An Environmental Authority amendment has been recently obtained, which
allows for fracture stimulation activities to now be conducted. Stimulation of Horseshoe #4 is planned as the next step
for production enhancement.
Also, during the December 2019 Quarter, Armour successfully fractured stimulated the Myall Creek #5A Permian
sandstones across the lower Bandana and Upper Tinowon formations. The well was brought online and achieved an
initial production wellhead rate (IP30) of 3.2 TJ/d. The well continues to exceed expectations and follow-up candidates
are being considered.
In addition to new production wells, Armour has continued to restart existing well stocks and optimise the gathering
system, with the addition of field compression. Low costs efforts to connect and restart Kungarri 1 and Riverside 1 have
resulted in an initial combined wellhead rate (IP30) of 0.37 TJ/d. Further intervention and workover efforts continue to
be considered for other existing wells in the gathering network.
Kincora Gas Reserves Upgrade
On 12 June 2020, Armour provided an update on the Company’s gas growth and development plans for the Kincora
Gas Plant which highlighted:
2P gas reserves increased by 22% to 150.3 PJ.
Material long term potential demonstrated across the wider Kincora Project.
Reserves independently verified.
The following numbers in Table 1 and Figure 4 have been evaluated in accordance with the Society of Petroleum
Engineers – Petroleum Resources Management System (SPE-PRMS) and independently certified and documented in
Armour Energy’s Hydrocarbon Reserves (as at 31 December 2019) report.
Kincora Gas Project
Gas (Bscf)
Sales Gas (PJ)
LPG (T)
Condensate (Bbl)
Table 1 – Combined Armour Energy Gas Reserves
1P
59.33
67.4
139,000
670,000
2P
132.2
150.3
310,000
1,493,000
3P
282.4
321.1
663,000
3,191,000
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350
300
250
200
150
100
50
0
Armour's Kincora Gas Reserves (PJ)
35.2
39.6
67.4
61.7
123.6
150.3
169.1
Dec-17
Dec-18
Dec-19
Dec-17
Dec-18
Dec-19
Dec-17
Dec-18
Dec-19
1P
1P
1P
2P
2P
2P
3P
3P
3P
294
321.1
1P Dec-17
1P Dec-18
1P Dec-19
2P Dec-17
2P Dec-18
Figure 4 – Armour Energy Reserves growth as per 31 December 2019
Notes:
Petroleum reserves are classified according to SPE-PRMS.
Petroleum reserves are stated on risked net basis with historical production removed
Petroleum Reserves have no deduction applied for gas used to run the process plant estimated at 7%
Petroleum Reserves can be sold on behalf of any minority interest holder
Petroleum Reserves are stated inclusive of previous reported estimates
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/petajoules, Condensate Yield 9938 barrels/petajoules
Armour’s successful hydraulic stimulation of Myall Creek 5A, the drilling of the Horseshoe 4 gas well and ongoing
geological and reservoir studies across the greater Kincora Project have contributed to the upgrade in reserves.
Armour has re-evaluated existing discovery wells and identified significant tight gas from the Myall Creek area and south
along the western flank of the Roma Shelf in its operated authority-to-prospect, potential-commercial-areas and
petroleum licences. Multiple hydrocarbon saturated tight liquid rich gas reservoirs are present in cased/suspended wells
and offer further opportunities to accelerate production. Armour has commenced plans to hydraulically stimulate existing
well stock in 2020 and in 2021. These efforts are expected to contribute to gas production and further characterise the
fields for future drilling and ultimately contribute to the reserve’s maturation strategy.
Kincora Oil Reserves and Resources Initial Booking
Armour completed an extensive review of its acreage for oil exploration, appraisal, and development potential. During the
financial year, Armour’s technical staff progressed geological and engineering studies across the greater Kincora Project.
As a result of these studies, Armour has identified a previously unbooked oil reserves and resources. Refer to Armours’
ASX announcement of 18 February 2020 for more information.
The following numbers in Table 2 and Table 3 have been evaluated in accordance with the Society of Petroleum
Engineers – Petroleum Resources Management System (SPE-PRMS) guidelines, independently assessed and
approved.
Kincora Oil Project
Reserves
Estimated Total Oil (BBL)
-
1P
2P
3P
245,600
1,220,600
2,639,500
Table 2: Armour Energy Bowen-Surat estimated net aggregate quantities of Oil Reserves
Notes
Reserve numbers in Table 1 only reflect new Oil Reserves
Reserves are classified according to SPE-PRMS
Reserves are stated on a risked net basis with historical production removed
Reserves can be lifted and sold on behalf of any minority interest holder
Reserves are stated inclusive of previous reported estimates
Bbl = barrels, kbbl = thousand barrels, mmbbl = million barrels
1P = Total Proved, 2P = Total Proved + Probable, 3P = Total Proved + Probable + Possible
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Kincora Oil Project
Contingent Resources
Estimated Total Oil (BBL)
-
1C
2C
3C
1,231,000
3,696,000
8,019,000
Table 3: Armour Energy Bowen-Surat estimated net aggregate quantities of Oil Contingent Resources
Notes
Contingent Resources numbers in Table 2 only reflect new Oil Reserves
Contingent Resources are classified according to SPE-PRMS
Contingent Resources are stated on a risked net basis with historical production removed, where applicable
Contingent Resources can be lifted and sold on behalf of any minority interest holder
Contingent Resources are stated inclusive of previous reported estimates
The aggregate 1C may be very conservative and the 3C very optimistic because of arithmetic summation
Bbl = barrels, kbbl = thousand barrels, mmbbl = million barrels
Murrungama Gas Project, Petroleum Lease PL1084 (Formerly Authority to Prospect No. 2046 (ATP2046)) –
Armour 10%
PL1084, previously known as ATP 2046, was part of the first national tender where gas had been designated to be
supplied exclusively to Australian domestic manufacturers, an initiative of the Queensland Government. The
Queensland Department of Natural Resources, Mines and Energy (DNRME) granted Petroleum Lease No.1084
(PL1084) over the former Authority to Prospect – ATP2046 at the beginning of the 2020 calendar year.
A Joint Venture between Armour and APLNG was formed for the development of this project. PL 1084 is an 18km2 coal
seam exploration tenure located 22km south-west of Chinchilla and adjoins APLNG’s Talinga Project, through which
produced gas and water will be processed. The area is surrounded by currently producing CSG fields and is anticipated
to likely have similar sweet-spot reservoir properties and production as the Talinga Gas Field. PL 1084 was granted with
the specific condition that the gas produced from PL1084 is to be sold exclusively, for local manufacturing.
In the 2020 financial year, Armour entered into an agreement with Australia Pacific LNG Pty Ltd (APLNG) to sell
Armour’s 10% interest in Petroleum Lease 1084 for a total of $4 million.
Northern Basins
South Nicholson Basin Farmin Agreement
ATP 1087 is Armour’s 100% owned highly prospective shale gas play in the Isa Super Basin, well understood rock
properties of up to 11% total organic content, and stacked play opportunities. Armour has drilled 6 wells to date in
ATP1087, including the Egilabria-2 well, which was an Australian first, achieving flows from a hydraulically stimulated
lateral well in shale. Armour has acquired extensive seismic and other geological data during its tenure and has drill
ready targets to achieve large scale production in the future.
In December 2019, a farmin agreement was executed between Armour and Santos QNT Limited (Santos) for Armour’s
South Nicholson Basin tenements, see Figure 5.
Key points below:
An initial cash payment of $A15 million, for the transfer of a 70% interest and operatorship of ATP1087 to
Santos. This was received in December 2019.
Under the farmin agreement, Santos has the right to earn a 70% interest in Armour’s North Queensland
tenements, being ATP1087 (granted), and ATP1107, ATP1192 and ATP1193 (applications), and the Northern
Territory tenements EP172 and EP177, both of which are also in the application phase;
Subsequent to year-end, the Company entered into an agreement with Santos to amend the South Nicholson
Basin farmin agreement, resulting in an immediate cash payment of $6 million, received in August 2020, as an
acceleration of future contingent permit transfer payments.
Subject to the satisfaction or waiver of certain conditions, Santos will free carry 100% of Armour’s share of expenditure
for the various work programs for all of the farmin permits up to a Total Capped Amount of A$64,900,000 (inclusive of
the A$12.5 million work program associated with ATP1087). However, Santos may exercise its withdrawal rights which
will reduce the total capped amount.
14 | P a g e
Figure 5 - Map showing the Farmin permits within the green border
The remainder of the Company’s Northern Territory exploration portfolio is not subject to, or affected by, this farmin
agreement.
Northern Territory
As a result of the Northern Territory Government inquiry and moratorium, Armour has sought suspensions, extensions,
and variations to the work programs of its granted tenements in the Territory. A number of the approvals for these
suspensions, extensions and variations have been received in the financial year. Armour has developed revised work
programs for its tenements in the Northern Territory and is working with the Northern Territory Government and the
Northern Land Council to establish ongoing exploration and development activities. Armour intends to resume
exploration activities and re-establish its social license in the areas as part of the forward work program.
15 | P a g e
Figure 6 – Northern Territory acreage outlined in purple.
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 s e c t i o n s of the McArthur and Tawallah
source rocks are present.
The Company is progressing three (3) retention licence applications over portions of granted licences EP 171, 176 and
190 (see Figure 6). Reported conventional discoveries to the Minister of flowing hydrocarbons from the Cow Lagoon-
1, Lamont Pass-3 and Glyde-1 wells allow parts the licences to be progressed to commercial petroleum licences.
Retention licences are an intermediate step to commerciality, allowing for further appraisal works, marketing
arrangements, pipeline feasibility studies, environmental studies, land access and Native Title approvals. Once
completed, a final investment decision to progress to a petroleum license can be made by the Company. The retention
licences each provide security over 12 blocks that are not subject to legislative reductions and will cover broad areas
where conventional and unconventional hydrocarbon prospects and discoveries have been through capital work
programs.
As noted previously, Armour is marketing other farmin opportunities covering its McArthur and Glyde Basin tenements
as per Figure 7, where the purple outline highlights Armour Energy’s 100% Tenure.
16 | P a g e
Cooper Eromanga Assets
Acquisition of Cooper Eromanga Basin Assets
The Company announced on 15 June 2020 that the share sale agreement with Oilex Ltd (“Oilex”) for the acquisition of
all the issued capital in CoEra Ltd had been executed by the parties. CoEra’s assets comprise a substantial footprint of
exploration and production licences on the oil rich Western and Northern Flanks of the Cooper Basin, refer Figure 7.
The basin historically has a high exploration success rate, low cost development pathways, and remains under
and under
acquisition and the many nearby discoveries and fields provide analogues for future discoveries.
explored
developed. Proven oil fairways transect and lie adjacent to the licence areas subject of the proposed
‐
‐
The acquisition consideration will include the issue to Oilex (or its nominees) of a minimum of 24.5m shares and a
maximum of 34.5m shares in Armour, subject to the VWAP of the Armour share price for a period of 90 days from the
execution of the Term Sheet. The variance is designed to deliver a closing consideration of $906,500 in Armour shares
to Oilex, subject to the aforementioned maximum and minimum parameters.
Completion of the sale agreement is subject to a number of conditions. The conditions include that the issue of the
shares to Oilex will be subject to any necessary Armour shareholder or regulatory approvals, and the shares issued will
also be subject to a 12-month voluntary escrow.
On 20 July 2020, Armour announced that Cordillo Energy Pty Ltd (“Cordillo”) had been successful in bidding for Block
E (PELA 677) (“Block C”) in the northern flank of the Cooper Basin in South Australia (see map below).
CO2019
Gazettal Block C forms one of five hydrocarbon exploration licence blocks released for competitive bidding by the South
Australian Department of Energy and Mining (“DEM”) in 2019.
‐
Senex
PRLs
Block C
PEL 444
PEL 112
Figure 7 – Location map of the Cooper Eromanga assets
Uganda Oil Project
The Ugandan Oil Project is located at the southern end of Lake Albert within the Albertine Graben which has recorded
discoveries of 6.5 billion barrels of oil. The Company was awarded the Kanywataba exploration licence in September
2017 with DGR Global, a major shareholder in Armour, holding a beneficial interest of 83.18% and the Company
16.82%. The exploration licence was renewed until 13 September 2021, subject to various conditions. This included the
completion of the 2D seismic data survey.
17 | P a g e
The Company has identified multiple developed (untested) on-trend structural traps (3-way and 4-way dip closures) and
multiple untested stratigraphic traps. The Kingfisher oil discovery (40km north east of Kanywataba) has produced from
commingled oil reservoirs 12,000 barrels per day from a single well with the field expected to come online at 40,000
barrels per day once in production.
Local oil seeps confirmed local working petroleum systems. The Company’s internal assessment of the Kanywataba
block is a Resource Best Estimate Risked 57-193 mmbls recoverable which compares to the Unrisked Prospective Oil
Resource Estimate (mmbls) of 145-217mmbls (Internal Armour Estimate; refer ASX release of 19 September 2017 for
full details).
Figure 8 - Map Source - DGR Global Website - http://www.dgrglobal.com.au/dgr-uganda
On 9 April 2020, the Company wrote to the Minister of Energy and Mineral Development (Minister) of the Ugandan
Government, advising that as a result of the COVID-19 pandemic, it was unable and is being prevented from undertaking
work on the 2D seismic program, based on a Force Majeure event occurring.
The Company stated that the travel restrictions put in place by both the Ugandan and Australian Governments prevented
key personnel from travelling to the site and the disruption to numerous businesses and supply chains meant that the
Company is unable and is being prevented from undertaking work on the 2D seismic program. The effect of this notice
to the Minister means that the period during which the event of Force Majeure is operative, will be added to the end of
the second exploration period.
Corporate Activities
Capital Raising
On 23 September 2019, the Company announced that it had successfully closed a private placement raising gross
proceeds of $4 million via an allocation of 80 million shares at a price of 5 cents each. Investors received one (1)
unlisted option exercisable at 8 cents (through to 30 September 2023) for every two (2) shares subscribed for in the
placement.
18 | P a g e
On 15 June 2020, the Company announced a $10 million capital raising program, which consisted of:
an initial placement which raised ~$3.36 million.
an underwritten accelerated non-renounceable, pro rata entitlement offer expected to raise ~$4.53 million.
an additional conditional placement to raise up to $2.1 million.
Due to significant demand from third-party investors in relation to the Company’s fund raising, on the 18 September
2020 the Armour Board announced that it had upsized the conditional placement component to approximately $7 million,
subject to the receipt of any necessary further shareholder approvals.
Under the offer, for every two (2) new shares issued under the entitlement offer and / or placement, the holder will also
receive one (1) attaching listed option exercisable at $0.05 and expiring 29 February 2024.
Corporate Bond Finance Facility
In 2019 Armour 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).
On 26 March 2020, Armour announced that noteholders of the Company’s $55 million Secured Amortising Notes (Notes)
had approved, by the requisite majority, the special resolution of Noteholders (the Special Resolution) to amend the
Conditions of the Notes as per Armour’s proposal.
The approved amendments included the following:
New Note principal amortisation schedule including 4 quarterly payments in the calendar year 2020 totalling
approximately $6.0 million.
Further unscheduled amortisation payment arrangements to cover certain future asset disposals or further farm-
in proceeds received from the Santos Farm-In Agreement.
Amendments to Financial Undertakings, including the Debt Service Cover Ratio, the Leverage Ratio, and the
Gearing Ratio.
