Annual Report
For the year ended 30 June 2021
1
Competent Persons Statement
Technical Statement – Hydrocarbon Reserves
The independently verified ‘Armour Energy Hydrocarbon Reserves, 30 June
2021’ report details a high degree of confidence in the commercial
producibility of Permian and Triassic 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 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 commercial 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 – Oil & Gas Reserves
Armour Energy engaged the services Mr Teof Rodriguez, Director of TR&A, to
provide independent expert review of reports on the operated Oil & Gas
Reserves associated within the Company’s Surat Basin acreage position. Mr.
Rodriguez completed and documented his review at 30 June 2021.
‐
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.
‐
The reserves review was carried out in accordance with the SPE Reserves
Auditing Standards and the SPE
PRMS guidelines under the supervision of Mr.
Michael Laurent, Chief Operating Officer, Armour Energy Limited. Mr Laurent’s
qualifications include being a professionally registered engineer in both
Australia and Canada, has over 20 years of diverse oil and gas industry
experience and has successfully held various senior managerial and GM
positions. His career spans a number of sectors and includes expertise in
reservoir, drilling, facilities, production and operations with particular emphasis
on resource and business development. Experience is underpinned with strong
strategic, commercial and technical acumen in both conventional and
unconventional reservoirs. Prior to joining Armour Energy, Michael successfully
leadership
held a variety of domestic and
appointments. Most recently he worked for Santos where he was responsible
for managing Cooper Basins oil and gas appraisal/development wells and
field optimisation
inception through to approval and
implementation. Mr Laurent has sufficient experience that is relevant to
Armour’s reserves and resources to qualify as a Reserves and Resources
Evaluator as defined in the ASX Listing Rules. Mr Laurent has consented to the
inclusion in this report of the matters based on his information in the form and
context in which it appears.
initiatives from
international
technical
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,
is dependent on technology under
or where commercial
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.
recovery
‐
2
Contents Page
Our Business ........................................................................................................................................................................... 5
Chairman’s Report ............................................................................................................................................................... 6
Operating and Financial Review ...................................................................................................................................... 8
Sustainability Report .......................................................................................................................................................... 25
Managing Risk .................................................................................................................................................................... 35
Board of Directors .............................................................................................................................................................. 38
Leadership Team ................................................................................................................................................................ 40
Directors’ Report ................................................................................................................................................................ 42
Remuneration Report (audited) ..................................................................................................................................... 47
Auditor’s Independence Declaration ........................................................................................................................... 60
Financial Statements ......................................................................................................................................................... 61
Consolidated Statement of Profit or Loss and Other Comprehensive Income ..................................................... 62
Consolidated Statement of Financial Position ............................................................................................................. 63
Consolidated Statement of Cashflows .......................................................................................................................... 64
Consolidated Statement of Changes in Equity ........................................................................................................... 65
Notes to the Financial Statements.................................................................................................................................. 66
Independent Auditor’s Report ...................................................................................................................................... 112
Corporate Directory ........................................................................................................................................................ 121
3
Primed for growth &
focused on delivery
4
Our Business
Our Purpose
To create a financially strong, healthy, and sustainable
business that delivers value to shareholders.
Our Vision
To become one of Eastern Australia’s prominent Oil & Gas
explorers and producers, and participate in energy
transition.
Our Values
We work as one team with a common
purpose.
We act with integrity in everything we do.
We show respect to our team, stakeholders
and the environment.
We have an owners mindset.
We are committed and look for innovative
solutions.
5
Chairman’s Report
Dear Shareholders
Whilst the last 18 months have presented Armour Energy with a range of challenges, I remain confident in the
Company’s future prospects.
In Amour’s latest Investor Presentation, the Company has outlined eight priorities which are focused on
delivering growth and positioning Armour for a strong future. 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.
Over the 2021 financial year, the Company reduced debt considerably by $18.7 million or 32%. This was
achieved by fulfilling scheduled amortisation payments as well as accelerated principal amortisation payments
following successful asset transactions. In early 2021 the Company completed an agreement with Santos to sell
Armour’s remaining interest in several South Nicholson Basin permits. With the completion of this additional
transaction, the Company has received approximately $33 million in cash proceeds in relation to the South
Nicholson Basin Project, whilst retaining 100% ownership and operatorship of the significant ATP(A) 1107 interest.
Notwithstanding some of the operational and work program challenges faced by the Company during the
year, the company is focused on demonstrating value to shareholders in its core operating areas, the Surat and
Cooper Basins, whilst extracting value from its Northern Basin assets.
In late 2020, the Company undertook a three well hydraulic stimulation work program with a frac service
company contractor conducting the stimulation. The work program was expected to significantly uplift
production at our Kincora plant in the Surat Basin however disappointingly the gel in the frac failed to
breakdown resulting in a low-side outcome for the program. These areas continue to be attractive candidates
for production stimulation and Armour has recently partnered with a private entity to re-stimulate one of these
wells in October 2021 (Warroon #1). At the same time, Armour continues to pursue full remediation of the work
program from the service company contractor.
To assist with funding for future exploration programs and to help accelerate the repayment of the Amour debt
position, the Company is actively progressing further asset transactions. In March 2021 Armour announced the
proposed demerger and separate ASX listing of Armour’s Northern Basin Oil & Gas Business into McArthur Oil &
Gas. Through the proposed demerger, Armour will unlock the value of the Northern Basin Business whilst also
removing the debt burden on the Company. This will enable Armour to focus on building on the untapped
exploration potential of both the Cooper and Surat Basins.
Significant progress has already been made on the McArthur transaction with a strong new proposed Board
and Management team with a wealth of experience across the resources industry assembled. A range of
regulatory and restructuring steps have been completed including the transfer of the permits into the new entity.
In addition, Armour undertook the airborne survey on behalf of McArthur in advance of the proposed demerger
and IPO.
In March 2021 and September 2021, Armour announced $11.5 million and $8.2 million capital raises via private
placements to institutional and sophisticated investors. The Company has received very strong support through
these raises.
6
Over the next 12 months, Armour’s focus will be on:
Completing the proposed demerger and IPO of the Northern Basin Business into McArthur Oil & Gas.
Increasing its production at Kincora (Surat) through partnering to fund production enhancement work
programs.
Reducing the operating cost base across the business and improving profitability.
Progressing exploration activity in the newly acquired Cooper-Eromanga Basins acreage as well as the
existing Surat Basin acreage with a view of high-grading the leads and prospects portfolio.
The market for gas on the East Costs continues to be strong. Spot gas prices at Wallumbilla have recovered from
the impacts of Covid-19 in 2020 and Armour remains confident that prices will continue to provide a strong
market demand and prices for our products.
This year, for the first time, Armour’s Annual Report specifically includes a Sustainability Report. The Company
recognises the importance and increasing level of investor and regulatory expectation in relation to
Environment, Social and Governance issues, including in relation to climate change. The Company will continue
to make further progress in these areas in future periods.
I want to thank the Company’s shareholders and external stakeholders for their continued support and patience
during this period. We are very focused on transforming Armour Energy into a prominent oil and gas exploration
and production company, with a commitment to delivering for our shareholders.
Yours sincerely
Nicholas Mather
Chairman
7
Operating and Financial Review
8
Executive Summary
Armour Energy Limited (Armour or the Company) and its controlled entities (the Group) is a Brisbane based ASX
listed company focused on the exploration, development and production of gas and associated liquids
resources. The Company’s work programs aim to increase liquid rich gas production and revenues while
focussing on becoming one of Eastern Australia’s prominent onshore Oil and Gas explorers and producers.
Figure 1 – Summary of Armour’s assets and locations
Key Points
Armour significantly reduced its debt under the Secured Amortising Notes by $17.4 million, with $11.4
million accelerated amortisation from asset transactions.
Armour further reduced its debt under the Tribeca Facility by $1.4 million due to the Queensland
Department of Environment and Science decreasing their estimated rehabilitation cost for the Surat Basin
Project and the sale of ATP 1087.
Completed the sale of Armour’s remaining 30% interest in various South Nicholson Basin Permits to Santos.
As consideration, Armour received approximately $12.2 million in cash plus retained 100% ownership of
Authority to Prospect Application (ATP (A)) 1107.