Amendments to extend the Debt Lock Up Date to 31 December 2020.
The establishment of an EBITDA (non-IFRS measure) performance benchmark for the 2020 calendar year.
Amendments to certain Conditions (Financial Accommodation and Disposals) in connection with the Ugandan
Oil Project.
Allow for the grant of certain Security interests and the provision of Financial Accommodation in relation to Joint
Ventures; and
Amendments to permit voluntary early redemption of the Notes.
As a result of the asset transactions with APLNG and Santos, which generated $10 million in working capital, Armour
made a $5.3 million early principal amortisation payment on the Secured Amortising Notes during August 2020.
19 | P a g e
Financial Review
Financial Performance
Revenue
Revenue
$21.1 million
2019: $27.8 million
Underlying EBITDA
(Non-IFRS measure)
$7.3 million
Operating Loss
$9.6 million
2019: 11.6 million
Figure 9
The second full year of operations at the Kincora Plant saw an overall 24.1% reduction (2019: increase of 88%) in
revenues from the sales of Gas, LPG, and condensate. This was a result of several factors including reduced average
realised pricing across most products, attributable to the COVID-19 Pandemic, except for gas prices which had a slight
increase. Unfortunately, the slight increase in the average gas price did not fully offset the reduced volumes of sales.
Sales Revenue ($ millions)
Gas Sales
FY2020
15.4
FY2019
19.8
Change
(22.3%)
Realised $/ unit
Gas Price (GJ)
Condensate Sales
Oil Sales
LPG Sales
Total Sales
2.7
0.9
2.1
21.1
4.1
1.3
2.6
(32.7%)
Condensate Price (BBL)
(29.9%) Oil Price (BBL)
(21.8%)
LPG Price (T)
27.8
(24.1%)
FY2020
6.10
0.46
0.50
526.94
FY2019
6.06
0.61
0.61
601.34
Change
0.7%
(24.8%)
(18.0%)
(12.4%)
Figure 9: Sales revenue and average realised prices per unit per revenue stream
Armour generated sales of $21.1 million during the year ended 30 June 2020, which represents a decrease of $6.7
million from the prior year (see Figure 9). Having reduced sales and a full years cost of running the operation, Armour realised
a gross profit from operations of $1.6 million (2019: $8.8 million). This was largely offset by the financing costs and general
and administrative expenses. As the current year’s finance cost was significantly less than the 2019 financial year, the
total loss after income tax for Armour was lower than the previous year at $9.6 million (2019: $11.6 million loss). Financing
costs of $7.2 million (2019: $13.6 million) mainly representing interest expense and amortisation expenses relating the
loan facilities taken out in the previous year
Armour has taken steps to reduce corporate costs as previously announced by a minimum of 35%. This included head
office staff reducing remuneration by 20% and planned redundancies. The Executive Chairman and Non-Executive
Directors have also reduced their fees by 20%. In addition, Armour is seeking to reduce to the full extent possible all other
overheads including contractor hours and rates and administration costs.
Armour is also aiming to reduce operating expenditure at its Kincora Gas Project by approximately 20%, while maintaining
its ability to reliably maintain production in a safe and environmentally compliant manner. This will include revised staff
rostering and schedules but will unfortunately also include some redundancies.
20 | P a g e
Assets
Cash
$3.2 million
2019: $9.2 million
Exploration Assets
$35.2 million
2019: $49.3 million
Oil and Gas Assets
$58.3 million
2019: $42.3 million
Total assets reduced by $4.9 million from $116.9 million to $112.0 million, and includes:
Cash and Cash Equivalents of $3.2 million.
Other Current Assets, including Receivables, Inventory and Assets Held for Sale of $5.6 million.
Financial assets comprising cash-backed security deposits and bank guarantees of $9.2 million.
Exploration assets of $35.2 million, which primarily consists of Armour’s Northern Territory and North
Queensland assets and offset with the $15 million received from Santos for the 70% interest and operatorship
of ATP1087.
Oil and Gas assets of $58.3 million which comprise all the land, licences, and physical assets within the Kincora
Project.
Intangibles of $0.2m related to the capitalisation of the development of software.
Liabilities
Corporate Bond and
Loan Facility
$54.8 million
2019: $57.4 million
Provisions
$7.7 million
2019: $8.6 million
Total liabilities decreased by $2.2 million from $72.1 million to $69.9 million, and includes:
Trade payables and other miscellaneous of $7.3 million.
Corporate Bond facility, Tribeca Loan facility and lease liabilities of $55.1 million.
Rehabilitation provision of $6.7 million and the present value of the deferred consideration payable to Origin
Energy of $1.0 million.
All covenants in place for the Corporate Bond and Tribeca Loan Facilities were passed during the year ended 30 June
2020.The final amount of $1.0 million payable to Origin energy is in relation to the purchase of the Kincora Project.
Unscheduled amortisation payments of $5.3 million was made to FIIG in August 2020, reducing the Corporate Bond
Facility ahead of planned. This was a result of the amendment to the Santos farmin agreement and the sale of Armour’s
10% interest in Murrungama.
Equity
Total equity decreased by $2.7 million from $44.8 million to $42.1 million, and includes:
Current year loss after income tax of $9.6 million.
The fair value adjustment down, net of tax, through comprehensive income of $1.0 million in respect to the
revaluation of the Lakes Oil NL holdings.
Net shares issued of $7.9 million during the financial year.
Cashflow
Armour reported net cash outflow from operating activities of $2.7 million (2019: $0.9 million) for the year ended 30 June
2020. Contributing to this was lower revenues received this year from the several uncontrollable factors and a drop in
production. Cashflows from investing activities primarily represents payments for Armour’s development wells including
MC5A, MCN1 and HS4, offset but the $15 million received from Santos for ATP1087. Cashflows from financing activities
relate to the receipt of funding under equity raisings, offset the repayment of the Company’s FIIG Corporate Bond
amortisations and Tribeca Facility repayments.
21 | P a g e
Directors’ Report
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 2020.
Directors
The following persons were Directors of Armour 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
Executive Chairman
Non-Executive Chairman
Independent Non-Executive Chairman
Independent Non-Executive Chairman
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:
Nicholas Mather (appointed 18 December 2009)
Executive Chairman
BSc (Hons, Geol), MAusIMM
Mr Mather’s special area of expertise if the generation of and entry into
undervalued or unrecognised resources 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 campaigns, and managing emerging resource
companies, Mr Mather brings a wealth of valuable experience.
Other current directorships: DGR Global Limited
Dark Horse Resources Limited
Aus Tin Mining Limited
Lakes Oil NL
SolGold 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)
None
Executive Chairman, Member of the Remuneration Committee.
6,169,912
1,260,971
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Stephen Bizzell (appointed 9 March 2012)
Non-Executive Director
BCom, 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
22 | P a g e
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 and Young and the Corporate
Tax division of Coopers and Lybrand.
Other current directorships: Renascor Resources Limited
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Energy
Limited
Laneway Resources Limited
Strike Energy Limited
UIL
Stanmore Coal Limited (resigned 15 May 2020)
Chair of the Audit and Risk Committee; Member of the Remuneration
Committee; Member of the Health, Safety and Environment Committee
13,287,066
11,814,005
December
(resigned
2018)
27
Roland Sleeman (appointed 11 October 2011)
Independent Non-Executive Director
B.Eng. (Mech), MBA
Mr Sleeman has 34 years' 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 is currently Chief Executive Officer of Lakes Oil NL.
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.
Lakes Oil NL
None
Chair of the Remuneration Committee; Chair of the Health, Safety and
Environment Committee; Member of the Audit and Risk Committee
58,333
Nil
23 | P a g e
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Company Secretary
Eytan Uliel (appointed 20 November 2017)
Independent Non-Executive Director
BA, LLB
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 to 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.
None
None
Member of the Audit and Risk Committee
Nil
Nil
Karl Schlobohm - BCom, 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 also 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
The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during
the year ended 30 June 2020, and the number of meetings attended by each Director were:
Full Board
Audit and Risk Committee
HSE Committee
Nicholas Mather
Stephen Bizzell
Roland Sleeman
Eytan Uliel
Attended
Held
Attended
Held
Attended
Held
14
14
12
11
14
14
14
14
-
2
2
-
-
2
2
2
-
1
1
-
-
1
1
-
Held: represents the number of meetings held during the time the Director held office or was a member of the relevant committee.
Corporate Structure
Armour Energy Limited 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 subsequently became an ASX-listed company on 26 April 2012.
Principal Activities
The principal activities of the Company during the year were oil and gas exploration, and production. There was no
significant change in the nature of these activities.
24 | P a g e
Significant Changes in the State of Affairs
There was no other significant change in the state of the affairs of the Company during the financial year that is not
detailed elsewhere in this report.
Operating and Financial Review
The loss for Armour after providing for income tax amounted to $9,570,777 (30 June 2019: $11,683,748).
Financial Performance and Cash Flows
Revenue from Contracts with Customers
Cost of Sales
Gross Profit
Other income and expenses
Finance income
Finance expenses
Income tax expense
Consolidated
30 June
2020
$
30 June
2019
$
21,103,928
(19,484,314)
27,819,335
(19,018,113)
1,619,614
(3,649,157)
127,546
(7,192,469)
(476,310)
8,801,222
(6,333,678)
192,524
(13,656,309)
(687,507)
Loss after income tax expense
(9,570,777)
(11,683,748)
Revenue from Contracts with Customers and Gross Profit significantly decreased during H2 largely due to lower
commodity prices (Oil and Gas), as a result of COVID-19 impacting the East Coast market. This was primarily caused
by LNG customers claiming Force Majeure on Australian Oil and Gas producers which caused an excess of gas flooding
the market.
Finance expenses due to the early redemption of the Company's convertible notes in FY 2019.
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 Armour. 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
Consolidated
30 June
2020
$
30 June
2019
$
(1,901,998)
3,008,041
(127,546)
720,491
(28,218)
2,660,068
1,135,632
(192,524)
71,329
61,976
Earnings before interest, depreciation, and amortisation (EBITDA)
1,670,770
3,736,481
25 | P a g e
Cash flow
In the year ended 30 June 2020, a total net cash outflow of $5.9 million was recorded. The net inflow from operating
activities was $3.3 million with $21.1 million of revenue positively contributing from operations.
Cash outflows from investing activities were $6.6 million, mainly attributable to the funds received from the execution of
the farm-in agreement with Santos covering Armour’s oil and gas exploration project in Northern Australia, offset by
costs relating to the development and exploration activities around the Kincora project.
During the year, Armour closed a private placement in September 2019, raising gross proceeds of $4.0 million via the
allotment of 80 million shares. Quarterly principal and interest repayments totalling $9.8 million for the $55.0 million
Secured Partially Amortising Notes were made during the year. Net cash outflows from financing activities were $2.7
million.
30 June
2020
$
Consolidated
30 June
2019
$
Net cash at the beginning of the year
Net cash from operating activities
Net cash from investing activities
Net cash from financing activities
9,225,176 5,104,627
(3,047,801) (986,638)
(6,824,736)
3,893,064
(13,688,453)
18,795,640
Net cash at the end of the year
3,245,703
9,225,176
Future likely developments, prospects, and business strategies
There are no further developments of which the Directors are aware of that is not detailed elsewhere in this report which
the Directors believe comment on, or disclosure of, would prejudice the interests of Armour.
Options on Issue
At the date of this report, the unissued ordinary shares of Armour Energy Limited under option are as follows:
Grant Date
29 March 2016
29 March 2016
29 March 2016
31 July 2018
01 October 2019
17 December 2019
23 June 2020
30 June 2020
12 August 2020
24 August 2020
17 September 2020
Date of Expiry
29 March 2021
29 March 2021
29 March 2021
31 July 2021
30 September 2023
30 September 2023
29 February 2024
29 February 2024
29 February 2024
29 February 2024
29 February 2024
Exercise
Price
$0.195
$0.345
$0.495
$0.161
$0.080
$0.080
$0.050
$0.050
$0.050
$0.050
$0.050
Number
under option
2,550,000
2,550,000
1,650,000
41,000,000
40,000,000
8,000,000
31,166,497
7,018,341
9,424,831
16,894,150
35,929,524
196,183,343
26 | P a g e
Remuneration Report (audited)
The remuneration report details the key management personnel remuneration arrangements for Armour, 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:
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Group performance and link to remuneration
Other transactions with key management personnel
The remuneration report details the remuneration arrangements for Key Management Personnel ("KMP") who are
defined as those persons who have authority and responsibility for planning, directing and controlling the activities of
Armour, directly or indirectly, including any Director (whether executive or otherwise) of Armour, including the executive
team.
The following persons are considered Key Management Personnel for Armour:
Directors
Nicholas Mather
Roland Sleeman
Stephen Bizzell
Eytan Uliel
Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Executives
Current Executives
Bradley Lingo
Karl Schlobohm
Michael Laurent
previously General Manager - Development (3 June 2019 to 30 June 2020)
Erin Clark
Chief Executive Officer (12 June 2020 to date)
Company Secretary
Chief Operating Officer (1 July 2020 to date)
Chief Financial Officer (acting) (7 August to date)
Previous Executives
Richard Aden
Nathan Rayner
Roger Cressey
Richard Fenton
Bruce Clement
Chief Financial Officer (23 July 2018 to 7 August 2020)
Chief Operating Officer (from 26 November 2018 to 19 July 2019)
Chief Executive Officer (21 November 2011 to 23 October 2019)
Interim Chief Executive Officer (21 October 2019 to 20 March 2020)
Chief Executive Officer (12 March 2020 to 17 April 2020)
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.
Principles used to determine the nature and amount of remuneration
Armour'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 Armour.
27 | P a g e
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 Armour 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 Armour. Further details on the remuneration of Directors and Executives are set out in this Remuneration
Report.
Armour aims to reward the Executives with a level and mix of remuneration commensurate with their position and
responsibilities within Armour. 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 Armour.
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.
Non-executive Directors’ Remuneration
The board seeks to set aggregate remuneration at a level which provides Armour with the ability to attract and retain
directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. Armour’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.
28 | P a g e
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, Armour 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 Armour or otherwise in connection with the business of Armour.
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 Armour's directors and officers insurance policy
Directors are made aware of Armour's Corporate Governance policies and procedures
Directors are ordinarily entitled to remuneration of $50,000 per annum, plus reasonable expenses for travel and
accommodation, however, as of May 2020 there was a 20% reduction to lower Corporate costs
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 2020 is detailed on page 30 of this remuneration
report.
Executive remuneration
Armour 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 Armour and
to:
link reward with the strategic goals and performance of Armour
align the interests of the executives with those of shareholders
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
The combination of these comprises the executive's total remuneration. The remuneration of executive directors and
other KMP for the year ended 30 June 2020 is detailed on page 30 of this Remuneration report.
Voting and comments made at the Company's 2019 Annual General Meeting ('AGM')
At the 2019 AGM, 99.8% of the eligible votes received supported the adoption of the remuneration report for the year
ended 30 June 2019. The Company did not receive any specific feedback at the AGM regarding its remuneration
practices.
29 | P a g e
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel (KMP) of Armour are set out in the following tables.