Completed the acquisition of Oilex Limited’s Cooper Basin exploration tenements – Petroleum Exploration
Licences (PELs) 112, 444 and Petroleum Exploration Licences Application (PELA) 677, and 27 Petroleum
Retention Licences (PRLs) in the South Australian Cooper-Eromanga Basins (Northern Fairway PRLs) -
covering over 5,200 km2. This makes the Company the operator and holder of the 3rd largest exploration
acreage in the South Australian Cooper Basin after Santos Limited and Beach Energy Limited.
As part of the annual impairment review, $13.5 million was recognised as an impairment across oil and
gas assets, exploration and evaluation assets and financial assets.
9
Strategy
To support Armour’s growth strategy, it has been focussing on the below eight priorities for the 2021 calendar
year:
Focus Outcome
1
2
3
4
5
6
7
8
Unlocking value for shareholders through demerger and IPO of Northern Basin Assets
Materially reduce debt and renegotiate terms
Extract value through commercialisation of under-utilised, operationally ready assets
Reduce the operating cost base across the business and improve profitability
Generate positive free cash flow to cover all operating and corporate costs and capital for
new investment
Build the Surat and Cooper exploration pipeline by the end of 2021
High grading of portfolio – Consolidate, unitise and rationalise across the portfolio
Demonstrate tangible improvement in HSE performance and culture across the business
Focussing on these priorities will enable Armour to unlock value for shareholders.
Operating Review
Surat Basin Assets
Kincora Gas Project Overview
The Company delivers gas to the Eastern Australian market from its Kincora Gas Project. Kincora achieved 95%
operational time for the third full year of operation (FY2020: 91%) and an average production of approximately
6.2 TJ/day (FY2020: 7.9 TJ/day) of sales gas plus associated liquids.
Average Production per day*
FY2021
FY2020
Change
Gas (TJ)
LPG (T)
Oil/Condensate (BBL)
6.2
10.2
121.7
7.9
13.9
152.1
(21.5%)
(26.6%)
(20.0%)
Table 1 – Kincora average production
* Volumes normalised to exclude shutdowns in respective years that reduced production from the Kincora Gas Plant
Kincora also produced an average of approximately 122 barrels (FY2020: 152 barrels) of oil and condensate per
day, and approximately 10 tonnes (FY2020: 13 tonnes) per day of Liquid Petroleum Gas (LPG). Oil and
condensate are sold ex-Kincora and transported to local Queensland refineries. LPG is 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, continues to be affected by COVID-19. The Company continues to
manage its costs and seeks to maximise its revenue.
10
Kincora Gas Reserves Update
Armour performed a review of its oil and gas reserves position. The work was conducted by Armour Energy’s
qualified technical team of Geoscientists and Engineers and completed in accordance with the definition
and guidelines of the 2018 Petroleum Resources Management System (PRMS, 2018) approved by the
SPE/AAPG/WPC/SPEE. The workflow was independently reviewed and certified by Teof Rodrigues from Teof
Rodrigues & Associates for financial year 2021 (30 June 2021). See Table 2.
The data from the 2020 Work Program and other technical workflows continues to support the reserves
position. Armour remains encouraged by potential found in a significant new pay zone across existing well
stock. Identifying these bypassed pay zones were only possible due to the advancements in logging
technology allowing for the identification of mineralogically complex sandstones with hydrocarbon saturation
suitable for hydraulic stimulation.
Highlights from the 30 June 2021 Certified Reserves Report:
2P oil reserves numbers lowered primarily from produced FY2021 volumes
2P gas reserves numbers lowered only from produced FY 2021 volumes
Material long term potential continues to be demonstrated across the wider Kincora Project
Reserves independently verified
Kincora Gas Project
Gas (Bscf)
Sales Gas (PJ)
LPG (k Tonnes)
Condensate (k Bbl)
Oil (k Bbl)
1P
38.6
43.9
91
436
229
2P
129.4
147.1
304
1462
1205
3P
287.1
326.5
674
3245
2624
Table 2 – Combined Armour Energy Reserves
Notes to Table 2
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 5 to 10%
Petroleum reserves can be sold on behalf of any minority interest holder
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 2,065 tonnes/petajoules, Condensate Yield 9,938 barrels/petajoules
Figures 2 and 3 – Gas and oil reserve comparison charts
11
The data from the 2020 Work Program has greatly contributed to the review of reserves. Armour remains
encouraged by potential found in a significant new pay zone across existing well stock. Identifying these
bypassed pay zones were only possible due to the advancements in logging technology allowing for the
identification of mineralogically complex sandstones with hydrocarbon saturation suitable for hydraulic
stimulation.
Figure 4 – Kincora Plant
Kincora Production Enhancement Activities
Armour’s 2020 Work Program included executing a three well hydraulic stimulation campaign and a number
of production enhancements projects. See figures 5, 6 and 7.
On 10 September 2020, Armour commenced the Surat 2020 Work Program on its 100% owned and operated
Kincora Gas Project. A three well stimulation campaign was executed over a 3-month period (Horseshoe #4,
Horseshoe #2 and Warroon #1), which built on the 2019 stimulation success of the Myall Creek #5A well. In
addition, identification of bypassed pay zones was made possible due to advancements in logging
technology allowing for the identification of mineralogically complex sandstones with hydrocarbon saturation
suitable for hydraulic stimulation.
Figure 5 – Carbean #01 Logging
12
All wells in the 2020 Work Programme were expected to produce and flow gas into Armour’s Surat Basin Gas
Gathering System to the Kincora Gas Processing Plant and contribute an estimated uplift of 3 TJ/day plus
associated liquids. The 2020 three well stimulation campaign (Horseshoe #2, Horseshoe #4 and Warroon #1)
ultimately delivered low side production volumes. As announced on 18 March 2021, the gel in the fracs
failed to breakdown following the proppant placement in respect of the three wells, impacting matrix flow
and causing the low-side outcomes. The Company has issued a dispute notice to the contractor with
regards to the services provided in respect of the wells.
Armour pursued the resolution from the frac service company contractor regarding execution of the recent
3-well frac programme and resulting production outcomes. Armour undertook a detailed independent
technical evaluation of the causes for the fracture stimulation programme outcomes and to secure an
agreement from the fracture stimulation contractor to undertake rectification works on all three wells to try to
achieve the pre-stimulation projected production rates. The Company has not yet been able to secure a
satisfactory resolution from the fracture stimulation contractor for rectification of the 3 wells involved in the
2020 fracture stimulation work programme. The Company will continue to pursue all necessary avenues to
secure rectification for these 2020 fracture stimulation work programme results.
Figure 6 – Armour Surat Basin Assets
Further to the three well stimulation campaign, Armour has successfully installed artificial lifts on a number of
existing wells to enhance production. The installation of a reciprocating sucker rod pump in the Myall Creek
#3 well bore, as an example, has allowed the well to continue flowing to the gathering network below the
critical rate required to lift liquids. This allows gas to flow to the surface uninhibited by liquids in the tubing and
reliably pumps liquids for sale. See figure 7.
These low risk and low capital activities improve overall well and field performance. The artificial lifts and
plunger lift systems, delivered as part of the 2020/2021 work program, responded in-line with expectations,
providing production adds and assisting with reducing operational costs and allowing remote optimisation.
13
Figure 7 – Myall Creek #3 Linear Rod Pump
Surat Basin Exploration
During the year the Company put a significant amount of focus on developing a multi-year exploration
programme portfolio based on building a deep portfolio of exploration leads and drill-ready prospects in both
the Cooper and Surat Basins.
In mid-June, the Company provided an early view on the development of this emerging exploration leads
and prospects portfolio at the Petroleum Exploration Society of Australia (PESA) Deal Day part of the Australian
Petroleum Production & Exploration Association (APPEA) Conference held in Perth. Armour’s presentation at
the PESA Deal Day emphasised the Company’s focus on delivering value for shareholders by demonstrating
the value of its high-quality assets in its core areas of interest – the Surat and Cooper Basins.
Through advanced 3D seismic interpretation techniques, the Company has identified potential significant
undrilled virgin gas bearing reservoir sand channels northeast of the main Myall Creek Field with 3D seismic
attribute signatures analogous to the best producing wells in the Myall Creek Gas Field.
In addition, new technical workflows in the vicinity of the Myall Creek and Riverside gas fields, along with
advanced wireline logging and petrophysical re-evaluation, indicates significant bypassed pay in the
Permian and Triassic reservoirs within existing wellbores.
Further, evaluation of the existing sparse 2D seismic outside the existing Myall Creek 3D area, shows promising
new drill exploration opportunities. To unlock new discovery potential, work has commenced on a feasibility
study for acquiring new 3D seismic.
Northern Basin Business
McArthur Basin and South Nicholson Basin
At the start of the financial year, Armour held a commanding position in the McArthur Basin (100%) and the
South Nicholson Basin, in joint venture with Santos QNT (30% Armour & operator, 70% Santos QNT).
14
Transactions with Santos QNT
In July 2020, Armour and Santos QNT (a 100% subsidiary of Santos Limited) amended the South Nicholson Basin
Farmin Agreement, delivering work programme benefits and to accelerate and crystalize contingent permit
transfer payments. Armour received an immediate cash payment of $6.0 million from Santos, replacing future
contingent permit payments.
In December 2020, Armour reached a further agreement with Santos QNT, selling the remaining 30% interest
in the South Nicholson Basin Exploration Project for $12.2 million. As part of this agreement, Armour retains a
material exposure to the South Nicholson Basin play by securing operatorship and full control of ATP(A) 1107,
covering 7,906 km2.
Over both transactions, Armour received a total of $33.2 million from Santos QNT and has retained 100%
interest in ATP(A) 1107, which is contiguous with ATP 1087, the permit which Santos QNT will be focusing its
exploration efforts.
Retention Licence Applications
In February 2021, the company submitted applications for Retention Licenses for Glyde, Cow Lagoon and
Lamont Pass conventional gas discoveries. Armour is the first operator in the McArthur Basin to lodge
applications for Retention Licences and only the second operator since 1990 to submit retention Licences in
the Northern Territory.
These licenses will allow the discoveries within these areas to progress towards commercial development and
the award of petroleum licences.
Once granted, the Retention Licences will put Armour (and now McArthur Oil and Gas, see below) in a good
position to take advantage of the current gas shortage and the Northern Territory’s and Federal
Government’s “Gas Led Recovery” objectives, by providing local gas to local businesses and communities.
Demerger and Listing of Northern Basin Business
As announced in March 2021, Armour proposes to demerge its Northern Basin Business, which comprises 13 permits
and covers approximately 97,000 km2, to McArthur Oil & Gas Limited (McArthur). Through an IPO, McArthur Oil & Gas
will seek to raise circa $65 million to fund both the consideration for the Northern Basin Business from Armour together
with McArthur’s future work program.
Figure 8 – Location Map of granted Permits and Application Blocks that form the Northern Basin Business
15
The Northern Basin Business consists of:
Conventional targets – Significant Resources, Proven Plays, Existing Discoveries & Multi-Target Portfolio.
Armour’s interests in the McArthur Basin contains extensive acreage holdings covering multiple
conventional gas and liquids rich prospects and plays.
Armour has reported conventional gas discoveries in Cow Lagoon-1, Glyde-1, Glyde-ST1 and oil
discoveries at Lamont Pass-3. The Glyde-1 discovery well flowed 3.3 MMscfd of sales-quality gas from the
Coxco Hydrothermal Dolomite of the McArthur Formation in Armour’s 100% owned and operated EP 171.
Glyde-1 has been confirmed as a conventional gas discovery and Contingent Resources of up to 53 BCF
3C Contingent Resources have been booked (see tables below). Based on these initial exploration
successes, the Company has filed applications for Retention Licenses covering the Greater Glyde Gas
Discovery as the first step towards progressing the Glyde Gas Discovery to commercial development.
Unconventional targets – Multi-TCF Resource & Multiple Shale Plays – Barney Creek, Wollogorang &
McDermott.
In addition to the proven conventional hydrocarbon systems established through the 5-well exploration
drilling programme, the Company’s position in the McArthur Basin also contains a potential World-class
unconventional shale gas petroleum system with multiple target shales in the Barney Creek and
Wollogorang and McDermott Shales of the Tawallah Group.
The Barney Creek Formation is considered to be one of the most prospective unconventional Shale Gas
plays in the southern McArthur Basin. The Barney Creek Formation is regionally extensive and thick
(commonly over 150m) with significant TOC concentration and an oil-prone organic matter type. The
Barney Creek Formation is oil mature at the surface and has been established to be wet-gas mature from
350m to 2400m and dry-gas mature where it is over 2400m deep. The Shale Gas play has a finely
interbedded nature with high dolomitic and silt components providing favourable conditions for large
volumes of gas to be held in pore spaces. It is expected that these rocks are likely to be well suited to
large scale fracture stimulation.
Armour’s initial exploration success in the McArthur Basin has also established the Wollogorang and
McDermott Shales of the Tawallah Formation as newly identified prospective shale source rock
unconventional resource exploration targets. Through work commissioned by the Company, the CSIRO
has confirmed the oil and gas generative potential in both the Wollogorang and McDermott Shales of
the Tawallah Formation.
See Corporate Activities for further details of the proposed demerger.
Resource Update
During the 2021, Armour commissioned Netherland, Sewell & Associates, Inc. (NSAI) to update the
independent resource estimate for Armour’s McArthur Basin assets, which form a significant part of the
Northern Basin Business.
The estimate was undertaken using the 2018 updated Petroleum Resources Management System and
confirms a Prospective Resource Best Estimate of approximately 33 TCF from the Conventional and
Unconventional structures in the McArthur Basin. The resource update has also confirmed 53 BCF (3C)
Conventional Contingent Gas Resource associated with Glyde-ST1 and the retention licence application
area.
16
Unrisked Gross (100%)
Contingent Sales Gas
Resource (BCF)
Unrisked Gross (100%)
Prospective Conventional
Sales Gas Resource (BCF)
Unrisked Gross (100%) Prospective
Unconventional Sales Gas
Resource (BCF)
Estimate
Estimate
Low
(1C)
-
Best
(2C)
6
High
(3C)
53
Low
(1C)
191
Best
(2C)
4,624
High
(3C)
54,813
Low
(1C)
5,203
Total
Estimate
Best
(2C)
High
(3C)
28,126
126,303
Unrisked Gross (100%)
Contingent Gas Resource (BCF)
Low
estimate
(1C)
Best
estimate
(2C)
High
estimate
(3C)
Mean
Total (EP 171)
-
6
53
7
Tables 3 and 4 – Updated resource estimate from Netherland, Sewell & Associates, Inc.
Northern Territory Exploration
In June 2021, Armour commenced a 20,000 km2 airborne geophysical survey, which is the largest airborne
survey of its type to be undertaken in the Northern Territory. The purpose of the survey is to provide clear areas
of exploration interest and to de-risk, rank and high-grade existing and new identified leads and prospects.
The survey will cover all or substantial portions of five (5) exploration permits (EPs 171, 174, 176, 190 and 191)
and one (1) exploration application area (EP(A) 193) which cover the Batten Trough and Fault Zone and a
conventional oil and gas fairway encompassing the Coxco Dolomite and McArthur and Tawallah Group
prospects and structural closures. See Figure 9 for the map of the survey area.
Figure 9 – Map of the area covered by the Airborne Geophysical Survey
17
Armour engaged geophysical technology company, Pinemont Technologies Australia Pty Ltd (Pinemont) to
undertake the airborne geophysical survey using their patented passive airborne survey technology (AEM-
PTP). The technology underpinning the AEM-PTP system measures a geophysical response associated with
variability in elements of the earth’s electromagnetic field interacting with REDOX cells. REDOX cells can form
in association with the upward fluid flow of migrating hydrocarbons and/or micro-seepage from hydrocarbon
accumulations.
The application of airborne technology has significant advantages as a data acquisition method including
its non-invasive nature and the ability to collect data over large areas in both a timely and cost-effective
manner. Once processed and interpreted, the data collected will help to mitigate risk associated with
potential hydrocarbon migration pathways and hydrocarbon reservoir charge.