Short-term benefits
Post-
employment
benefits
Share-based payments
Cash
bonus
Non-
monetary
Super-
annuation
Equity-
settled
Options
Equity-
settled
Shares
Cash
salary and
fees
$
203,000
48,333
48,333
48,333
50,000
13,800
279,635
322,825
46,313
329,528
230,562
117,054
30 June 2020
Directors:
N Mather
S Bizzell
R Sleeman
E Uliel
Other Key
Management
Personnel:
K Schlobohm
B Lingo**
M Laurent****
R Aden*
B Clement**
R Fenton**
R Cressey**
N Rayner***
$
-
-
-
-
-
-
-
2,012
-
-
1,934
-
$
-
-
-
-
-
817
20,650
26,775
-
-
-
-
$
-
-
-
-
-
1,288
20,772
21,175
2,404
-
21,134
6,947
73,720
$
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
203,000
48,333
48,333
48,333
50,000
21,287
321,057
372,787
48,717
329,528
321,164
124,001
$
-
-
-
-
-
5,382
-
-
-
-
67,534
-
1,737,716
3,946
48,242
72,916
1,936,540
*
**
***
****
Mr Aden was employed as CFO from 23 July 2019 to 07 August 2020.
Mr Cressey was CEO from 21 November 2011 to 23 October 2019. Mr Fenton was Interim CEO from 21 October 2019 to 20 March 2020.
Mr Clement was CEO from 12 March 2020 to 17 April 2020. Mr Lingo commenced as CEO on 12 June 2020.
Mr Rayner was employed as COO from 26 November 2018 to 19 July 2019.
Mr Laurent was employed from 26 March 2019 as Subsurface Manager but was subsequently promoted to GM Development effective 19
July 2019.
30 | P a g e
Short-term benefits
Post-
employment
benefits
Share-based payments
30 June 2019
Directors:
N Mather
S Bizzell
R Sleeman
E Uliel
W Stubbs*
Other Key
Management
Personnel:
R Cressey*
K Schlobohm
R Aden***
R Fenton**
N Rayner**
P 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
bonus
Non-
monetary
Super-
annuation
Equity-
settled
Options
Equity-
settled
Shares
$
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
$
-
-
-
-
-
$
-
-
-
-
-
41,638
25,675
-
15,464
-
9,854
-
-
18,870
17,826
13,425
-
66,956
75,796
13,211
4,404
-
-
-
4,404
22,019
$
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
210,000
50,000
50,000
50,000
20,833
476,743
54,404
336,776
309,174
205,136
8,803
1,771,869
*
**
***
Mr Stubbs retired on 27 November 2018. Mr Cressey was CEO from 21 November 2011 to 23 October 2019.
Mr Fenton was employed from 16 July 2018 to 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 until 7
August 2020.
All other directors were not entitled to or awarded any performance-based incentives or bonuses during the current or
prior year.
Armour has an incentive scheme which rewards employees for contributing to the overall performance of Armour. The
underlying objective of the incentive arrangements is to:
Ensure employees understand Armour's business drivers, objectives, and performance
Strengthen the involvement and focus of employees in achieving the business' objectives
Improve teamwork, communication, and interaction among employees
Under the incentive scheme, Armour may at its discretion, on an annual basis, pay a bonus to permanent employees
who are employed by Armour 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')
For 30% of the potential maximum award, the overall corporate performance compared to predetermined
corporate performance targets but subject to satisfactory personal performance
31 | P a g e
For the year ended 30 June 2020 $67,534 of other employment benefits were taken as ordinary shares in lieu of cash
(2019: $99,961). The number 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.
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:
Details:
Bradley Lingo
Chief Executive Officer
12 June 2020
Mr Lingo is entitled to a base remuneration of $276,000 per annum,
exclusive of superannuation.
Mr Lingo is entitled to participate in any Incentive Plan implemented or established by the Company. Both Armour and
Mr Lingo are entitled to terminate the contract upon giving six (6) months written notice. Armour is entitled to terminate
the agreement immediately upon Mr Lingo’s insolvency or certain acts of misconduct. Mr Lingo is entitled to terminate
the agreement immediately upon a significant diminution in his benefits, job content, status, responsibilities, or authority.
Mr Lingo is entitled to a bonus, to be assessed annually by the Board, based on the following weighted KPI’s. The base
remuneration for the bonus payment calculation will be a maximum 100 % of the sum of $100,000 (Base Amount),
calculated on an annual basis unless otherwise agreed by the Board.
No
KPI’s
1
2
3
The Board approving a debt or equity refinancing of the FIIG Notes.
The Company achieving a stabilised flow rate of in excess of 14TJ’s per day from the Kincora Gas
Project.
The Board approving the entering into of a farm-out or other commercial agreement in respect
of the NT Assets.
TOTAL
In addition to the bonus payment, Mr Lingo is entitled to the below Performance Shares:
Contribution
Percentage
50%
25%
25%
100%
32 | P a g e
No
Performance Criteria
1.
2.
3.
4.
5.
6.
On the first Commercial Discovery in the Co-Era Assets being determined in accordance with
recognised standards in the oil and gas industry and announced by the Company
The VWAP for Shares trading on ASX for 20 consecutive days is not less than 500% over the
closing price for Shares on the last trading day before the Commencement Date.
The Board approving the entering into of a farm- out or other commercial agreement in respect of
the NT Assets.
The Board approving a refinancing of the FIIG Notes.
The Company achieving a stabilised flow rate of in excess of 14TJ’s per day from the Kincora Gas
Project
On the first Commercial Discovery on any
Licences other than.
(a) The Kincora Gas Project; and
(b) The CoEra Assets.
Number of
Performance
Shares
900,000
1,800,000
1,350,000
1,350,000
900,000
900,000
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Nicholas Mather
Executive Chairman
18 December 2009
On-going
Mr Mather is ordinarily entitled to a base remuneration of $210,000 per
annum, inclusive of superannuation. However, due to cost reductions
this was reduced from April 2020.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Michael Laurent
Chief Operating Officer
1 July 2020
On-going
Mr Laurent is ordinarily entitled to a base remuneration of $421,797 per
annum, inclusive of superannuation.
Mr Laurent was employed from 26 March 2019 as Subsurface Manager but was subsequently promoted to GM
Development effective 19 July 2019.
Mr Laurent commenced as COO on 1 July 2020 and is now entitled to $100,000 of AJQ Shares, to bring his total
package to $421,797 per annum. The shares are equivalent to 2.65 million shares and will be escrowed for 12 months
from issuance.
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.
33 | P a g e
All directors and key management personnel have no entitlement to termination payments in the event of removal for
misconduct.
The base remuneration, inclusive of superannuation, included in the contractual arrangements to other key management
personnel is set out below:
Key Management Personnel
B Lingo**
K Schlobohm
M Laurent
R Aden*
B Clement**
R Fenton**
R Cressey**
N Rayner***
Base salary incl
super
Maximum bonus
payable
$276,000
$50,000
$320,000
$340,000
$475,000
$329,528
$410,613
$340,000
$100,000
-
$96,000
$102,000
$213,750
-
$374,989
$102,000
* Mr Aden was employed as CFO from 23 July 2019 to 07 August 2020.
** Mr Cressey was CEO from 21 November 2011 to 23 October 2019. Mr Fenton was Interim CEO from 21 October 2019 to 20 March 2020. Mr
Clement was CEO from 12 March 2020 to 17 April 2020. Mr Lingo commenced as CEO on 12 June 2020.
*** Mr Rayner was employed as COO from 26 November 2018 to 19 July 2019.
Share-based compensation
During the year ended 30 June 2020, there were no shares issued in lieu of fixed remuneration.
Options granted as part of remuneration for the year ended 30 June 2020
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 Armour to align comparative
shareholder return and reward for directors and executives.
During the year ended 30 June 2020, there were no options granted as remuneration to Key Management Personnel
(2019: nil). Details of all options on issue over unissued ordinary shares in Armour Energy Ltd on 30 June 2020 to Key
Management Personnel as remuneration are set out in the table below:
2020
KMP
Vesting
date - all
100%
vested
Grant date
Grant
number
Exercise
price
Expiry
Date
Number
vested
Balance on
30 June
2020
Value
per
option
at
grant
date*
K Schlobohm
29/03/2019
29/03/2016
300,000
$0.195 29/03/2021
300,000
$0.06
300,000
K Schlobohm
29/03/2019
K Schlobohm
29/03/2019
29/03/2016
300,000
$0.345 29/03/2021
300,000
$0.06
300,000
29/03/2016
300,000
$0.495 29/03/2021
300,000
$0.06
300,000
900,000
900,000
900,000
*
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.
Performance Shares
The table below shows how many performance shares were granted and vested during the year. No performance
shares were forfeited during the year.
34 | P a g e
KMP
Expected
vesting date
Grant date
Grant
number
Exercise
price
Number
vested
B Lingo
B Lingo
B Lingo
B Lingo
B Lingo
B Lingo
30/06/2022
12/06/2025
31/03/2021
31/12/2021
31/12/2021
30/06/2023
12/06/2020
900,000
12/06/2020
1,800,000
12/06/2020
1,350,000
12/06/2020
1,350,000
12/06/2020
12/06/2020
900,000
900,000
7,200,000
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance on
30 June
2020
Value per
PS at
grant
date*
$0.03
$0.02
$0.03
900,000
1,800,000
1,350,000
$0.03
1,350,000
$0.03
$0.03
900,000
900,000
7,200,000
* With the exception of tranche 2, value per performance share at grant date is calculated using the share price at
the date of issue. Tranche 2 contains a market based performance conditions and the value per performance share
at grant date is calculated using a Monte Carlo simulation model, which takes into account factors such as the
market based vesting condition, the share price at the date of issue and volatility of the underlying share price and
the time to maturity of the performance share.
Shares issued on exercise of remuneration options
There were no options exercised during the year that were previously granted as remuneration (2019: nil).
Shareholdings
Details of all ordinary shares in Armour Energy Ltd as of 30 June 2020 held by Key Management Personnel is set out
below:
Directors / Key Management Personnel
N Mather
S Bizzell
R Sleeman
R Cressey (*)
K Schlobohm
R Aden (**)
R Fenton (*)
N Rayner (***)
Balance at
1 Jul 2019
3,647,968
1,659,051
58,333
2,120,054
391,049
595,462
381,287
316,045
9,169,249
Granted as/
in lieu of
compensation
-
Options
exercised
-
Net changes
Other
1,182,396
30 Jun 2020
4,830,364
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
553,015
2,212,066
-
58,333
(2,120,054)
-
-
(381,287)
(316,045)
-
391,049
595,462
-
-
(1,081,975)
8,087,274
* Mr Cressey was CEO from 21 November 2011 to 23 October 2019. Mr Fenton was Interim CEO from 21 October 2019 to 20 March 2020.
** Mr Aden was employed as CFO from 23 July 2019 to 07 August 2020.
*** Mr Rayner was employed as COO from 26 November 2018 to 19 July 2019.
NOTE: "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 as of 30 June 2020 (2019: nil).
Option holdings
Details of all option holdings in Armour Energy Ltd as of 30 June 2020 held by Key Management Personnel is set out
below:
35 | P a g e
Directors/
Key
management
personnel
Balance
at 1 Jul
2019
N Mather
S Bizzell
1,500,000
1,500,000
R Sleeman
750,000
R Cressey (*) 4,100,000
K Schlobohm
900,000
8,750,000
Granted as
remuneration
Options
exercised
Net Change
other
Balance
at
30 Jun
2020
Total
vested
Total
Vested and
exercisable
Total
unvested and
un-
exercisable
-
-
-
-
-
-
-
-
-
-
-
-
(908,803)
591,197
591,197
591,197
4,776,505 6,276,505 6,276,505
6,276,505
(750,000)
(4,100,000)
-
-
-
-
-
-
-
900,000
900,000
900,000
(982,298) 7,767,702 7,767,702
7,767,702
-
-
-
-
-
-
*
Mr Cressey was employed from 21 November 2011 to 23 October 2019.
"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 on 30 June 2020 (2019: nil).
Performance share holdings
Details of all performance shareholdings in Armour Energy Ltd as of 30 June 2020 held by Key Management Personnel
is set out below. The performance shares carry no dividend or voting rights. See page 32 above for conditions that
must be satisfied for the performance shares to vest.
When exercisable, each performance share is convertible into one ordinary share of Armour Energy Limited. If an
executive ceases employment before the shares vest, the shares will be forfeited.
Directors/ Key
management
personnel
Balance
at 1 Jul
2019
Granted as
remuneration
Performance
shares
exercised
Balance at
30 Jun
2020
Total
vested
Total Vested
and
exercisable
Total
unvested
and un-
exercisable
B Lingo
-
-
7,200,000
7,200,000
-
-
7,200,000
7,200,000
-
-
-
-
7,200,000
7,200,000
Group performance and link to remuneration
During the financial year, Armour 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 as of 30 June 2020 was $0.02.
The earnings of Armour for the five years to 30 June 2020 are summarised below:
Sales revenue
Profit (loss) after income tax
2020
$
21,103,928
(9,570,776)
2019
$
27,819,335
(11,683,748)
2018
$
14,748,819
(12,198,333)
2017
$
572,600
(11,474,692)
2016
$
153,569
(18,873,927)
36 | P a g e
Armour 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.
Armour 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)
2.0
6.7
9.0
7.0
6.0
2020
2019
2018
2017
2016
Other transactions with key management personnel and their related parties
Company debt instruments held by key management personnel
There were no convertible notes held by key management personnel on 30 June 2020.
The early redemption of all existing Convertible Notes on issue on 29 March 2019 was repaid through a refinancing
transaction involving the issue of the $55 million new Secured Partially Amortising Notes, some of which were
subscribed for by key management personnel, as set out below.
Corporate bond holdings
Stephen Bizzell
Corporate bond payments
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
Interest
$
Principal
$
Additions /
Disposals
$
Total paid
during 2020
$
10,828
7,000
-
17,828
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.
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.
Armour entered into an agreement with Bizzell Capital Partners Pty Ltd as Lead Manager for the capital raising program
detailed in an ASX announcement on 23 September 2019.
On 23 September 2019, Armour Energy completed a private placement which raised gross proceeds of $4 million via
the allotment of 80 million shares, with attached unlisted options. Bizzell Capital Partners managed the private
placement and was paid a capital raising fee of $240,000 (net of GST) on arm's length terms.
Bizzell Capital Partners was also entitled to receive an allotment of 8 million unlisted options exercisable at 8 cents
through to 30 September 2023. Of the 8 million, 2 million were subsequently transferred to an unrelated sub-underwriter.
This transaction was approved by shareholders at the company’s AGM on 26 November 2019.
37 | P a g e
In an ASX announcement on 15 June 2020, Armour entered into an agreement with Bizzell Capital Partners Pty Ltd and
JB Advisory as Joint Lead Managers for the capital raising program. Armour announced a further capital raising program
comprising a Placement and an Entitlement Offer, with the Entitlement Offer being fully underwritten by Bizzell Capital
Partners.
During the year ended 30 June 2020, Armour also paid Bizzell Capital Partners $22,687 under the Underwriting
Agreement, and $73,352 in relation to the allotment of Placement Shares on 23 June 2020.
Under the agreement, Bizzell Capital Partners Pty Ltd will received a management fee of one (1) percent of the funds
raised under the entitlement offer, the placement and conditional placement, an underwriting fee of five (5) percent of
all new shares issued under the entitlement offer, a placement fee of five (5) percent of all new shares issued and any
funds raised under the Conditional Placement and an option fee representing 4 options for every $1 raised pursuant to
the Placement and Conditional Placement (subject to shareholder approval).