Cooper Basin Assets
Figure 10 – aircraft that performed the survey
Cooper Basin Overview
Armour completed the purchase of South Australian Cooper Basin Assets from Oilex in October 2020. This
Cooper Basin acreage makes Armour the holder of the 3rd largest net acreage position in the South Australian
portion of the Basin with existing 3D seismic coverage.
The acquisition of Oilex’s assets comprised a consideration of $0.9 million in Armour shares. The assets include
a 100% interest in Petroleum Exploration Licence (“PEL”) 112 and PEL 144 (covering 1,086 km2 and 1,166 km2
respectively). In addition, Armour has also acquired a 100% interest in 27 Petroleum Retention Licences
(“PRL’s”) covering a total 2,445km2 (including 792km2 of 3D Seismic) by assuming the obligations of Oilex under
existing arrangements between Oilex and Senex Energy Ltd. These 27 PRL’s were acquired for $27 together
with the assumption of existing abandonment liabilities and the replacement of a security deposit for $0.4
million with the South Australian Government. Under the transaction, Senex retained a 20% back in right at
cost, subject to certain conditions, following the drilling of a well.
Cooper Basin Exploration
During the year the Company put a significant amount of focus on developing a multi-year exploration
programme portfolio based on building a deep portfolio of exploration leads and drill-ready prospects in both
the Cooper and Surat Basins.
18
In mid-June, the Company provided an early view on the development of this emerging exploration leads
and prospects portfolio at the Petroleum Exploration Society of Australia (PESA) Deal Day part of the Australian
Petroleum Production & Exploration Association (APPEA) Conference held in Perth. Armour’s presentation at
the PESA Deal Day emphasised the Company’s focus on delivering value for shareholders by demonstrating
the value of its high-quality assets in its core areas of interest – the Surat and Cooper Basins.
The focal points of these exploration efforts have been on areas with existing 3D seismic coverage and are
focussed on extending the Western Flank Oil Fairway in South Australia in the Company’s 100% owned and
operated exploration permits PEL 444 and PEL 112.
Along the Western Flank extension, both the southern and northern extents were modelled with positive
correlation and prediction. Workflows will continue with the extensive seismic database, but limited 3D
coverage, to identify structural and stratigraphic potential. In the Company’s PESA Deal Day presentation, a
number of significant 3D-seismic controlled exploration leads and prospects were presented.
Armour will perform its own data and analysis, as well as re-evaluating the existing technical data with the
aim to identify stratigraphic trends and development opportunities in this historically successful oil rich Western
and Northern Flanks of the Cooper Basin.
Figure 11 – Location map of the Cooper Eromanga assets
19
Uganda Assets
Uganda Oil Project Overview
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%. In 2019, the exploration licence was renewed for a further two-year term
and further renewed as a condition of the force majeure until 28 May 2023.
Uganda Exploration
The Company has identified multiple developed (untested) on-trend structural traps (3-way and 4-way dip
closures) and multiple untested stratigraphic traps. 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.
Figure 12 – Location map of the Uganda assets
Corporate Activities
Capital Raising
Over the financial year, Armour completed two capital raises. In September 2020 Armour advised the
previously announced capital raise had closed and due to significant demand from third-party investors in
relation to the Company’s fund raising, the Board was able to upsize the conditional placement component
to a total of approximately $7 million, resulting in a combined total of approximately $15 million capital raise.
For every two new shares issued under the program, the holder received one attaching option exercisable
at $0.05 and expiring on 29 February 2024. These options are listed on the ASX with the ticker code AJQOA.
In March 2021, Armour announcement the successful completion of an $11.5 million equity raise. For every
four new shares issued under the Placement, the holder received one attaching option exercisable at $0.05
and expiring 29 February 2024. These options are listed on the ASX with the ticker code AJQOA.
20
Secured Amortising Notes Facility
In 2019 Armour raised $55 million of funds through the issues of secured and amortising notes (Notes). The
Notes have a repayment schedule through until 29 March 2024. Through finalising transactions with Santos
QNT Pty Ltd on the South Nicholson Basin and with Australia Pacific LNG on the Murrungama block, Armour
accelerated $11.4 million in principal amortisation payments on the Securing Amortising Notes during the 2021
financial year.
In March 2021 Armour received approval from Noteholders for amendments to the Conditions of the
Secured Amortising Notes. The approved amendments include:
1. New Note principal amortisation schedule to reflect the $11.4 million reduction in aggregate
outstanding principal value of the Notes by way of unscheduled amortisation payments already
made by Armour
2. Amendments to Financial Undertakings, including the Debt Service Cover Ratio, the Leverage Ratio
and the cash balances Armour must maintain
3. Amendments to increase a certain limit on incurring Financial Indebtedness
4. The creation of a new Interest Reserve Account which requires Armour to maintain a certain
balance
5. Amendments to the early redemption of Notes provisions
6. Amendments to the payment timeframes for the unscheduled amortisation payments
7. Consent from the Noteholders to extend the due date for the environmental bonding finance
facility
These amendments provide Armour the runway required to execute the proposed McArthur Oil & Gas
demerger and IPO. In turn, upon success of the demerger and IPO, Armour intends to use the consideration
received to retire some or all its outstanding debt.
Building the Executive Leadership Team
Following the appointment of Brad Lingo as CEO in June 2020, Armour has continued to build the strength of
the Executive Leadership Team.
In July 2020, Michael Laurent was promoted to the role of Chief Operating Officer. Toni Hawkins joined Armour
as the Chief Financial Officer in December 2020 and Mark Greenwood as Chief Commercial Officer in June
2021. The new Executive Leadership Team is focused on strengthening and growing the Armour business.
21
Financial Review
Results for the financial year
2021
2020
Change
Sales Revenue
Average Realised Sales Price
EBITDA (Non-IFRS measure)
Exploration Expenditure
Non-Cash Impairment
Statutory NPAT
Operating Cashflow
Development Spend
Cash Balance
Debt (excl. transaction costs)
Earnings Per Share - Basic
Earnings Per Share - Diluted
$'000
$AUD
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
c.p.s
c.p.s
17,502
5.90
(3,621)
(5,217)
(12,353)
(11,594)
(7,062)
(11,123)
2,358
(39,110)
(1.0)
(0.7)
21,104
5.20
1,671
(2,270)
(720)
(9,571)
(2,856)
(21,322)
3,246
(57,909)
(1.7)
(1.7)
(3,602)
0.70
(5,292)
(2,947)
(11,633)
(2,023)
(4,206)
10,199
(888)
18,799
0.7
1.0
Table 5 – Summary of financial results
Change
%
(17%)
13%
(317%)
(130%)
(1616%)
(21%)
(147%)
48%
(27%)
32%
43%
61%
Sales Revenue
Year-on-year sales were 17% lower due to low-side production outcomes. This was slightly offset with
recovering realised prices.
Development Expenditure
Armour’s Development Expenditure of $11.1 million primarily represents the 2020 Work Program in the Surat
Basin.
Non-cash impairment
As part of Armour’s annual impairment review, there was a total of $12.4 million identified to be written-off.
The impairment related to Surat Basin’s ATP 2028 and various historic oil & gas assets.
Debt
In 2021, Armour significantly reduced its total debt by 32%. The Secured Amortised Notes reduced by $17.4
million, to $33.7 million, including $11.4 million of accelerated payments as a result of asset transactions. With
an original face value of $55 million, Armour has now reduced the Notes by nearly 40%.
The Tribeca Facility held by the Company also contributed to the reduction of total debt by $1.3 million. A
reassessment of the financial assurances held by the Queensland Government for the Surat Basin reduced it
by $1.1 million. There was a further $0.2 million returned due to the sale of ATP 1087.
22
Financial performance and cash flows
Revenue from contracts with customers
Cost of goods sold
Gross profit
Net gain on sale of assets
Other income and expenses
Finance income
Finance expenses
Impairments
Income tax expense
Consolidated
30-Jun-21
$'000
17,502
(22,151)
(4,649)
15,857
(4,201)
70
(6,316)
(12,353)
-
30-Jun-20
$'000
21,104
(19,484)
1,620
-
(2,930)
128
(7,193)
(720)
(476)
Loss after income tax expense
(11,592)
(9,571)
Table 6 – Financial Performance
The reduction in revenue from contracts with customers is largely due to low-side outcomes from the 2020
work program in the Surat Basin. This was slightly offset by recovering commodity prices (Oil and Gas).
Earnings before interest, tax, depreciation and amortisation (EBITDA) – Non-IFRS measure
Loss before income tax and net finance expenses
Add/(Less):
Interest Received
Depreciation and Amortisation
Non-cash impairment
Gain on Disposal of PPE
EBITDA (non- IFRS measure)
Table 7 – EBITDA
Consolidated
30-Jun-21
$'000
(5,278)
(70)
5,232
12,353
(15,857)
(3,620)
30-Jun-20
$'000
(1,902)
(127)
3,008
720
(28)
1,671
The upside in EBITDA reflects Armour’s commitment to unlocking value for shareholders by selling its non-core
assets and focussing on its primary operations.
Cash flow
Net cash at the beginning of the year
Net cash from operating activities
Net cash from investing activities
Net cash from financing activities
Consolidated
30-Jun-21
$’000
3,245
(7,062)
4,773
1,401
30-Jun-20
$’000
9,225
(3,048)
(6,825)
3,893
Net cash at the end of the year
2,358
3,245
Table 8 – Summary of cashflows
23
In the year ended 30 June 2021, total net cash outflow was $0.9 million. The net cash outflow from operating
activities was $7.1 million with $18.9 million of revenue positively contributing from operations.
The net cash inflow from investing activities were $4.8 million mainly attributable to the funds received from:
The sale of Armour’s 10% interest in the Murrungama block to APLNG
The proceeds from the farm-in agreement and subsequent sale of Armour’s interests in a number of South
Nicholson Basin oil and gas exploration permits to Santos
Offset by $16.9 million in capital spend on oil and gas assets, additional financial assurances and
exploration and evaluation assets
These funds were used to support Armour’s operations and costs relating to the development and exploration
activities in the Kincora project and Northern Territory Assets.
Over the financial year, Armour completed two capital raises. The first raise closed in September 2020 and
due to significant demand from third-party investors resulted in a combined total of approximately $15 million
capital raise. In March 2021, Armour announced the successful completion of a second capital raise for $11.5
million.
24
.
Sustainability Report
25
Acknowledgement
Armour acknowledges the Traditional Owners of the land in which we operate. The Turrbal and Jagera people
in Brisbane, the Mandandanji people where our Surat operations are, the Yandruwandha/Yawarrawarrka and
Dieri people in the Cooper Basin and the Wannyi people and Gangalidda & Garawa people in Northern
Queensland as well as a number of Traditional Owners Groups under the Northern Land Council in the Northern
Territory.
Performance in 2021
358
Days Since
Last Safety
Incident
11
TFIFR
0
Recordable
Environmental
Incidents
0
Covid-19
Cases
Like all industries & companies in Australia, Armour has endured a challenging and constantly evolving business
environment in 2021 as a result of Covid-19. Armour successfully implemented changes that were measured
and consistent with government guidelines to ensure that the business continued to operate safely and
responsibly whilst protecting and respecting the communities where we operate. Reduced staff working hours
and working from home arrangements provided the business with the required flexibility to continue operations
which ensured continued investment into the regional areas.
Health and Safety
The safety of our employees, contractors, and the communities where we operate drives Armour’s 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 2021 financial year, regrettably the Kincora Gas Project recorded 1 recordable incident, which when
converted to a base of one-million man hours, resulted in a TRIFR (Total Reportable Incident Frequency Rate)
of 11. As at 30 June 2021, Armour had achieved 358 days without recordable incidents and in early July 2021,
Armour achieved a TRIFR of 0 with a focus for FY22 on the “Beyond 0” program. Inspections of our operating
sites by Resource Safety & Health Queensland (RSHQ) has not identified any regulatory noncompliance and
Armour continues to work with the regulators to meet obligations with no formal notices or penalties being
received.
26
Armour continues to operate responsibly and in compliance with government guidance in relation to Covid-
19. Armour is committed to ensuring that our operations do not put our employees, our contractors, and the
communities where we operate at risk. Simple measures such as working from home, restricting site travel to
essential users whilst implementing social distancing and good hygiene practice within our offices has resulted
in minimal impact to daily operations and no reported covid cases for employees. Armour is proud to report
that the majority (>80%) of our Surat Operations team has been vaccinated with employees ‘rolling up their
sleeves’ to do their part in the Surat Community.
Driving in remote areas presents a significant risk to Armour employees and in November 2020 Armour opened
the Surat office as the new base of our Surat operations. This has reduced the need to travel to the Kincora
terminal with field based operations managed from Surat and has resulted in a 50% decrease in the total Kms
travelled each month by Armour staff. Successful recruitment from the regional areas has also reduced travel
time for employees.
The 2020 work program that comprised the hydraulic stimulation of the 3 wells was delivered with 0 recordable
injuries and 0 reportable environmental incidents. Armour is proud of our contractors and their delivered safety
performance and will continue to engage contractors that have a demonstrated good safety track record.
The Armour Safety Culture Survey was an opportunity for Armour to engage with our workforce and determine
areas for continuous safety improvement. The results identified that safety leadership, safety consistency and
relationships as being the biggest influencers on safety performance with work continuing to improve in this
area.
Industry Collaboration
Armour as a member of the Safer Together industry working group committed to creating the leadership and
collaboration needed to build a strong and consistent safety culture. As part of the community we share
industry lessons learnt and improve quickly by implementing learnings.
Environment
Armours operations are subject to environmental regulation under federal and state legislation. For the year
ended 30 June 2021, Armour Energy reported outstanding environmental performance with zero recordable
environmental incidents reported.
The Group has focused on the continued development and improvement of the Armour Environmental
Management System to ensure that Armour continues to meet all environmental obligations. Armour has
been successful in securing a reduction of $1.2 million in its Financial Assurance through the new Estimated
Rehabilitation Cost (ERC) framework.
The Kincora Gas Project is an established oil and gas field that is spread across numerous PLs in the Surat
region of Queensland. Armour took over the project in 2016 and is committed to the practical
decommissioning and remediation of nonoperational assets. The Riverslea Pond Soil & Water Assessment was
completed and represents part of the first phase of the Kincora decommissioning and rehabilitation plan. The
study has identified practical options for the remediation of the site with Armour now focusing on further
studies in 2022.
Waste recycling is not currently available at Roma or throughout the Surat area, however, Armour has been
able to recycle 4 tonnes of steel and 9,500 litres of waste oil. Future recycling of carboard and ‘containers for
cash’ should reduce the volume of waste to landfill with Armour preparing to set waste reduction targets for
the future.
As a responsible Operator, Armour continues to deliver work programs with minimum impact to the
environment. Minimum disturbance controls such as use of existing access tracks, use of existing leases and
rapid reinstatement ensures that disturbance is avoided or temporary and reduces future rehabilitation.
27
Armour is aware of the risk that poor weed hygiene practices pose to farmers in our operating areas. Armour
ensures the highest level of weed hygiene control and adopts suitable practices in consultation with
landholders. All contractors that visit any Armour site are required to adopt the same practices. Armour has
trained all staff that conduct work on landholders properties in vehicle weed hygiene.
Climate Change Disclosure
Climate change is one of the most significant challenges facing the world today and as a member of the
energy industry, Armour recognises the important role it has to play. The world is transitioning to a low-carbon
future, and climate change is an important political, social, environmental, and commercial issue. 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. Natural gas is widely recognised for its part in reducing global emissions. 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 <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 can confirm that for the period 2020- 2021, it met the corporate group thresholds prescribed by the
National Greenhouse Gas Reporting (NGER) Act with reporting to be completed in October 2021.
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 staff movements and logistics to reduce road traffic and distance travelled in our
operations and projects has led to a 50% reduction in the total kms travelled each month.
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:
28
Assessment of regional and local aquifers to characterise the geochemistry of formation water prior to
and during initial stages of exploration and development, including hydraulic stimulation, 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.
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.
During the year, Armour commenced studies on the potential use of depleted gas fields for carbon capture
and storage (CCS). CCS is a process which aims to safely capture carbon dioxide (CO2) and permanently
store deep underground in geological formations. CCS is seen as playing an important role in reducing
carbon emissions and transition to cleaner energy.