Samuel Holdings Pty Ltd
On 15 June 2020, it was announced that The Entitlement Offer was expected to partly be sub-underwritten by Samuel
Holdings Pty Ltd (as trustee).
Samuel Holdings Pty Ltd has agreed to sub-underwrite up to 60,933,755 New Shares of the Shortfall, on the basis that
no New Shares will be issued that would result in Samuel Holdings Pty Ltd and its associates to have in aggregate no
more than 20% of the Voting Power of the Company. Samuel Holdings Pty Ltd will receive a fee of five (5) percent of
the sub-underwritten amount from Bizzell Capital Partners and Armour will issue four (4) Underwriter Options for every
$1 of the sub-underwritten amount, subject to Shareholder approval.
Other than the above, there were no other transactions with Key Management Personnel for the year ended 30 June
2020.
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
Other than the below subsequent events, no other matter or circumstance has arisen since 30 June 2020 that has
significantly affected, or may significantly affect Armour's operations, the results of those operations, or Armour's state
of affairs in future financial years.
On 1 July 2020, Armour announced that Cordillo Energy Pty Ltd, a 100% subsidiary of Oilex Limited and one
of the companies include in the Oilex transaction with Armour, was successful in bidding for Block CO2019-E
in the Northern Flank of the Cooper Basin, South Australia.
On 10 July 2020, the Company announced a further extension to the closing date of the Entitlement Offer to 5
August 2020. On the 18 September 2020, the Company announced that it had successfully completed the
capital raising and will raise a total of $15 million, subject to necessary approvals.
38 | P a g e
On 27 July 2020, the Farmin Agreement between the Company and Santos QNT Pty Ltd was amended to
accelerate payments relating to the permit award process, resulting in Santos made a one
off, unconditional
accelerated cash payment of $6 million in total in full consideration of all future contingent permit transfer
payments covering the Application Areas.
‐
On 15 Augusts 2020, the Company received the second payment of $3.5 million from the Sales and Purchase
Agreement with Australia Pacific LNG Pty Ltd for the sale of Armour’s 10% interest in Petroleum Lease 1084
known as the “Murrungama block” (PL1084).
As a result of the above asset transactions, Armour made a $5.3 million early principal amortisation payment
on the Secured Amortising Notes during August 2020.
On 18 August 2020, Armour executed a term sheet with Auburn Resources Limited, a public, unlisted company,
for the sale of Ripple Resources Pty Ltd, for 5,600,000 fully paid shares in Ripple Resources Pty Ltd.
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
Armour is subject to significant environmental regulation in relation to its operations. Armour 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.
Armour 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 and Environmental Management System (HSEMS)
and assurance processes.
During the financial year, the Kincora Gas Project recorded three recordable incidents. 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 Armour continues to work with the regulators to meet obligations.
Climate Change
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.
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 non-audit services totalling $0.3 million relates to other
advisory services provided.
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.
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The Directors are of the opinion that the services as disclosed in note 42 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.
Officers of the Company who are Former Partners of BDO
There are no officers of the Company who are former partners of BDO.
Rounding of amounts
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with
that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
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 Armour
support and have adhered to the ASX corporate governance principles, where appropriate for the Company. Armour’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
Executive Chairman
30 September 2020
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Managing Risk
Armour 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
Armour. These events may be beyond the control of the Board or management of Armour Energy.
The major risks associated with an investment in Armour are summarised below:
Operating Risks
Armour 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
Armour’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 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
Armour’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, Armour 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.
Armour 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, Armour
engages experienced consultants and other technical advisors to provide expert advice where necessary.
Safety Risk
Safety remains of critical importance in the planning, organisation and execution of Armour Energy’s exploration and
operational activities. Armour 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
Armour 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.
Armour’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.
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Access to Capital
On 30 June 2020, Armour remains well funded with cash reserves 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 is dependent upon
several factors, including the success of the Kincora Gas Plant, successful exploration and subsequent exploitation of
Armour’s tenements.
Should these avenues be delayed or fail to materialise, Armour has a proven history of the ability to successfully raise
additional funding through debt, equity or farm out/sell down to allow Armour to continue as a going concern and meet
its debts as and when they fall due.
A recent example of the ability to raise funding via equity was the announcement of the 18 September 2020 of the $15
million placement and entitlement offer.
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 45 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.
For our development and exploration activities, wherever possible we source local materials such as gravel and
construction water from our local landholders and local businesses. 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
landowners, governments, and community groups.
Armour maintains its Operational acreage across a large number of private landholders. Seamlessly interfacing with cattle
and cropping routines is the result of open communication and relationships built on mutual trust and respect. Development
and exploration schedules are developed in consultation with landholders to minimise local impacts to their business.
Health and Safety
The safety of our employees, contractors, and the communities where we operate continues to drive Armour focus to
continually improve our Safety Management System based on review of our safety performance and the effectiveness
of controls that we implement.
For the 2020 financial year, regrettably the Kincora Gas Project recorded 3 recordable incidents, which when converted
to a base of one-million man hours, results in Armour Energy reporting a company TRIFR (Total Reportable Incident
Frequency Rate) of 33. Armour is striving for TRIFR returning to 0 through a focus on Driver Safety and Working in Hot
Environments.
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 with
no formal notices or penalties being received.
Industry Collaboration
In 2019 Armour Energy Ltd joined Safer Together and is committed to being part of an industry working group committed
to creating the leadership and collaboration needed to build a strong and consistent safety culture.
Environment
The Group’s operations are subject to environmental regulation under federal and state legislation. For the year ended
30 June 2020, Armour Energy reported outstanding environmental performance with 0 recordable environmental
incidents reported.
The Group has focused on the continued development and improvement of the Armour Environmental Management
System in order to assure that the Group continues to meet all environmental obligations. Armour has been successful
42 | P a g e
in obtaining strategic Environmental Approvals that has led to amalgamation of several Armour Environmental
Authorities (EA) to create the Kincora Gas Project EA. The new EA has adopted Streamline Model Conditions that
represents a significant commitment from Armour to continue to minimise harm to the environment through complying
with conditions that are outcomes-focussed and that provide transparency and consistency across the petroleum
industry.
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 40% 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 contributing to a lower-carbon future through the sale of its natural gas products
(as above) as well as the reduction of its own carbon footprint.
Armour Energy Ltd can confirm that for the period 2018 – 2019 it met the corporate group thresholds prescribed by the
National Greenhouse Gas Reporting (NGER) Act with reporting being completed in October 2019.
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 and consume less fuel gas for own use.
Optimisation of staff movements and logistics to reduce road traffic and distance travelled in our operations and
projects.
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.
Execution 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.
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.
New well site facility installations will include electrically driven instrumentation powered by local solar panel
arrays.
Furthermore, Armour minimises its impact on land and waterways in relation to development and exploration activities
by undertaking the following:
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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 and 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
minimise 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 and 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.
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 site issues connected with the issues
highlighted above.
Competent Persons Statement
Technical Statement – Hydrocarbon Reserves
The report ‘Armour Energy Hydrocarbon Reserves, 01 January 2020’, documents the Reserves Update based upon
Armour’s successful drilling and sales production from the Myall Creek 4A, Myall 5A and Horseshoe 4 wells in PL 511
and PL 227 (see Map 1). The estimated aggregated quantities of petroleum reserves to be recovered from existing wells
and through future capital are listed in Table 1 above and exclude 5% production processing fuel and provisional flaring.
The independently verified ‘Armour Energy Hydrocarbon Reserves, 01 January 2020’ report details a high degree of
confidence in the commercial producibility of Permian aged reservoirs previously discovered and produced in operated
granted petroleum licenses 511 and 227 using, recent Armour drilled and hydraulically stimulated wells, 2D-3D seismic,
historic and modern well data, reservoir pressure data, electric logs and rock properties from chip and 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 Armour to the
APA Group metered sales connection to the Roma to Brisbane Pipeline (Run 2) at Wallumbilla and the report discloses
44 | P a g e
the portion of petroleum Reserves that will be consumed as fuel in production and lease plant operations. Armour 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
Armour operated Kincora Project. The methodology used to determine the economic assumptions are based upon
strategic objectives that include, but not limited to, new drills, hydraulic stimulation, workovers, recompletes and surface
facility modifications to ramp up to and maintain a 30 TJ/day production profile for 15 years. 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 licences with approved environmental authorities and
financial assurances. Armour has a social licence to operate and relevant surface access agreements are in-place.
Armour 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. Armour 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 and 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 -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.
Wellbores will be designed to protect aquifers and deviated drilling may be used to lessen the overall impact to surface
owners, environmental receptors, strategic cropping and to consolidate surface infrastructure. Processing at the Kincora
Gas Plant will be required to separate the extracted hydrocarbons into dry gas, liquid petroleum gas, oil, and condensate
and to remove any impurities prior to sales.
Technical Statement – Contingent Oil Resources
Armour Energy engaged the services Mr Teof Rodriguez, Director of TR&A, to provide independent expert review of
reports on the operated Oil Resources associated within the Company’s 100% WI petroleum licenses 14 and 22 and
within the 90% WI petroleum license 30, in the Kincora Project on 4 February 2020.
The basis for confirming the existence of a significant quantity of potentially moveable hydrocarbons in the Early Jurassic
and Middle Triassic aged reservoirs and the determination of a discovery is based upon stand-alone appraisal and
appraisal pilot production from existing historic wells in and around the New Royal, Washpool-Wilga, Borah Creek,
Kincora, Waratah and Riverslea Oil Fields. These oil pools have an aggregated cumulative oil production of 2.25 Mmbbl.
Ongoing analysis of existing 2D and 3D data, well data and historic production will allow future new drill locations to be
inventoried and new access negotiations have been completed to allow for the Early Jurassic and Middle Triassic aged
reservoirs to be included in the Armour Energy Greater Kincora Field Development Plan, revised January 2020 and
scheduled into the 2020-2025 drilling campaign.
At present the detailed petrophysical reservoir parameters, mapping of gross-rock-volume (GRV), historical production,
rate-transit-analysis, well tests, core data, 2D and 3D seismic, structure maps and net sand isopaches using probabilistic
distributions determined the net recoverable Contingent Oil Resources calculated for the report. Petroleum license
commitments and new wellbores have been budgeted. The new wells are part of a 5-year appraisal and development
plan to increase oil sales production in a staged approach to-up-to 350 barrels/day using new or existing oil facilities for
separating and collection by ORI for sales.
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
45 | P a g e
of development. Further exploration appraisal and evaluation is required to determine the existence of a significant
quantity of potentially moveable hydrocarbons.
Consents
The reserves information in this ASX release is based on, and fairly represents, data and supporting documentation
prepared by, or under the supervision, of Mr Teof Rodrigues. Mr Rodrigues’ primary discipline is Reservoir Engineering
and during his 40
year period in the Industry has had the opportunity to work in multidisciplined teams to appreciate the
importance of understanding the process involved in moving the hydrocarbons from the reservoir to the reference sales
point. As the Chief Reservoir Engineer for 6 years he had the Corporate Reserves Team reporting to him. In addition,
he had the responsibility of endorsing all the Major Projects and the key Reserves and Resource estimates of the
Company. He is a Director of TR&A and an experienced petroleum Reserves and resources estimator with 40 years
relevant experience. He has adhered to the ASX Listing Rules Guidance Note 32. His qualifications and experience
meet the requirements to act as a Competent Person to report petroleum reserves under PRMS (2018). The Resources
information in this ASX announcement was issued with the prior written consent of Mr Rodrigues in the form and context
in which it appears.
‐
PRMS
The reserves review was carried out in accordance with the SPE Reserves Auditing Standards and the SPE
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
and 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
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 (June 2018).
to
‐
‐
‐
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
categorised in accordance with the level of certainty associated with the estimates and may be sub
classified based on
project maturity and/or characterised by their economic status.
‐
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Forward Looking Statement
This announcement may contain certain statements and projections provided by or on behalf of Armour Energy Limited
(Armour) with respect to the anticipated future undertakings. These forward
looking statements reflect various
assumptions by or on behalf of Armour. Accordingly, these statements are subject to significant business, economic
and competitive uncertainties and contingencies associated with exploration and/or production which may be beyond
the control of Armour which could cause actual results or trends to differ materially, including but not limited to price
fluctuations, exploration results, resource estimation, environmental risks, physical risks, legislative and regulatory
changes, political risks, project delay or advancement, ability to meet funding requirements, factors relating to property
title, native title and aboriginal heritage issues, dependence on key personnel, share price volatility, approvals and cost
estimates. Accordingly, there can be no assurance that such statements and projections will be realised.
Armour makes no representations as to the accuracy or completeness of any such statement of projections or that any
forecasts will be achieved.
‐
Additionally, Armour makes no representation or warranty, express or implied, in relation to, and no responsibility or
liability (whether for negligence, under statute or otherwise) is or will be accepted by Armour or by any of their respective
officers, directors, shareholders, partners, employees, or advisers as to or in relation to the accuracy or completeness
of the information, statements, opinions or matters (express or implied) arising out of, contained in or derived from this
presentation or any omission from this presentation or of any other written or oral information or opinions provided now
or in the future to any interested party or its advisers. In furnishing this information, Armour undertakes no obligation to
provide any additional or updated information whether as a result of new information, future events or results or
otherwise.
Nothing in this material should be construed as either an offer to sell or a solicitation of an offer to buy or sell securities.
It does not include all available information and should not be used in isolation as a basis to invest in Armour Energy
Limited.
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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 R M SWABY TO THE DIRECTORS OF ARMOUR ENERGY LIMITED
As lead auditor for the audit of Armour Energy Limited for the year ended 30 June 2020, 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.
R M Swaby
Director
BDO Audit Pty Ltd
Brisbane, 30 September 2020
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.