Armour funded a pre-feasibility study with consulting company, RISC Advisory, to evaluate the technical
feasibility of using the Newstead field for carbon capture and storage. The study determined that Newstead
and other depleted fields within Armour’s acreage are good candidates for carbon capture and storage
and are at a scale which could underpin a Blue Hydrogen project. In parallel, Armour has made an Expression
of Interest to the Queensland government to release certain acreage for licensing under the Queensland
Geosequestration Act.
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 Financial Stability Board created the Task Force on Climate-related Financial Disclosures (TCFD) to
improve and increase reporting of climate-related financial information. The TCFD has developed a set of
voluntary recommendations for companies to disclose information about how they oversee and manage
climate related risks and opportunities. Armour recognises the importance of transparency to our stakeholders
and the Board is considering the adoption of the TCFD Recommendations as a framework for guiding our
climate-related risk management and disclosures in future reporting periods.
Armour’s strategic approach is to minimise our emissions and to participate in the energy transition whilst
building a resilient business. The Company’s Executive Team and Audit and Risk Management Committee will
continue to review the potential impacts of climate change on the organisation and will be responsible for
delivering Armour’s climate change priorities.
In the 2022 financial year our climate change priorities are:
Undertake a gap analysis against the TCFD recommendations and identify an
implementation action plan.
Review the Company’s governance policies and processes to ensure climate
change is appropriately addressed.
Review management responsibilities and accountabilities for climate change.
Undertake a detailed review of the Company’s risk assessment in relation to
climate change.
29
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 historic 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.
The Board does not current consider the Company to be subject to a material financial impact as a
consequence of the various categories of climate change risk and as a result, no adjustments are included
in the financial statements. Future commodity prices are based on the Group’s estimate of future market
price with reference to various external forecasts. These price forecasts consider the potential impact of
climate change as one of the many factors that can affect long term price estimates.
Armour recognises the key physical and transitional risks from climate change that may impact the Company
into the future.
1. Physical risks include one off significant disruptions such as extreme weather events as well as more
graduate changes in the environment in which we operate. Armour’s operational activities are at risk
of severe interruption by extreme weather events such as bushfires or floods.
2. Transitional risks are risks associated with the global move towards a low carbon economy. The
Company could be at risk through reduced demand for oil and gas products, increased regulation
or higher stakeholder expectations impacting the Company’s reputation.
The impacts to the Company of the above risks could include reduced revenue, increased costs, higher cost
of capital or inability to access capital or insurance. The risks are covered in more detail in the Managing Risk
section of this report.
30
People
46
Direct
employees
20%
Female
workforce
50%
Site based employees
from the Region
As a small operation, people are at the core of our business. Armour directly employs 46 people with 20%
female. We have a diverse workforce with our team coming from a breath of backgrounds, from as close as
New Zealand and PNG to as far as the UK. Over a quarter of our workforce were originally from outside of
Australia.
Of our site based team, approximately 50% are employed from within the Darling Downs and Western
Queensland region and 26% from the local area.
During 2021, with contribution and engagement from across the business, Armour has established new
corporate values. Our values set out the way in which Armour will operate, guide how we make decisions
and are important to setting the culture in our organisation.
Armour has introduced a new online learning system. Initially this system is focused on our core induction,
safety and compliance training. It will allow us to better deliver, track and reporting on the learning and
development of our employees.
31
Community
Armour operates in the Surat region of Queensland and strives to be an active and supportive member of the
community. A strong presence in the Surat community is a key focus and the opening of the Armour Surat
office in November 2020 demonstrates a commitment to the town of Surat. Having a local office sees
more local engagement and investment by the Armour team. Wherever possible, Armour buys goods and
services from businesses in local communities. We continue to foster positive relationships with other key
stakeholders such as landowners, governments and community groups.
Supporting Local Businesses
Armour aims to engage with local businesses and contractors that can support our operations. Strong
partnerships with local contractors are crucial to Armour’s operations in the Surat.
For our project activities, wherever possible we source local materials such as gravel and construction water
from our local landholders and local businesses. Flowers Earthmoving has been an ongoing supporter and
contractor to Armour. This family business provides earthmoving for both our well and pipeline project activities.
Roma-based Ricketts Mechanical Services and Gavco Instrumentation Services and Repairs provide contractor
services to Armour. These contractors provide specialist skills and work closely with the Armour operational team.
They use local people for their team.
Materials and parts supplies are also sourced from vendors based in the Surat and Roma area, supporting local
employment. Businesses such as Taylors Parts, Banks Bolts and Fasteners are key suppliers to Armour. Additionally,
Surat Tyre Service is our primary tyre supplier, Bayly Motors provides vehicle servicing, the Wagon Wheel General
Store provides our supplies and Surat Ag provides our chemicals for land management. All these businesses are
family owned and employ local people.
32
Construction and operations employees of Armour enjoy meals and accommodation at the family-run New
Royal Hotel Motel and Balonne’s Royal Bistro. Proprietors Don and Karen Thom extend a warm welcome to the
Armour team with hearty meals, daily lunch packs and friendly service. Don is also one of our Senior Plant
Operators at the Kincora Plant.
Armour appreciates the support it has received from local businesses to work through the challenging impacts
of Covid-19 to the business.
Community
Armour are proud to support the local community of Surat where our people live and work. Thriving
community organisations are the life blood in rural and regional areas, fostering a strong community spirit.
In 2021, Armour sponsored the Surat Ladies
Bowling Club Annual Pink and Blue Bowls
Day. This community event was enjoyed by a
wide cross section of the local community
and raised funds for a cancer charity. A
number of the Armour team took part in the
bowls day and surprised us with some hidden
talents.
The Queensland Police Legacy Scheme shares the Queensland Government and Queensland Police Service
priorities of giving all our children a great start and keeping our communities and children safe. In producing
the Child Safety Handbook, Queensland Police Legacy demonstrate their commitment to these priorities and
make us mindful that all children are vulnerable, and we all share in the responsibility of keeping them safe.
Armour continues to provide sponsorship to ensure that children in the Surat & St. George area receive the
handbook and continue to have access to a resource to turn to in times of need, and support so that they
can cope with the challenges they may face.
33
Armour was the sponsor of the ‘Monochrome” category for the In Focus Annual Photography competition at
the Surat on Balonne Gallery. The Surat on Balonne Gallery is housed in the Cobb & Co Changing Station
complex and focuses on the development and promotion of local and regional artists. This annual event
provides budding photographers the opportunity to showcase their talents.
Landholders and Traditional Owners
Armour maintains its operational acreage across a large number of private landholders in the Surat area.
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.
In the Northern Territory, Armour undertook multiple engagements with all 38 Pastoral Leaseholders over our
acreage in preparation for the largest private airborne survey in the Northern Territory which commenced in
late June 2021.
Armour respects the Traditional Owners in the areas in which we operate. Armour has continued positive
ongoing engagement with the Northern Land Council in the Northern Territory with plans for future stakeholder
engagement with the Traditional Owners.
In June 2021, Armour representatives attended a Gangalidda and Garawa Native Title Aboriginal Corporation
(GGNTAC) community meeting in Burketown. Following the positive engagement at this meeting, Armour was
advised that the GGNTAC has agreed to proceeding with the granting of the ATP(A) 1107 permit.
Industry Engagement
Armour engages and collaborates extensively across the Oil & Gas industry. This includes through the
Queensland Resources Council, Safer Together and the Northern Territory Energy Club.
Jobs, Royalties and Taxes
Armour directly employed 46 people at 30 June 2021 as well as a number of contractors.
Armour contributed $1.2 million in royalties and $0.6 million in payroll tax to the Queensland Government.
34
Managing Risk
Armour is an explorer, developer and producer of gas and associated liquids. The Group operates 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 material risks for Armour are outlined below. This summary is not an exhaustive list of all risks that may affect
Armour, nor have they been listed in any particular order of materiality.
Operational Risks
Production Risks
Armour has a single production operation and is therefore reliant on continued performance of operations
at the Kincora Gas project. Any issues that curtail operations at the Kincora facility could materially impact
revenue flows. There are numerous operating risks which may result in a reduction in performance that
decreases Armour’s ability to produce gas to meet customer contracts. The risks include, but are not limited
to, factors such as weather conditions, machinery failure, critical infrastructure failure or natural disasters. To
prevent or minimize production losses from such things as, machinery or infrastructure failures, Armour has in
place maintenance programs and operational procedures. These mitigants are implemented by competent
on-site operators and engineering support.
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 risk that the interpretation
of data may not align with the future experienced conditions in the field. Due care is taken with each
estimation.
Armour prepares its reserves and resources estimates in accordance with the 2018 update to the Petroleum
Resources Management System sponsored by the Society of Petroleum Engineers, World Petroleum Council,
American Association of Petroleum Geologists and Society of Petroleum Evaluation Engineers (SPE-PRMS). To
support and validate the Company’s gas and oil reserves position, an external qualified auditor is engaged
annually to provide an independent expert review.
Exploration and Development Risk
Armour’s production growth is dependent on its ability to explore, develop and deliver new resources and
reserves. Oil and gas exploration is a speculative endeavour and carries a degree of risk associated with
failure to find commercially viable hydrocarbons. Armour utilises prospect evaluation and ranking to analyse
existing acreage for exploration and development opportunities. Each project is assessed on its merits before
investment decisions are taken. Armour also seeks partnering and farm-in opportunities to manage the risk.
Safety, Environmental and Sustainability Risks
Safety Risk
Safety remains of critical importance in the planning, organisation and execution of Armour’s exploration and
operational activities. Oil and gas operations pose a risk of harm to employees, contractors or the community
in which Armour operates. Armour is committed to providing and maintaining a working environment in which
its employees and contractors 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. Armour has in place detailed and
proactive safety and health management plans which are reviewed regularly. Armour also participates in
the Safer Together industry working group committed to creating the leadership and collaboration needed
to build a strong and consistent safety culture.
35
Climate Change
Climate change risk, in the form of either physical or transitional risk, is a global issue impacting all businesses.
Physical risks through extreme weather events such as bushfires or floods may cause significant disruption to
Armour’s operations. The potential impact of this type of event includes damage to infrastructure, loss of
production and delay or cost increases to project delivery. Armour has in place response plans to minimise
any impact from such events as well as a comprehensive insurance program.
Climate change and the transition to a lower carbon emissions economy may lead to an increase in
regulation and expectations. An increased focus by governments, regulators and broader stakeholders in
relation to climate change and expectations of companies may impact Armour’s longer-term growth
through increased regulation and cost. The International Energy Agency (IEA) has noted that banks,
insurance companies and other operators are exiting coal. Gas plays an important role in coal-to-gas
switching and as a firming energy for renewables in reducing overall carbon emissions, however, in the longer-
term sentiment towards gas may change which may impact access to and cost of capital and insurance.
Environmental Risk
Armour’s operational activities pose a risk of harm to the environment and community through an
environmental incident or non-compliance.
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.
Pandemic Risk
A pandemic outbreak of a communicable disease such as COVID-19 has the potential to affect personnel,
production and delivery of projects. The Company responded to Covid-19 through its health and safety
management plans to manage this risk including ongoing monitoring and response to government directions
and advice. This enables Armour to take active steps to manage risks to the Company’s staff and stakeholders
and to mitigate risks to its operations and communities where Armour operates.
Strategic and Financial Risks
Regulatory Risks
Changes in government, policy or legislation may result in material adverse impact on Armour’s operations
and financial position. Retrospective or unexpected regulatory changes may impact the viability of projects.
Companies in the oil and gas industry may also be required to pay direct and indirect taxes, royalties and
other imposts in addition to normal company taxes. Armour’s financial position may be affected by changes
in government taxation and royalty policies or in the interpretation or application of such policies.
36
Armour monitors regulatory developments and seeks opportunities to engage with governments and
regulators as well as industry bodies.
Commodity Price Risk
The prices Armour receives for the oil and gas produced is subject to the volatility of commodity prices and is
a key driver for the business’s financial performance. 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. This is particularly the case in relation
to the Queensland gas spot market, and for oil, condensate, and LPG sales. Armour has in place some fixed-
price AUD gas sales, as well as contracts and contracted agreements for some other products.
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.
Access to Funding
Armour’s ability to fund operations and future growth is impacted by its ability to access funding. At 30 June
2021, Armour remained funded with cash reserves expected to be sufficient to meet the business’s operating
costs. Armour’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 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.
Recent examples of the ability to raise funding via equity was the successful completion of the $11.5 million
private placement in March 2021 and the $8.2 million private placement announced on 27 September 2021.
37
Board of Directors
Nicholas Mather (appointed 18 December 2009)
Stephen Bizzell (appointed 9 March 2012)
Executive Chairman
BSc (Hons, Geol), MAusIMM
Non- Executive Director
BCom, MAICD, SA Fin
Nicholas Mather has been involved in the junior
resource sector at all levels for 34 years during
which time he has been instrumental in the
creation of resource companies with aggregate
market caps at
takeover and currently of
approximately $6.8Bn. Nick is currently a Non-
Executive Director of SolGold plc, Aus Tin Mining,
New Peak Metals and Lakes Blue Energy NL. Nick is
Managing Director and co-founder of DGR Global
Limited (ASX) and was co-founder and served as
an Executive Director of Arrow Energy NL until 2004.
Nick was also the founder and Chairman of
Waratah Coal, a co-founder and Non-Executive
Director of Bow Energy Limited until its recent
takeover by Arrow Energy Pty Ltd.
Nick is Executive Chairman and a member of the
Remuneration Committee.
Current directorships/other interests
DGR Global Limited
NewPeak Metal Limited
Aus Tin Mining Limited
Lakes Blue Energy NL
SolGold plc (LSE and TSX)
Former directorships (last 3 years)
IronRidge Resources Limited (AIM) (resigned 28
June 2021)
is
Stephen Bizzell
the Chairman of boutique
corporate advisory and funds management group
Bizzell Capital Partners Pty Ltd. He is currently
Chairman of MAAS Group Holdings Ltd and
Laneway Resources Ltd, and Director of Strike
Energy Ltd and Renascor Resources Ltd. Stephen
was previously an Executive Director of Arrow Energy
Ltd, co-founder and Non-Executive Director of Bow
Energy Limited and formerly Non-Executive Director
of Queensland Treasury Corporation, Stanmore Coal
Ltd, Diversa Ltd, Apollo Gas Ltd, UIL Energy Ltd and
Dart Energy Ltd. He qualified as a Chartered
Accountant and has considerable experience in the
fields of corporate restructuring, debt and equity
financing, and mergers and acquisitions and has
over 25 years’ corporate finance and public
company management experience. Stephen is a
member of
the Audit & Risk Committee,
Remuneration Committee and the Health, Safety
and Environment Committee.
Current directorships/other interests
MAAS Group Holdings Limited
Renascor Resources Limited
Laneway Resources Limited
Strike Energy Limited
Challenger Energy Group Plc
Former directorships (last 3 years)
UIL Energy Limited (resigned 27 December 2018)
Stanmore Coal Limited (resigned 15 May 2020)
Interests in shares: 9,019,912
Interest in options: 7,978,634
Interests in shares: 19,287,066
Interest in options: 48,969,324
38
Roland Sleeman (appointed 11 October 2011)
Eytan Uliel (appointed 20 November 2017)
Independent Non-Executive Director
Independent Non-Executive Director
B.Eng. (Mech), MBA
BA, LLB
for
roles
those
including
Roland Sleeman has over 40 years energy industry
experience, including in oil and gas production
and processing, electricity generation and gas
ranging from
transmission. He has had
negotiation and management of major energy
contracts,
the 1980’s
establishment of
the NWS gas project,
management of the Goldfields Gas Pipeline and
Chief Commercial Officer for Eastern Star Gas
where, with Japanese partners, a modular LNG
project was well advanced prior to takeover by
Santos. More recently, Roland has provided expert
advice to the Australian Energy Regulator in
assessment of regulatory submissions, assisted the
NT Power and Water Commission with gas and
pipeline contract management, and was and
independent member of the Western Australian
Rule Change Panel (which oversaw Rules for
operation of Western Australian electricity and gas
markets). He is a Director and Chief Executive
Officer of Lakes Blue Energy NL.