48 | Page
Financial Report
Consolidated statement of profit or loss and other comprehensive income
Revenue
Revenue from contracts with customers
Cost of goods sold
Gross profit
Other income
Interest revenue
Expenses
General and administrative expenses
Exploration expenditure written off
Share based payments
Other expenses
Finance costs
Consolidated
30 June
2020
21,103,928
30 June
2019
27,819,335
(19,484,314)
(19,018,113)
7
1,619,614
8,801,222
490,832
127,546
16,198
192,524
17
(3,346,582)
(6,174,435)
(720,491)
(72,916)
-
(71,329)
(42,136)
(61,976)
24
(7,192,469)
(13,656,309)
Loss before income tax expense
(9,094,466)
(10,996,241)
Income tax expense
9
(476,310)
(687,507)
Loss after income tax expense for the year attributable to the owners of Armour
Energy Limited
(9,570,776)
(11,683,748)
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
9
(1,487,500)
(2,126,990)
446,252
638,097
Other Comprehensive income for the year, net of tax
(1,041,248)
(1,488,893)
Total Comprehensive income for the year attributable to the owners of Armour
Energy Limited
(10,612,024)
(13,172,641)
Basic loss per share
Diluted loss per share
Cents
Cents
10
10
(1.7)
(1.7)
(2.4)
(2.4)
49 | P a g e
Consolidated statement of financial position
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Assets held for sale
Total current assets
Non-current assets
Intangibles
Exploration and evaluation assets
Right-of-use 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
Lease liabilities
Employee benefits
Borrowings
Deferred consideration
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Employee benefits
Provision for restoration and abandonment
Deferred consideration
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued Capital
Reserves
Accumulated Losses
Total equity
11
13
14
15
17
33
18
19
16
35
36
22
21
23
35
37
20
21
Consolidated
30 June 2020 30 June 2019
9,225,176
3,245,703
2,016,447
2,667,516
2,587,580
1,960,822
867,860
522,734
8,717,590
14,376,248
44,581
-
8,762,171
14,376,248
224,636
-
35,209,279
49,276,740
216,017
-
58,333,384
42,344,331
9,196,611
10,516,785
35,119
38,125
103,215,046
102,175,981
111,977,217
116,552,229
6,605,725
4,140,312
189,884
401,071
38,381
309,040
11,713,940
1,203,125
1,000,000
1,000,000
19,910,620
6,690,858
43,122,579
57,415,243
33,247
49,177
28,786
51,371
6,688,065
6,688,065
-
919,143
49,893,068
65,102,608
69,803,688
71,793,466
42,173,529
44,758,763
27
28
114,310,816
106,538,828
2,445,629
3,268,695
(74,582,916)
(65,048,760)
42,173,529
44,758,763
50 | P a g e
Consolidated statement of changes in equity
Consolidated
Issued
capital
$
Accumulated
losses
$
Reserves
$
Total equity
$
Balance at 1 July 2018
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
-
-
-
(11,683,748)
(11,683,748)
(1,488,893)
-
(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
-
-
-
(20,521)
2,893,012
-
-
(20,521)
2,893,012
(5,381,801)
5,381,801
-
154,126
10,265,776
(298,366)
49,410
-
-
-
-
-
154,126
- 10,265,776
-
-
(298,366)
49,410
-
-
(250,000)
250,000
-
42,136
-
42,136
Balance at 30 June 2019
106,538,828
3,268,695
(65,048,760) 44,758,763
Consolidated
Issued
capital
$
Accumulated
losses
$
Reserves
$
Total equity
$
Balance at 1 July 2019
106,538,828
3,268,695
(65,048,760) 44,758,763
Adjustment for change in accounting policy
-
-
36,620
36,620
Balance at 1 July 2019 – restated
106,538,828
3,268,695
(65,012,140)
44,795,383
Loss after income tax expense for the year
Other Comprehensive income for the year, net of tax
-
-
-
(9,570,776)
(9,570,776)
(1,041,248)
-
(1,041,248)
Total Comprehensive income for the year
-
(1,041,248)
(9,570,776)
(10,612,024)
Transactions with owners in their capacity as owners:
Shares issued during the year
Share issue costs
Recognition of deferred tax assets relating to share issue costs
Share-based payments
8,338,854
-
(708,099)
212,800
73,699
67,534
-
5,382
-
-
-
-
8,338,854
(495,299)
73,699
72,916
Balance at 30 June 2020
114,310,816
2,445,629
(74,582,916) 42,173,529
51 | P a g e
Consolidated statement of cashflows
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
Government grant
Consolidated
30 June
2020
24,101,194
30 June 2019
30,029,497
(17,702,339)
(28,593,632)
(3,280,452)
(2,635,131)
122,597
203,791
(6,571,932)
(6,759,126)
283,131
8,884
Net cash used in operating activities
12
(3,047,801)
(7,745,717)
Cash flows from investing activities
Payment for financial assets
Receipt for sale of exploration asset
Refund/(payments) for security deposits
Payments for property, plant, and equipment
Payments for oil and gas assets
Payments for exploration and evaluation
Payments for intangible assets
Grant funds received in relation to oil and gas assets
Farm-in Agreement funds received for exploration assets
(450,000)
500,000
-
-
257,018
(214,079)
-
(22,187)
(22,006,044)
(16,713,985)
(2,497,128)
(169,367)
(224,636)
-
2,596,054
3,431,165
15,000,000
-
Net cash used in investing activities
(6,824,736)
(13,688,453)
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
27
23
23
23
8,433,734 10,138,450
- 55,000,000
-
6,759,200
(3,850,000)
(43,388,436)
(690,670)
(2,954,495)
Net cash from/ (used in) financing activities
3,893,064 25,554,719
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
(5,979,473)
4,120,549
9,225,176
5,104,627
Cash and cash equivalents at the end of the financial year
11
3,245,703
9,225,176
52 | P a g e
Notes to the Financial Statements
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 30 September 2020.
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 2020:
is a general-purpose financial report.
1.
2.
is prepared on a going concern basis (discussed further in Note 4).
3. has been prepared in accordance with the Corporations Act 2001.
4. has been prepared in accordance with accounting standards and interpretations in this report, which encompass
the:
a. 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”).
c.
b. 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 25.
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.
d.
e. presents reclassified comparative information where required for consistency with the current year’s
presentation.
f. 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 2019. None had a significant impact on the
Financial Statements.
g. 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.
53 | P a g e
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 31.
Rounding of amounts
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with
that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
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 2020 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.
Non-current assets or disposal groups classified as held for sale
Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying
amount and fair value less costs of disposal. For non-current assets or assets of disposal groups to be classified as held
for sale, they must be available for immediate sale in their present condition and their sale must be highly probable.
An impairment loss is recognised for any initial or subsequent write down of the non-current assets and assets of disposal
groups to fair value less costs of disposal. A gain is recognised for any subsequent increases in fair value less costs of
disposal of a non-current assets and assets of disposal groups, but not in excess of any cumulative impairment loss
previously recognised.
Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses
attributable to the liabilities of assets held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of disposal groups classified as held for sale are presented
separately on the face of the statement of financial position, in current assets. The liabilities of disposal groups classified
as held for sale are presented separately on the face of the statement of financial position, in current liabilities.
54 | P a g e
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 has entered into joint arrangements with
various parties for interest in exploration tenements as disclosed in note 30. Exploration expenditures incurred in relation
to these joint operations have been capitalised in accordance with AASB 6 Exploration for and Evaluation of Mineral
Resources.
Impairment of non-financial assets
Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. At each reporting date, Management reviews the carrying values of its assets to determine
whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount
of the asset, being the higher of the asset’s fair value less costs to sell and value in use is compared to the assets carrying
value. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable
amount.
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.
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 are 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 were 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.
Grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be
received, and the company will comply with all attached conditions. Government grants relating to costs are deferred and
recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate.
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.
55 | P a g e
The Group has achieved relatively stable production during the last 12 months, resulting in $21,103,928 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 existing flowing wells.
For the year ended 30 June 2020, the Group generated a consolidated net loss before tax of $9,089,084 and incurred
operating cash inflows of $2,683,032. As at 30 June 2020, the Group had cash and cash equivalents of $3,245,703, net
current assets of $565,491 and net assets of $42,173,529.
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.
COVID-19 Response
Cost Reductions
Armour is taking steps to reduce corporate costs by a minimum of 35%. This includes all head office staff reducing
remuneration by 20% and unfortunately includes a number of redundancies. The Executive Chairman and Non-Executive
Directors have also reduced their fees by 20% from April 2020. Future consideration will be given to the partial payment
of Director fees in shares, subject to any necessary shareholder and regulatory approvals. In addition, Armour is seeking
to reduce to the full extent possible all other overheads including contractor hours and rates, administration costs and office
rent. These remuneration reductions are anticipated to remain in place for at least a six-month period and will be reviewed
and updated as and when required.
Armour is also aiming to reduce operating expenditure at its Kincora Gas Project by approximately 20%, while maintaining
its ability to reliably maintain production in a safe and environmentally compliant manner. This will include revised staff
rostering and schedules but will unfortunately include some redundancies.
Capital Expenditure 2020
The capital raising program as originally announced was aiming to raise approximately $10m via a series of share
placements (to raise approximately $5.5m) and an underwritten Accelerated Non-Renounceable Entitlement Offer (to raise
approximately $4.5m). Shareholder approval was necessary for the settlement of some of the placement amounts, and
this has now been received as a result of the EGM held on 18 September 2020.
Due to significant demand from third-party investors in relation to the Company’s fund raising, the Board has been able to
upsize the conditional placement component to a total of approximately $7m subject to receipt of any necessary further
shareholder approvals, which will give the capital raising program a combined total of approximately $15m.
The additional equity raised through the upsized conditional placement enables the Company to accelerate several key
work programs outlined in the investor presentation released on the ASX on 21 August 2020. The Company intends to
use the funds raised from the upsized placement specifically to fund the following work programs:
Surat Basin Production Enhancement – the six-well stimulation program which commenced on 10 September
2020 with the commencement of works at the Horseshoe-4 well (see ASX release of 10 September) including
accelerating the timing of the portion of the program scheduled for the June 2021 quarter;
Cooper Basin Exploration – Accelerating the Cooper Basin exploration program aimed at high grading the existing
2D/3D seismic controlled leads and prospects portfolio to generate 3 to 5 high-quality drill ready 3D controlled
prospects by FYE 2021; and
Newstead Gas Storage Restart - Undertake minor above ground facility works to restart the Newstead Gas
Storage Project including overhaul of the sales gas injection compression equipment and installation of a new bi-
directional valves at the pipeline interconnection facilities in the Wallumbilla Gas Hub.
In addition to these programs the additional upsized placement funds will also be used for general working capital purposes
and provide some flexibility in treasury management. Together with existing working capital, the upsized placement funds
further strengthens the Company’s balance sheet and puts the Company in a position to significantly increase work
program activity aimed at increasing production and cash flow in the near term and developing a pipeline of exploration
projects to deliver reserves and production growth across core assets.
56 | P a g e
Notwithstanding the above, the Directors consider it appropriate to prepare the financial statements on a going concern
basis after having regard to the above and the following matters:
1. As announced on 20 August 2020 the Company had completed non-core asset sales of $10 million.
2. A total of $15 million has been raised from upfront placement, institutional entitlement offer, retail entitlement
offer and conditional placement with $10.6 million being raised post year end.
3. The cash generating ability of the Kincora Project will continue to increase as the Group’s development plans
move ahead and into Phase 3 and 4 of its growth strategies.
4. The implementation of the long-term 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:
a. 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.
b. Reducing its level of capital expenditure through farm-outs and/or joint ventures.
c. Managing its working capital expenditure.
d. Applying for eligible Research and Development tax refund receipts, and other Government incentives;
and
e. 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 adjustment relating to the recoverability and reclassification of the recorded
assets 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.
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
9
17
18
18
20
Deferred tax assets
Exploration and evaluation assets
Oil and Gas assets
Government Grants
Provision for restoration and abandonment
There are no other critical accounting judgements, estimates and assumptions that are likely to affect the current or future
financial years.
Note 6. 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, Northern Territory, and Victoria, Australia.
Operating segments are determined on the basis of financial information reported to the Board.
57 | P a g e
For the year ended 30 June 2020, Management identified the Group as having two main reporting segments, being
Exploration, Evaluation and Appraisal activities (EEA), and the Production and Development of petroleum products (oil,
gas, LPG and condensate) in the Surat Basin, Queensland (Surat), and will report on these segments accordingly.
The Corporate and other segment represents administration and other overheads that are not allocated to the operating
segments.
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.
Types of products and services
The principal products and services of each of these operating segments are as follows:
EEA
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.
Surat
The Group produces petroleum products from its Kincora operating plant in the Surat Basin, which includes a mix of Gas,
LPG, Oil and Condensate and sells these to LNG and Domestic customers.
Intersegment transactions
An internally determined cost base is set for all intersegment services provided. All such transactions are eliminated on
consolidation of the Group's financial statements.
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 2020 approximately 58% (2019: 69%) 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.
58 | P a g e
Operating segment information
Consolidated - 30 June 2020
Revenue
Revenue from contracts with customers
Total segment revenue
EBITDA
Depreciation and amortisation
Impairment of assets
Gain on disposal of assets
Interest revenue
Finance costs
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
EEA
$
Surat
$
Corporate
$
Total
$
-
-
21,103,928
21,103,928
-
-
21,103,928
21,103,928
191,633
2,379,789
(900,644)
1,670,778
-
(2,949,842)
(58,198)
(3,008,040)
(720,491)
-
-
-
-
28,210
-
-
-
127,546
(720,491)
28,210
127,546
(1,942,301)
(5,250,168)
(7,192,469)
(528,858)
(2,484,144)
(6,081,464)
(9,094,466)
(476,310)
(9,570,776)
35,209,278
73,691,929
- 108,901,207
3,076,010
111,977,217
667
18,446,555
-
18,447,222
51,356,466
69,803,688
59 | P a g e
Consolidated - 30 June 2019
Revenue
Revenue from contracts with customers
Total segment 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
EEA
$
Surat
$
Corporate
$
Total
$
-
-
27,819,335
27,819,335
-
-
27,819,335
27,819,335
(2,656)
9,475,472
(5,736,336)
3,736,480
-
(1,116,869)
(18,763)
(1,135,632)
(71,329)
-
-
-
-
(61,976)
-
-
(71,329)
(61,976)
-
192,524
192,524
(1,598,349)
(12,057,959)
(13,656,308)
(73,985)
6,698,278
(17,620,534)
(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
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.
60 | P a g e
Note 7. Revenue from contracts with customers
Revenue
Revenue from contracts with customers
Consolidated
30 June
2020
$
30 June
2019
$
21,103,928 27,819,335
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.
Consolidated
30 June
2020
$
30 June
2019
$
15,386,230 19,807,216
2,643,491
5,368,628
2,068,339
3,649,359
21,103,928 27,819,335
Revenue from contracts with customers:
Gas
LPG
Oil and Condensate
Accounting policy for revenue
The Group recognises revenue as follows:
Revenue from contracts with customers
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:
61 | P a g e
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.
Note 8. Expenses
Loss before income tax includes the following specific expenses:
Cost of sales
Operating expenses
Depreciation and Amortisation
Plant and equipment
Office equipment
Oil and Gas assets - classified as cost of goods sold
Amortisation of intangibles
Rights of Use assets
Total depreciation
Impairment
Exploration and evaluation
Net foreign exchange (gains)/ loss
Net foreign exchange (gains)/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
2020
$
30 June
2019
$
19,484,314
19,018,113
341
15,682
2,743,408
42,175
206,435
3,042
15,721
1,116,869
-
-
3,008,041
1,135,632
720,491
71,329
39,844
(54,702)
769,832
599,120
72,916
42,136
8,726,997
7,707,593
62 | P a g e
Note 9. Income tax
(a) Component of income tax expense (benefit)
Income tax expense (benefit) is made up of:
Deferred tax
Aggregate income tax expense
Income tax charged in equity is made up of:
Deferred tax
Aggregate income tax charged in equity
The prima facie tax on profit / (loss) before income tax is reconciled to the income tax expense
as follows:
Loss before income tax expense
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
Consolidated
30 June
2020
$
30 June
2019
$
476,310
687,507
476,310
687,507
30,057
49,410
30,057
49,410
(9,094,466)
(10,996,241)
(2,728,340)
(3,298,872)
21,875
12,641
-
351
(2,706,465)
(3,285,880)
3,788,046
3,102,461
(605,271)
-
147,659
723,267
476,310
687,507
63 | P a g e
(b) Reconciliation of net deferred tax
Reconciliation of net deferred tax
Deferred tax asset
Carried forward tax losses
Accruals/provisions
Property, Plant & Equipment (Armour)
Capital raising costs through P&L
Capital raising costs in equity
Provision for rehabilitation (Surat Basin)
Available for sale financial assets
Amortisation of Convertible Notes
Amortisation of Tribeca Facility
Lease Liabilities
Net charged
to other
comprehensi
ve income
Net charged
to income
Opening
balance
1 July 2019
Net charged
to equity
Closing
Balance
30 June 2020
8,505,088
(5,560,815)
205,884
116,569
12,572
108,998
88,307
1,378,837
781,927
1,361,531
-
(37,275)
(40,882)
-
-
-
264,504
298,062
-
7,664
-
-
-
-
-
-
446,252
-
-
-
-
-
-
-
2,944,273
322,453
12,572
71,723
73,699
121,124
-
-
-
-
50,639
1,378,837
1,228,179
1,361,531
562,566
58,303
12,707,648
(5,216,677)
446,252
124,338
8,061,561
Deferred tax liability
Exploration & Evaluation assets
Oil & Gas assets
Other
(13,029,324)
4,380,747
321,677
332,453
-
27,166
Potential benefit at 30%
(12,707,647)
4,740,366
-
-
-
-
-
-
(94,280)
(8,648,577)
654,130
(67,114)
(94,280)
(8,061,561)
Net deferred tax
-
(476,310)
446,252
30,058
-
Deferred tax assets not recognised
Unused tax losses
39,831,901
13,485,952
Tax benefit at 30%
11,949,570
4,045,786
-
-
-
53,317,853
-
15,995,356
64 | P a g e
Prior year
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
Net charge to
other
comprehensi
ve income
Net charged
to income
Opening
Balance
1 July 2018
Net charged
to equity
Closing
Balance
30 June 2019
12,196,242
(3,691,154)
145,081
12,572
203,757
65,523
1,378,837
143,830
834,970
-
60,803
-
(94,760)
(26,626)
-
-
526,561
264,504
-
-
-
-
-
-
638,097
-
-
-
-
-
-
49,410
-
-
-
-
8,505,088
205,884
12,572
108,997
88,307
1,378,837
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)
521,969
(1,429,519)
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
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 2020 under COT. Deferred tax assets
which have not been recognised as an asset, will only be obtained if:
1. The Group derives future assessable income of a nature and of an amount sufficient to enable the losses to be
realised.
2. The Group continues to comply with the conditions for deductibility imposed by the law; and
3. No changes in tax legislation adversely affect the Group in realising the losses.
65 | P a g e
(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 ceased 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.
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.
66 | P a g e
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.
Note 10. 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
2020
$
30 June
2019
$
Loss after income tax attributable to the owners of Armour Energy Limited
(9,570,776) (11,683,748)
Weighted average number of ordinary shares used in calculating basic loss per share 573,421,237 487,281,207
Weighted average number of ordinary shares used in calculating diluted loss per
share
573,421,237
487,281,207
Number
Number
Basic loss per share
Diluted loss per share
Cents
Cents
(1.7)
(1.7)
(2.4)
(2.4)
Options and performance shares are not considered dilutive due to losses made by the Group.
Options, performance shares and conversion of convertible notes into equity may become dilutive in the future.
Accounting policy for earnings per share
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
67 | P a g e
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Note 11. Current assets – Cash and cash equivalents
Cash on hand
Cash at bank and in hand
Other cash and cash equivalents
Consolidated
30 June
2020
$
30 June
2019
$
-
3,242,546
3,157
31,019
9,076,454
117,703
3,245,703
9,225,176
Other cash and cash equivalents include bank accounts held by the Group as operator in joint operations in tenements.
Accounting policy for cash and cash equivalents
Cash and cash equivalents include 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.
68 | P a g e
Note 12. Cashflow information
(a) Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax expense for the year
(9,570,776)
(11,683,748)
Consolidated
30 June
2020
$
30 June
2019
$
Adjustments for:
Depreciation and amortisation
Net loss/(gain) 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
Inventory adjustment
Expenses classified as financing activities
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) / decrease in trade and other receivables
(Increase) / decrease in deferred tax assets
(Increase) / decrease in inventories
Increase / (decrease) in provisions
3,008,041
1,135,632
(28,218)
72,916
720,491
61,976
42,136
71,329
(1,203,125)
(370,079)
1,513,201
3,417,558
80,857
109,902
(220,196)
-
-
-
102,966
3,760,165
(345,126)
(374,030)
2,557,906
(2,640,558)
516,676
476,310
(380,707)
687,507
(626,758)
(648,881)
-
(1,073,505)
Net cash used in operating activities
(3,047,801)
(7,745,717)
(*) Net of amounts relating to oil and gas, and exploration and evaluation assets
Equity settled share-based payment transactions are disclosed in Note 28.
Apart from those in Note 28, there are no other non-cash financing and investing activities to disclose.
69 | P a g e
(b) Reconciliation of liabilities arising from financing activities
Consolidated
Convertible
note liabilities
$
Convertible
note coupons
$
Tribeca Loan
$
Corporate
Bonds
$
Total
$
Balance at 1 July 2018
37,511,879
1,543,466
-
-
39,055,345
Net cash from/ (used in) financing
activities
Transaction costs
Equity settled
Amortisation
Cost of convertible note early
redemptions
Balance at 30 June 2019
Net cash used in financing
activities
Amortisation
Balance at 30 June 2020
(43,388,436)
(1,543,466)
6,759,200
55,000,000
16,827,298
-
(154,126)
2,270,518
3,760,165
-
-
-
-
-
-
-
-
-
-
-
(137,219)
(2,893,012)
919,597
(2,350,866)
-
117,543
(2,488,085)
(3,047,138)
3,307,658
-
-
3,760,165
4,648,566
52,766,677
57,415,243
-
(3,850,000)
(3,850,000)
1,015,374
255,902
1,271,276
-
5,663,940
49,172,579
54,836,519
Note 13. Current assets – Trade and other receivables
Trade receivables
Cash calls from (to) JV parties
Cash call receivable - Lakes Oil NL
Other receivables
Withholding tax receivable
Consolidated
30 June
2020
$
30 June
2019
$
1,734,337
2,698,854
97,978
61,132
(30,676)
-
1,893,447
2,668,178
123,000
(3,432)
-
2,770
2,016,447
2,667,516
70 | P a g e
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 2020 (30 June 2019: Nil). Based on the historical recovery of receivables, the small number of customers and
customer payment obligations per gas sales agreements, the historical loss rates are adjusted for current and forward
looking information on economic factors affecting the Group’s customers, including the COVID-19 pandemic. As such the
company considers that no allowance for expected credit losses is appropriate for the Group.
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 2020, included in trade receivables is one significant debtor accounting for approximately 57% (2019: 70%)
of the total trade receivables.
Note 14. Current assets – Inventories
Finished goods - at cost
Stock on hand - at cost
Consolidated
30 June
2020
$
30 June
2019
$
364,834
2,222,746
523,401
1,437,421
2,587,580
1,960,822
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.
71 | P a g e
Note 15. Current assets - non-current assets classified as held for sale
10% Interest in Murrungama PL1084
Consolidated
30 June
2020
$
44,581
30 June
2019
$
-
The Group has entered into an agreement with Australia Pacific LNG to sell them a 10% stake in Petroleum Lease 1084
(Murrungama). A $0.5 million deposit was received by the Group in June 2020. This deposit is refundable to Australia
Pacific LNG should completion not occur within 6 months. The deposit is sitting in Other payables (see Note 16)
Note 16. Current liabilities - Trade and other payables
Trade payables
Other payables
Other tax liabilities
GST payable
Accrued expenses
Consolidated
30 June
2020
$
30 June
2019
$
3,547,686 2,613,838
600,656
24,539
182,775
-
33,827
114,576
2,250,069 1,378,071
6,605,725 4,140,312
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.
72 | P a g e
Note 17. Non-current assets - Exploration and evaluation assets
Exploration and evaluation assets
Less: Accumulated impairment
Movements in carrying amounts
Balance at the beginning of the year
Additions
Government grants relating to Exploration and Evaluation assets
Farm-in agreement proceeds*
Exploration expenditure written off
Provision for impairment
Movements in the provision for impairment amounts
Balance at the beginning of the year
Provisions raised
Consolidated
30 June
2020
$
30 June
2019
$
42,720,194 56,067,164
(6,790,424)
(7,510,915)
35,209,279 49,276,740
Consolidated
30 June
2020
$
30 June
2019
$
49,276,740 48,903,126
802,021
(311,925)
2,270,311
(617,281)
(15,000,000)
-
(720,491)
-
(71,329)
(45,153)
35,209,279 49,276,740
Consolidated
30 June
2020
$
30 June
2019
$
(6,790,424)
(720,491)
(6,745,271)
(45,153)
(7,510,915)
(6,790,424)
In December 2019, a farmin agreement was executed between Armour and Santos QNT Limited (Santos) for Armour’s
South Nicholson Basin tenements. Key points below:
An initial cash payment of $15 million, for the transfer of a 70% interest and operatorship of ATP1087 to Santos.
Under the farmin agreement, Santos has the right to earn a 70% interest in Armour’s North Queensland
tenements, being ATP1087 (granted), and ATP1107, ATP1192 and ATP1193 (applications), and the Northern
Territory tenements EP172 and EP177, both of which are also in the application phase;
Subsequent to year-end, the Company entered into an agreement with Santos to amend the South Nicholson
Basin farmin agreement, resulting in an immediate cash payment of $6 million, received in August 2020, as an
acceleration of future contingent permit transfer payments.
Subject to the satisfaction or waiver of certain conditions, Santos will free carry 100% of Armour’s share of expenditure
for the various work programs for all of the farmin permits up to a Total Capped Amount of $64.9 million (inclusive of
the A$12.5 million work program associated with ATP1087). However, Santos may exercise its withdrawal rights which
will reduce the total capped amount.
73 | P a g e
Accounting policy for farmin arrangements
Armour does not record any expenditure made by the farmee in its account. It also does not recognise any gain or loss
on its exploration and evaluation farmin arrangements but reallocates the costs previously capitalised in relation to the
whole interest as relating to the interests held. Any cash consideration received directly from the farmee is credited
against costs previously capitalised in relation to the whole interest with any excess accounted for by Armour as a gain
on disposal.
Provision for Impairment of Exploration and Evaluation assets
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 and was
then fully impaired in the year ended 30 June 2019.
As part of the annual review of the Ripple Resources interest, it was determined that it was appropriate for an impairment
to be recognised in relation to the Exploration and Evaluation assets as the carrying amount of the Group's interest
exceeded what is expected to be its recoverable amount. As such, an impairment of $720,491 was written off during the
year ended 30 June 2020.
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 2020, 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.
74 | P a g e
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
Government Grants relating to Oil and Gas Assets
Consolidated
30 June
2020
$
30 June
2019
$
74,394,404
53,072,117
(5,616,315)
(2,872,907)
68,778,089
50,199,210
(4,388,589)
(2,416,043)
(6,056,116)
(5,438,836)
(10,444,705)
(7,854,879)
58,333,384
42,344,331
Consolidated
30 June
2020
$
30 June
2019
$
42,344,331
30,987,611
21,322,289
15,666,066
-
(73,237)
(2,743,408)
(1,116,869)
(2,589,828)
(3,119,240)
58,333,384
42,344,331
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.
75 | P a g e
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 and the program finished in October 2019.
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
Less: cumulative fair value movement
Financial assurances
Security deposits
Movements in financial assets at fair value through Other Comprehensive Income
Opening balance at 1 July
Additions
Fair Value adjustments through Other Comprehensive Income
Consolidated
30 June
2020
$
30 June
2019
$
4,702,000
4,252,000
(3,614,490)
(2,126,990)
1,087,510
2,125,010
6,778,007
6,988,181
1,331,094
1,403,594
9,196,611
10,516,785
Consolidated
30 June
2020
30 June
2019
2,125,010
4,252,000
450,000
-
(1,487,500)
(2,126,990)
1,087,510
2,125,010
Financial assets at fair value through other comprehensive income comprise investments in the ordinary capital of
Lakes Oil NL.
76 | P a g e
The fair values of financial assets approximate their carrying amounts principally due to the fact that they are measured
and recognised at fair value. Level 3 inputs, being unobservable inputs have been used in determining the fair value of the
LKO Investment. The fair value was based on an external valuation report that determined the implied equity value of the
recent convertible notes issued by LKO. Level 3 inputs were used as the basis of the fair value as LKO has currently been
suspended from the active market.
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.
Security deposits and financial assurances are measured at amortised cost.
Note 20. Non-current liabilities - Provision for restoration and abandonment
Consolidated
30 June
2020
$
30 June
2019
$
Restoration and abandonment
6,688,065
6,688,065
Key judgement - provision for rehabilitation
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 are valued by an independent expert in accordance with
legislative requirements and is reviewed at each reporting period. For the provision recognised at 30 June 2020, 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.
77 | P a g e
Note 21. Deferred consideration
Current
Deferred consideration payable
Non-current
Deferred consideration payable
Consolidated
30 June
2020
$
30 June
2019
$
1,000,000
1,000,000
-
919,143
1,000,000
1,919,143
Accounting policy for deferred consideration
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 consisted of three $1 million payments to be made on the 1st, 2nd, and 3rd anniversary of first gas.
The final payment is due in September 2020 and $1 million has been classified as a current liability.
Note 22. Current liabilities – Borrowings
Tribeca Loan Facility
FIIG Corporate Bond
FIIG Corporate Bond accrued interest
Note 23. Non-current liabilities - Borrowings
Total secured liabilities
The total secured liabilities are as follows:
Tribeca Loan Facility
FIIG Corporate Bonds
FIIG Corporate Bonds - issue costs
Refer to note 26 for further information on financial risk management.
Consolidated
30 June
2020
$
5,663,940
6,050,000
30 June
2019
$
-
-
-
1,203,125
11,713,940
1,203,125
Consolidated
30 June
2020
$
30 June
2019
$
-
4,648,566
45,100,000
55,000,000
(1,977,421)
(2,233,323)
43,122,579
57,415,243
78 | P a g e
The Group complied with all covenant requirements of the Tribeca loan facility and FIIG Corporate bonds during the year
ended 30 June 2020.
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
2020
$
30 June
2019
$
51,150,000
55,000,000
(2,350,866)
(2,350,866)
373,445
117,543
49,172,579
52,766,677
Consolidated
30 June
2020
$
30 June
2019
$
6,759,200
6,759,200
(137,218)
(137,218)
(2,893,012)
(2,893,012)
1,885,603
895,986
49,367
23,610
5,663,940
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.
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
79 | P a g e
(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
$0.10
92.045%
2.10%
31 July 2021
Immediate
0%
$0.161
The value of each option was determined to be $0.0485 per option.
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.
Note 24. 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
2020
$
30 June
2019
$
4,769,248
6,425,620
864,654
73,484
1,477,710
3,307,656
80,857
-
-
109,903
(20,519)
3,760,165
7,192,469
13,656,309
Note 25. 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
80 | P a g e
Consolidated - 30 June 2020
Financial assets (liabilities) at fair value through other
comprehensive income
Total assets
Consolidated - 30 June 2019
Level 1
$
Level 2
$
Level 3
$
Total
$
-
-
-
-
1,087,510
1,087,510
1,087,510
1,087,510
Level 1
$
Level 2
$
Level 3
$
Total
$
Financial assets (liabilities) at fair value through other
comprehensive income
Total assets
2,125,010
2,125,010
-
-
-
-
2,125,010
2,125,010
Assets and liabilities held for sale are measured at fair value on a non-recurring basis.
The fair values of all 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.
Level 3 inputs used in determining the fair value of the Lakes Oil investment was based on an external valuation report
that determined the implied equity value of the convertible notes issued by LKO. The external valuation report assumed
the following:
100% volatility of stock
0% dividend yield
0.74% risk free rate
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.
81 | P a g e
Note 26. 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.
82 | P a g e
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.
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.
83 | P a g e
Financing arrangements
The Group had no access to undrawn borrowing facilities at the end of the reporting period (2019: 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.
Weighted
average
interest rate
1 year or less
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
Consolidated - 30 June
2020
%
$
-
-
6,605,726
1,000,000
9.00%
608,328
6,802,534
8.75%
10,363,203
25,208,906
27,970,078
16.30%
6.30%
33,487
156,397
-
33,247
-
-
Total non-derivatives
18,767,141
32,044,687
27,970,078
Weighted
average
interest rate
1 year or less
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
Consolidated - 30 June
2019
%
$
Non-derivatives
Non-interest bearing
Trade payables
Deferred consideration
Interest-bearing - fixed rate
Tribeca facility
Corporate bonds
Capital lease
Lease liability
Non-derivatives
Non-interest bearing
Trade payables
Deferred consideration
Interest-bearing - fixed rate
Tribeca facility
Corporate bonds
Capital lease
Total non-derivatives
$
-
-
$
-
-
$
-
-
-
$
-
-
-
Remaining
contractual
maturities
$
6,605,726
1,000,000
7,410,862
63,542,187
33,487
189,644
78,781,907
Remaining
contractual
maturities
$
4,025,736
1,000,000
8,020,856
74,057,500
67,167
87,171,259
$
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
4,025,736
1,000,000
9.00%
8.75%
8.25%
608,328
7,412,528
4,812,500
21,607,265
47,637,735
38,381
28,786
-
10,484,945
29,048,579
47,637,735
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.
84 | P a g e
Note 27. Equity - Issued capital
Issued and paid up capital
Ordinary shares - fully paid
Share issue costs
Recognition of deferred tax asset relating to share issue costs
30 June
2020
Shares
30 June
2019
Shares
30 June
2020
$
30 June
2019
$
Consolidated
779,247,711
509,437,570 121,221,533 112,815,145
-
-
-
-
(8,999,494)
(8,291,395)
2,088,777
2,015,078
779,247,711
509,437,570 114,310,816 106,538,828
Movements in ordinary share capital
Details
Date
Shares
Issue price
$
Balance
1 July 2018
405,175,941
96,367,882
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
10 August 2018
November 2018
7 November 2018
28 August 2018
101,384,299
$0.100 10,138,395
209,425
980,176
$0.100
$0.110
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
26,978
(298,366)
49,410
Balance
30 June 2019
509,437,570
106,538,828
Shares issued for cash (Entitlement Offer)
30 September 2019
80,000,000
$0.050
4,000,000
Shares issued under employment contracts
5 November 2019
1,164,384
$0.058
67,534
Shares issued for cash (Entitlement Offer)
Shares issued for cash (Entitlement Offer)
Share issue costs
Recognition of deferred tax assets relating to share
issue costs
23 June 2020
165,273,600
$0.023
3,801,294
30 June 2020
23,372,157
$0.023
537,560
(708,099)
73,699
Balance
30 June 2020
779,247,711
114,310,816
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.
85 | P a g e
Options
The following share options were on issue at balance date.
Grant Date
29/03/2016
29/03/2016
29/03/2016
31/07/2018
01/10/20191
17/12/20191
23/06/20202
30/06/20202
Expiry Date
29/03/2021
29/03/2021
29/03/2021
31/07/2021
30/09/2023
30/09/2023
29/02/2024
29/02/2024
Number
Exercise
price
% vested
2,550,000
2,550,000
1,650,000
41,000,000
40,000,000
8,000,000
31,166,497
7,018,341
133,934,838
$0.195
$0.345
$0.495
$0.161
$0.080
$0.080
$0.050
$0.050
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
1In September 2019, the Company closed a private placement raising gross proceeds of $4 million via an allocation of 80 million shares at a price of 5
cents each. Investors also received one (1) unlisted option exercisable at 8 cents (through to 30 September 2023) for every two (2) shares subscribed,
resulting in 40,000,000 unlisted options being issued.
2In June 2020, the company announced a further capital raising program. there was an attaching option for every two (2) New Shares issued under the
Entitlement Offer and / or Placement available to both institutional and retail eligible shareholders. There were 38,184,838 options issued exercisable at
5 cents and expiring 29 February 2024.
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 number 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.
86 | P a g e
Note 28. Equity - Reserves
Financial assets at fair value through other comprehensive income reserve
Share-based payments option reserve
Performance shares reserve
Tribeca Loan Option Reserve
Consolidated
30 June
2020
$
30 June
2019
$
(5,339,941)
(4,298,693)
4,887,176
4,674,376
5,382
-
2,893,012
2,893,012
2,445,629
3,268,695
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
$
Performance
rights
reserve
$
Performance
shares
reserve
$
Convertible
note reserve
$
Equity
conversion
right - Tribeca
Loan
$
Total
$
Consolidated
Balance at 1 July 2018
(2,809,800) 4,632,240
125,000
125,000
5,402,322
Revaluation - gross
Deferred tax
(2,126,990)
638,097
-
-
Share-based payments
-
42,136
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
-
-
-
-
-
-
-
Balance at 30 June 2019
(4,298,693) 4,674,376
Revaluation - gross
Deferred tax
(1,487,500)
446,252
-
-
Share-based payments
-
212,800
Balance at 30 June 2020
(5,339,941) 4,887,176
-
(125,000)
(125,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,382
5,382
-
-
-
- 7,474,762
- (2,126,990)
- 638,097
-
42,136
(20,520)
-
(20,520)
-
-
2,893,012 2,893,012
- (250,000)
(5,381,802)
- (5,381,802)
-
-
-
-
2,893,012 3,268,695
- (1,487,500)
- 446,252
- 218,182
-
2,893,012 2,445,629
87 | P a g e
Note 29. 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
2020
30 June
2019
%
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Note 30. Interests in joint operations
Information relating to joint operations that are material to the Group are set out below:
Name
PL 1084 (Formerly ATP 2046) Sykes Block
ATP119P South - Waldegrave
ATP119P South - Snake Creek East
ATP 212P - PL 30
ATP212P - PL512, PPL22
Weribone Pooling Area
PCA157 Bainbilla Block
ATP 754P
ATP 1087
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
Queensland, Australia
Victoria, Australia
Victoria, Australia
Uganda
Ownership interest
30 June
2020
%
30 June
2019
%
10.00%
46.25%
25.00%
90.00%
84.00%
50.64%
24.75%
50.00%
30.00%
51.00%
25.00%
16.82%
10.00%
46.25%
25.00%
90.00%
84.00%
50.64%
24.75%
50.00%
100.00%
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.
88 | P a g e
Note 31. 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 shares reserve
Tribeca Loan Option Reserve
Accumulated losses
Total equity
30 June
2020
$
Parent
30 June
2019
$
(12,147,033)
(18,597,164)
(1,041,248)
(1,488,893)
(13,188,281)
(20,086,057)
30 June
2020
$
Parent
30 June
2019
$
792,406
6,250,473
90,565,129
99,710,194
2,135,332
2,474,046
51,344,615
55,291,576
114,310,806 106,538,817
(5,337,946)
(4,296,703)
4,887,176
4,674,376
5,382
-
2,893,012
2,893,012
(77,537,916)
(65,390,884)
39,220,514
44,418,618
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
As at 30 June 2020, the parent entity is a guarantor for its subsidiary Armour Energy (Surat Basin) Pty Ltd for debts relating
to the Tribeca loan facility.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019.
89 | P a g e
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and 30 June 2019.
Note 32. Related party transactions
Parent entity
Armour Energy Limited is the parent entity of the Group and listed on the ASX on 26 April 2012.
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 36 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
2020
$
30 June
2019
$
456,000
336,039
456,000
144,500
1. 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 (2019: $38,000). For the year ended 30 June 2020 $456,000 (2019: $456,000) was paid or payable to
DGR Global for the provision of the Services. The total amount outstanding at year end was $167,200 (2019:
$88,930). As at 30 June 2020 DGR Global held nil convertible notes, and 8,750 corporate bonds totalling
$8,750,000 (2019: nil convertible notes, 8,750 corporate bonds). The corporate bonds were purchased on the
same terms and conditions as other bondholders.
2. On 23 September 2019, 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 was paid a capital raising fee of $240,000. Bizzell Capital Partners received an allotment of 8
million unlisted options exercisable at 8 cents through to 30 September 2023. Of the 8 million options, 2 million
were subsequently transferred to an unrelated sub-underwriter.
During June 2020, Armour announced a capital raising comprising a Placement and an Entitlement Offer, with the
Entitlement Offer being fully underwritten by Bizzell Capital Partners. Bizzell Capital Partners was paid $22,687
under the Underwriting Agreement, and $73,352 in relation to the allotment of Placement Shares on 23 June 2020.
90 | P a g e
As at 30 June 2020, Bizzell Capital Partners held 6 million unlisted options, nil convertible notes, and 100 corporate
bonds (2019: nil underwriting options, nil convertible notes, and 100 corporate bonds). The corporate bonds were
purchased on the same terms and conditions as all other bondholders.
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 prior
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 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 2020 was $264,000
(2019: $144,500).
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 the
year
Disposals/
Balance at the
Additions (*)
Other
end of the year
Corporate bond holdings
Stephen Bizzell
100
-
-
100
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 33. Non-current assets - right-of-use assets
Motor vehicles - right-of-use
Less: Accumulated depreciation
Consolidated
30 June
2020
$
626,477
(410,460)
216,017
30 June
2019
$
-
-
-
91 | P a g e
Accounting policy for right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in
the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset,
and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of
the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment in line with
AASB138 Impairment of Assets or adjusted for any remeasurement of lease liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with
terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss
as incurred.
Refer to note 43 for further information on the impact of the adoption of AASB 16.
Note 34. 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 35. Current and non-current liabilities - lease liabilities
Current Lease liability
Non-Current Lease liability
*Reclassification of capital leases in 2019 from borrowings into lease liabilities.
Refer to note 26 for further information on financial risk management.
Consolidated
30 June
2020
$
30 June
2019
$
1,741,662
1,607,495
73,720
72,916
48,242
75,796
22,019
66,956
1,936,540
1,772,266
Consolidated
30 June
2020
$
30 June
2019*
$
189,884
33,247
223,131
38,381
28,786
67,167
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed
92 | P a g e
payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts
expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option
is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend
on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured
if there is a change in the following: future lease payments arising from a change in an index or an interest rate used;
residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is
remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of
the right-of-use asset is fully written down.
Refer to note 45 for further information on the transition to AASB 16.
Note 36. Current liabilities - Employee benefits
Employee benefit obligations
Consolidated
30 June
2020
$
30 June
2019
$
401,071
309,040
Accounting policy for employee benefits
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.
Note 37. Non-current liabilities - Employee benefits
Employee benefits
Consolidated
30 June
2020
$
30 June
2019
$
49,177
51,371
Accounting policy for employee benefits
The liability for long service leaves 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.
93 | P a g e
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
Forfeited during the year
Expired during the year
2020
WAEP
$0.30
$0.28
2020
Number
2019
WAEP
2019
Number
17,375,000
-
(10,625,000)
$0.29
$0.27
22,875,000
(5,500,000)
-
Outstanding and exercisable at the end of the year
$0.33
6,750,000
$0.30
17,375,000
There were no options issued to employees and Directors under the Armour Energy Employee Share Option Plan during
2020 (2019: NIL). The options outstanding as at 30 June 2020 have a weighted average remaining contractual life of 0.75
years and exercise price of $0.33.
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
2020
WAEP
$0.17
$0.01
$0.27
30 June
2020
Number
43,000,000
8,000,000
(2,000,000)
2019
WAEP
$0.20
$0.16
$0.20
June 2019
Number
7,000,000
41,000,000
(5,000,000)
$0.15
49,000,000
$0.17
43,000,000
The other options outstanding as at 30 June 2020 have a weighted average remaining contractual life of 1.44 years and
exercise price of $0.15.
94 | P a g e
1. The opening balance of options were issued in two tranches:
(i) 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).
2. Granted this year:
Bizzell Capital Partners managed the private placement close on 23 September 2019 and was entitled to receive
an allotment of 8,000,000 unlisted options exercisable at 8 cents through to 30 September 2023. Of the 8 million,
2 million were subsequently transferred to an unrelated sub-underwriter.
The fair value of these options at grant date was $212,800. This value was calculated using a Black Scholes
option pricing model applying the following inputs:
Number of options
Exercise price
Share price on grant date
Grant date
Expiry date
Volatility
Dividend yield
Risk-free interest rate
Weighted average fair value at grant date
8,000,000
$0.080
$0.056
30/09/2019
30/09/2023
75.493%
0%
0.78%
$0.0266
Performance shares
The following table illustrates the number of, and movements in, performance shares issued for during the year.
Balance at the start of the year
Granted during the year (ii)
Expired during the year
Consolidated
30 June
2020
30 June
2019
-
7,200,000
-
7,200,000
-
-
-
-
During the year ended 30 June 2020, 7,200,000 performance shares were awarded to Chief Executive Officer, Mr Bradley
Lingo, in six tranches. The performance shares expire on termination of employment. Grant date for each tranche was 12
June 2020. The fair value of these performance shares at grant date was $173,160. This value was calculated based on
the share price at the date the performance shares were granted multiplied by the number of performance shares expected
to vest, with the exception of tranche 2, which was valued using a Monte Carlo simulation model. Refer below for the key
inputs to the model.
95 | P a g e
No Performance Criteria
1. On the first Commercial Discovery in the Co-Era
Assets being determined in accordance with
recognised standards in the oil and gas industry
and announced by the Company
Number of
Performance
Shares
Vesting
date
% vested Fair value at grant
date
900,000 30/06/2020
-
$0.027
2. The VWAP for Shares trading on ASX for 20
1,800,000 12/06/2025
-
$0.016
consecutive days is not less than 500% over the
closing price for Shares on the last trading day
before the Commencement Date.
3. The Board approving the entering into of a farm-
out or other commercial agreement in respect of
the NT Assets.
1,350,000 31/03/2021
4. The Board approving a refinancing of the FIIG
1,350,000 31/12/2021
Notes.
5. The Company achieving a stabilised flow rate of
900,000 31/12/2021
in excess of 14TJ’s per day from the Kincora Gas
Project
6. On the first Commercial Discovery on any
900,000 30/06/2023
-
-
-
-
$0.027
$0.027
$0.027
$0.027
Licences other than.
(a) The Kincora Gas Project; and
(b) The CoEra Assets.
The fair value of tranche 2 of the above performance shares at grant date was $28,980. This value was calculated using
a Monte Carlo simulation pricing model applying the following inputs:
Number of performance shares
Exercise price
Share price on grant date
Grant date
Expiry date
Volatility
Dividend yield
Risk-free interest rate
Weighted average fair value at grant date
Tranche 2
1,800,000
$-
$0.02
12/06/2020
n/a
103%
0%
0.39%
$0.0161
Share based payment expense
Equity settled share-based payments
For the year ended 30 June 2020 $67,534 of other employment benefits were taken as ordinary shares in lieu of cash
(2019: $99,961).
96 | P a g e
Option expense
There was no share option expense recognised in the statement of profit or loss and other comprehensive income for the
year ended 30 June 2020 (2019: $42,136).
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 is 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.
he cost of equity-settled transactions is 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.
Note 39. Commitments
Consolidated
30 June
2020
$
30 June
2019
$
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Oil and Gas assets
-
6,333,398
The capital commitments related to the 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. The program finished in October 2019 and therefore there are no
further amounts committed.
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
-
-
-
-
-
-
-
207,873
150,871
358,744
38,381
28,786
67,167
-
97 | P a g e
Net commitment recognised as liabilities
-
67,167
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
13,451,427
18,442,987
33,037,547
37,477,283
-
1,810
46,488,974
55,922,080
Capital 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:
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 2020.
Note 41. Events after the reporting period
Other than the below subsequent events, no other matter or circumstance has arisen since 30 June 2020 that has
significantly affected, or may significantly affect Armour's operations, the results of those operations, or Armour's state
of affairs in future financial years.
On 1 July 2020, Armour announced that Cordillo Energy Pty Ltd, a 100% subsidiary of Oilex Limited and one
of the companies include in the Oilex transaction with Armour, was successful in bidding for Block CO2019-E
in the Northern Flank of the Cooper Basin, South Australia.
On 10 July 2020, the Company announced a further extension to the closing date of the Entitlement Offer to 5
August 2020. On the 18 September 2020, the Company announced that it had successfully completed the
capital raising and will raise a total of $15 million, subject to necessary approvals.
On 27 July 2020, the Farmin Agreement between the Company and Santos QNT Pty Ltd was amended to
off, unconditional
accelerate payments relating to the permit award process, resulting in Santos made a one
accelerated cash payment of $A6 million in total in full consideration of all future contingent permit transfer
payments covering the Application Areas.
‐
98 | P a g e
On 15 Augusts 2020, the Company received the second payment of $3.5 million from the Sales and Purchase
Agreement with Australia Pacific LNG Pty Ltd for the sale of Armour’s 10% interest in Petroleum Lease 1084
known as the “Murrungama block” (PL1084).
As a result of the above asset transactions, Armour made a $5.3 million early principal amortisation payment
on the Secured Amortising Notes during August 2020.
On 18 August 2020, Armour executed a term sheet with Auburn Resources Limited, a public, unlisted company,
for the sale of Ripple Resources Pty Ltd, for 5,600,000 fully paid shares in Ripple Resources Pty Ltd.
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
Grant funding audit
Other non-audit services*
*The non-audit services included the advice on the redemption of the convertible notes.
Consolidated
30 June
2020
$
30 June
2019
$
88,642
87,552
6,700
24,905
3,200
16,001
31,605
19,201
120,247
106,753
99 | P a g e
Note 43. Accounting Policies
New and Revised Accounting Standards and Interpretations
Adoption of new and revised accounting standards
The accounting policies adopted are consistent with those of the previous financial year except for changes arising from
the adoption of the following new accounting pronouncements which came into effect in the current reporting period:
AASB 16 Leases
Interpretation 23 Uncertainty over Income Tax Treatments
Armour elected to apply the modified retrospective approach on transition to AASB16, with the cumulative effect being
recognised in retained earnings at 1 July 2019. The comparative period has not been restated.
The other amendments did not have any impact on the amounts recognised in prior periods and are not expected to have
a significant effect on the current or future periods.
AASB 16 Leases
AASB 16 supersedes AASB 17 Leases and sets out the principles for the recognition, measurement, presentation, and
disclosure of leases. Armour has adopted AASB 16 from 1 July 2019. The standard eliminates the distinction between
operating leases and finance leases. Except for short-term leases and leases of low-value assets, right-of-use assets and
corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating lease expense
recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an interest
expense on the recognised lease liabilities (included in finance costs).
In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared
to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation)
results improve as the operating expense is now replaced by interest expense and depreciation in profit or loss.
For classification within the statement of cash flows, the interest portion is disclosed in operating activities and the principal
portion of the lease payments are separately disclosed in financing activities. The standard does not substantially change
how a lessor accounts for leases. The impact of the adoption of AASB 16 on Armour’s consolidated financial statements
is below.
The change in accounting policy affected the following items in the balance sheet on 1 July 2019:
right-of-use assets - increase by $314,278
lease liabilities - increase by $277,658
Using a weighted average incremental borrowing rate of 6.2%, the net impact on retained earnings on 1 July 2019 was a
decrease of $36,620. A reconciliation of note 39 Commitments of the 30 June 2019 annual report is as follows:
Operating lease commitments disclosed as at 30 June 2019
Impact of discounting operating lease commitments to present value
Operating lease commitments discounted using the lessees incremental borrowing rate at the date of initial
application
Add: finance lease liabilities recognised as at 30 June 2019
Lease Liability recognised as at 1 July 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
1 July
2019
$
358,744
(81,086)
277,658
67,167
344,825
207,178
137,647
100 | P a g e
Impact of the new definition of a lease
Armour has elected to use the transition practical expedient allowing the standard to be applied only to contracts that were
previously identified as leases, applying AASB 117 at the date of initial application. Therefore, the definition of a lease in
accordance with AASB 117 and Interpretation 4 Determining whether an Arrangement contains a Lease will continue to
be applied for those leases entered into or modified before 1 July 2019.
Upon application Armour excluded initial direct costs from the measurement of the rights-of use asset and used hindsight
in determining the term if the contract contained options to extend or terminate the lease.
The change to the definition of a lease mainly relates to the concept of control. AASB 16 determines whether a contract
contains a lease on the basis of whether the customer has the right to control the use of an identified asset for a period of
time in exchange for consideration.
Former operating leases
AASB 16 changes how Armour’s accounts for leases previously classified as operating leases under AASB 117, which
were off-balance sheet.
See note 33 for further information on accounting for AASB16.
Short term leases (lease terms of 12 months or less) and lease of low value assets
Armour has elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease
term of 12 months or less and do not contain a purchase option (‘short term leases’), and the lease contracts for which the
underlying asset is of low value (‘low-value assets’).
For short-term leases (lease term of 12 months or less) and leases of low value assets, Armour has opted to recognise a
lease expense on a straight-line basis as permitted by AASB 16. This expense is presented within other expenses in the
consolidated statement of profit or loss.
IFRIC 23 Uncertainty over income tax treatments
IFRIC 23 Uncertainty over income tax treatments is to be applied when there is uncertainty of income tax treatments
under IAS 12. It requires judgement to be made in relation to whether or not tax treatments should be considered
independently or together, with the decision being based on the most probable resolution of the uncertainty. It is not
expected to have a significant effect on the current or future periods.
Australian Accounting Standards and Interpretations that have been recently issued or amended but are not yet
effective have not been adopted by Armour for the annual reporting period ended 30 June 2020. On evaluating these
standards and interpretations, management do not expect a material impact upon the financial statements on their
adoption.
The adoption of the remaining standards and interpretations of the above 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.
101 | P a g e
Armour Energy Limited
Directors’ Declaration
30 June 2020
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 2 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 2020 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
Executive Chairman
30 September 2020
102 | P a g e
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 2020, 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 2020 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.
103 | Page
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.
•
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.
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.
• 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.
104 | Page
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.
Other information
The directors are responsible for the other information. The other information comprises the
information contained in Chairpersons’ Report, the Directors’ Report, and the Corporate Governance
Summary for the year ended 30 June 2020, but does not include the financial report and our auditor’s
report thereon, which we obtained prior to the date of this auditor’s report, and the annual report,
which is expected to be made available to us after that date.
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
identified above 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 on the other information that we obtained prior to the date
of this auditor’s report, 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.
105 | Page
When we read the annual report, if we conclude that there is a material misstatement therein, we are
required to communicate the matter to the directors and will request that it is corrected. If it is not
corrected, we will seek to have the matter appropriately brought to the attention of users for whom
our report is prepared.
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:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.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 27 to 38 of the directors’ report for the
year ended 30 June 2020.
In our opinion, the Remuneration Report of Armour Energy Limited, for the year ended 30 June 2020,
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
R M Swaby
Director
Brisbane, 30 September 2020
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 | Page
Further information
Shareholder Information
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 30 June 2020.
Distribution Schedule
AJQ – Armour Energy Limited fully paid ordinary shares
Holding distribution
21 Sep 2020
Range
Securities
%
No. of holders
100,001 and Over
50,001 to 100,000
10,001 to 50,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
888,053,310
95.53
21,674,983
17,956,043
1,575,549
368,834
9,086
2.33
1.93
0.17
0.04
0.00
929,637,805
100.00
Unmarketable Parcels
6,032,634
0.65
588
273
634
192
106
58
1,851
604
Unlisted options exercisable at $0.195 expiring 29 March 2021
Holding distribution
Range
Securities
%
No. of holders
21 Sep 2020
100,001 and Over
50,001 to 100,000
10,001 to 50,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
2,550,000
100.00
0
0
0
0
0
0.00
0.00
0.00
0.00
0.00
2,550,000
100.00
Unmarketable Parcels
0
0.00
5
0
0
0
0
0
5
0
Unlisted options exercisable at $0.345 expiring 29 March 2021
Holding distribution
Range
Securities
%
No. of holders
21 Sep 2020
100,001 and Over
50,001 to 100,000
10,001 to 50,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
2,550,000
100.00
0
0
0
0
0
0.00
0.00
0.00
0.00
0.00
2,550,000
100.00
Unmarketable Parcels
0
0.00
5
0
0
0
0
0
5
0
%
31.77
14.75
34.25
10.37
5.73
3.13
100.00
32.63
%
100.00
0.00
0.00
0.00
0.00
0.00
100.00
0.00
%
100.00
0.00
0.00
0.00
0.00
0.00
100.00
0.00
107 | P a g e
Unlisted options exercisable at $0.495 expiring 29 March 2021
Holding distribution
Range
Securities
%
No. of holders
21 Sep 2020
100,001 and Over
50,001 to 100,000
10,001 to 50,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
1,650,000
100.00
0
0
0
0
0
0.00
0.00
0.00
0.00
0.00
1,650,000
100.00
Unmarketable Parcels
0
0.00
4
0
0
0
0
0
4
0
Unlisted options exercisable at $0.161 expiring 31 July 2020
Holding distribution
21 Sep 2020
Range
Securities
%
No. of holders
100,001 and Over
50,001 to 100,000
10,001 to 50,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
41,000,000
100.00
0
0
0
0
0
0.00
0.00
0.00
0.00
0.00
41,000,000
100.00
Unmarketable Parcels
0
0.00
1
0
0
0
0
0
1
0
Unlisted options exercisable at $0.08 expiring 30 September 2023
Holding distribution
Range
Securities
%
No. of holders
21 Sep 2020
100,001 and Over
50,001 to 100,000
10,001 to 50,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
47,585,000
99.14
335,000
80,000
0
0
0
0.70
0.17
0.00
0.00
0.00
48,000,000
100.00
Unmarketable Parcels
0
0.00
38
4
2
0
0
0
44
0
%
100.00
0.00
0.00
0.00
0.00
0.00
100.00
0.00
%
100.00
0.00
0.00
0.00
0.00
0.00
100.00
0.00
%
86.36
9.09
4.55
0.00
0.00
0.00
100.00
0.00
108 | P a g e
Unlisted options exercisable at $0.05 expiring 29 February 2024
Holding distribution
Range
Securities
%
No. of holders
21 Sep 2020
100,001 and Over
50,001 to 100,000
10,001 to 50,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
2,000,000
100.00
0
0
0
0
0
0.00
0.00
0.00
0.00
0.00
2,000,000
100.00
Unmarketable Parcels
0
0.00
1
0
0
0
0
0
1
0
AJQOA – quoted options exercisable at $0.05 expiring 29 February 2024
Holding distribution
Range
Securities
%
No. of holders
21 Sep 2020
100,001 and Over
50,001 to 100,000
10,001 to 50,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
95,507,265
97.03
1,464,632
1,144,273
176,158
132,873
8,142
1.49
1.16
0.18
0.13
0.01
98,433,343
100.00
Unmarketable Parcels
1,111,446
1.13
60
20
38
23
45
12
198
111
%
100.00
0.00
0.00
0.00
0.00
0.00
100.00
0.00
%
30.30
10.10
19.19
11.62
22.73
6.06
100.00
56.06
109 | P a g e
Twenty Largest Holders as at 21 September 2020
Name
DGR Global Limited
Rookharp Capital Pty Limited
Mr Paul Cozzi
Tenstar Trading Limited
Mr Tony Adams
Mr Graeme Andrew Beadsley & Oakley Morgan Trustee Cpy Ltd
&
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
Mr Simon William Tritton
Bizzell Capital Partners Pty Ltd
Hayes Investments Co Pty Ltd
Mr Peter Maroun Kahwaji
PMK Properties Pty Ltd
Mr Ronald Geoffrey Phillips
Serec Pty Ltd
CF2 Pty Ltd
MR Paul Ainsworth
Tempest Dawn Pty Limited
CPS Control Systems Pty Limited
CD & PA Brawne Superannuation Fund Pty Ltd
DGR Global Limited
Total of Twenty Largest Holders
Total Shares Held
Ordinary shares (AJQ) –
number held
Issued capital
%
149,999,615
96,844,029
52,000,000
65,559,455
21,739,130
21,739,130
12,556,983
10,860,144
10,434,782
10,000,000
9,000,000
8,000,000
8,000,000
7,431,087
6,500,000
6,238,301
6,000,000
5,484,782
5,094,773
5,021,780
149,999,615
518,503,991
929,637,805
16.14
10.42
5.59
7.05
2.34
2.34
1.35
1.17
1.12
1.08
0.97
0.86
0.86
0.8
0.7
0.67
0.65
0.59
0.55
0.54
16.14
55.79
100.00
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Name
Listed Options (AJQOA) –
number held
Issued Options
%
DGR Global Limited
Mr Tony Adams
Mr Graeme Andrew Beadsley & Oakley Morgan Trustee Cpy Ltd
&
Rookharp Capital Pty Limited
Tenstar Trading Limited
Bizzell Capital Partners Pty Ltd
BAM Opportunities Fund Pty Ltd
Serec Pty Ltd
Mikado Corporation Pty Ltd
Mr Simon William Tritton
Mr Ronald Geoffrey Phillips
Limits Pty Limited
Folium Capital Pty Ltd
Ventoux Pty Ltd
BAM Coolabah Investments Pty Ltd
Samual Holdings Pty Ltd
Mr Paul Ainsworth
Tempest Dawn Pty Limited
BNP Paribas Nominees Pty Ltd HUB24 Custodial SERV LTD
Rocket Science Pty Ltd
Total of Twenty Largest Holders
Total Listed Options Held
Substantial Holders
The Company is aware of the following substantial holdings:
18,749,951
10,869,565
10,869,565
10,869,562
8,194,931
5,000,000
3,353,913
3,250,000
2,000,000
2,000,000
1,413,043
1,086,956
1,086,956
1,013,228
1,000,000
820,939
750,000
717,391
691,712
625,000
84,362,712
98,433,343
19.05
11.04
11.04
11.04
8.33
5.08
3.41
3.30
2.03
2.03
1.44
1.10
1.10
1.03
1.02
0.83
0.76
0.73
0.70
0.63
85.69
100.00
Name
Ordinary Shares – Number Held
Issued Capital %
DGR Global Limited
David Rooke*
Tenstar Trading Limited
Mr Paul Cozzi
149,999,615
66,127,375
65,759,455
60,695,652
13.94
11.22
6.11
5.64
* Figures per notice received dated 16 October 2019.
Voting Rights
All ordinary shares carry one vote per share without restriction.
Restricted Securities
There are no restrictions over any security holdings as at 30 June 2020.
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