Roland is the Chair of Remuneration Committee,
Chair of the Health, Safety and Environment
Committee and a member of the Audit and Risk
Committee.
Current directorships/other interests
Lakes Blue Energy NL
Former directorships (last 3 years)
None
Interests in shares: 59,999
Interest in options: NIL
Eytan Uliel is a finance executive with extensive oil
and gas industry experience. He has served as
Commercial Director of Bahamas Petroleum plc, a
UK-listed company with conventional oil
exploration acreage offshore The Bahamas. Eytan
was Chief Financial Officer and Chief Commercial
Officer of Dart Energy Limited, Chief Commercial
Officer of
its predecessor company, Arrow
International Ltd, Asian Regional Head of the
Corporate & Structured Finance Group at
Babcock & Brown. Eytan was also with Carnegie,
Wylie & Company as Managing Director. Eytan
commenced his career as a corporate lawyer,
with leading Australian law-firm Freehills. He has
also previously served as Chairman and Chair of
the Audit Committee of Easycall International Ltd
(dual ASX / SGX listed), Director and Chair of the
Audit committees of Strike Energy Limited (ASX
listed) and Jasper Investments Ltd (SGX listed), an
alternate director of Thakral Corporation Limited
(SGX listed), a director of CH4 Gas Ltd (ASX listed
until merged with Arrow Energy Ltd), and an
alternate director of Neverfail Springwater Ltd (ASX
listed). Eytan was previously a director and
member of the audit committee of Lonely Planet
Publications Pty Ltd, and a director of various Arrow
/ Dart entities across Asia and Europe.
Eytan is Chair of the Audit and Risk Committee.
Current directorships/other interests
None
Former directorships (last 3 years)
None
Has no interest in Armour Energy shares or options.
39
Leadership Team
Bradley Lingo
Michael Laurent
Toni Hawkins
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
B.Arts (Honors), JD
B.Eng (Mech)
B.Bus, CA, GAICD
Brad Lingo has had a distinguished
career spanning over 30 years in a
diverse
range of oil and gas
leadership roles, including business
development,
ventures,
mergers and acquisitions and
corporate finance. Brad has been
actively involved in oil and gas
exploration, development and
production activities in the Cooper
Basin since 1993.
new
Prior
to his
Brad has received recognition as
an oil and gas industry leader
winning the S&P/ASX200 Energy
Best CEO of the Year award in 2014
the annual SMH/East Coles
in
awards.
role at
Drillsearch, he was Head of Oil &
Gas for the Commonwealth Bank
of Australia. Brad 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.
‐
in
development.
Michael Laurent is a professional
engineer with over 20 years of
diverse oil & gas
industry
experience, having successfully
held various senior managerial
and GM positions. His career
spans a number of sectors and
includes expertise
reservoir,
drilling, facilities, production and
particular
operations
with
resource and
emphasis on
business
His
experience is underpinned with
strong strategic, commercial and
in both
technical acumen
conventional
and
reservoirs.
unconventional
Career accomplishments include
a track record of accepting P&L
responsibility
ensuring
and
operational
budgets are met. Prior to joining
Armour, Michael held a variety of
domestic
international
technical leadership roles. Most
recently he worked for Santos
where he was responsible for
managing Cooper Basins oil and
gas appraisal/development wells
and field optimisation initiatives
from
to
approval and implementation.
objectives
inception
through
and
and
roles
in ASX
to various
Toni Hawkins has over 20 years’
experience in a range of senior
finance
listed
companies, and brings a depth of
energy and resources
industry
experience to her role as CFO for
Armour Energy. Toni began her
before
career
at Qantas
senior
progressing
finance
roles at Coca-Cola
Amatil and Origin Energy, and
prior to joining Armour held the
role of General Manager,
Finance and Business Services at
Senex Energy. Toni is experienced
in building positive stakeholder
leading high
relationships and
performing
that have
transformational
delivered
strong business
change and
Toni holds a
performance.
Bachelor
Business
of
(Management & Accounting)
from the Queensland University of
Technology and is a graduate of
of
the
Institute
Company Directors. She
is a
the Chartered
member of
Accountants Australia and New
Zealand and
Finance
Executives Institute.
Australian
teams
the
40
Mark Greenwood
Chief Commercial Officer
B.Eng (Chem)
Karl Schlobohm
Company Secretary
B.Comm, B.Econ, MTax, CA, FGIA
Mark Greenwood joined Armour Energy
in 2021 from Santos Limited where he
spent the last seven years in senior roles
joint venture
spanning commercial,
management, gas & liquids marketing,
strategy and business development.
Mark has held various positions within the
industry including as a top-rated Energy
analyst at Citigroup and JP Morgan. Mark
of Chemical
holds a
Engineering
the University of
Adelaide.
Bachelor
from
matters.
Schlobohm
Karl
is a Chartered
Accountant with 25 years experience
across a wide range of industries and
businesses. Karl joined DGR Global in
2009 and has acted as CFO and / or
Company Secretary for all of the listed
entities sponsored by DGR Global in
that time. He has expertise in Company
Secretarial
Corporate
matters,
Governance, Financial Accounting,
Corporate Finance and Corporate
holds
Taxation
Undergraduate Degrees in Commerce
and Economics, together with a Masters
Degree in Taxation. He is a member of
the Australian Institute of Company
Directors and the Institute of Chartered
Accountants
in Australia. Karl has
previously held positions as Company
Secretary and / or Non-Executive
listed Linc Energy
Director of ASX
Limited, Agenix
Limited, Discovery
Metals Limited and Global Seafood
Limited. He has also acted as CFO for
Discovery Metals Limited and Meridian
Minerals Limited.
Karl
41
Directors’ Report
42
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 2021.
Principal activities and significant changes in the state of affairs
The Group’s principal activities are focused on oil and gas exploration, development and production of gas
and associated liquids resources. The Group’s 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.
In October 2020, Armour Energy Limited acquired CoEra Limited 1 from Oilex Ltd. CoEra Limited is the holding
company of Cordillo Energy Pty Ltd and Holloman Petroleum Pty Ltd. Cordillo Energy Pty Ltd holds 27
Petroleum Retention Licences (PRLs) and 1 Petroleum Exploration Licence under Application (PELA) covering
2,990 km2 and Holloman Petroleum Pty Ltd holds two Petroleum Exploration Licences (PELs) covering 2,252 km2
of the Cooper Eromanga area.
There were no other significant changes in the state of the affairs of the Company during the financial year
that have not been detailed elsewhere in this report.
A detailed operating and financial review is provided on pages 8 to 24 of this report and forms part of the
Directors’ report. Material risks to the Company are discussed on pages 35 to 37.
Directors
The Directors of Armour during the whole of the financial year and up to the date of this report are:
Nicholas Mather
Stephen Bizzell
Roland Sleeman
Eytan Uliel
Executive Chairman
Non-executive director
Independent non-executive director
Independent non-executive director
Their qualifications, experience and special responsibilities are included on pages 38 and 39.
Company Secretary
Mr Karl Schlobohm is Armour’s Company Secretary. Details of Mr Schlobohm’s qualifications and experience
are set out on page 41.
Meetings of Directors
The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee
held during financial year 2021, and the number of meetings attended by each Director were:
Board
Audit and Risk Management Committee
Held
Attended
Held
Attended
Nicholas Mather
Stephen Bizzell
Roland Sleeman
Eytan Uliel
11
11
11
11
11
11
11
11
3
3
3
3
3
3
Held: represents the number of meetings held during the time the Director held office or was a member of the relevant committee.
1 Later converted to a proprietary company
43
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.
Dividends
There were no dividends paid, recommended, or declared during the current or previous financial year or
since the end of the year.
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
31-Jul-18
1-Oct-19
17-Dec-19
23-Jun-20
30-Jun-20
12-Aug-20
24-Aug-20
17-Sep-20
1-Oct-20
1-Oct-20
19-Oct-20
19-Oct-20
22-Dec-20
24-Mar-21
8-Jul-21
Date of
Expiry
31-Jul-21
30-Sep-23
30-Sep-23
29-Feb-24
29-Feb-24
29-Feb-24
29-Feb-24
29-Feb-24
29-Feb-24
29-Feb-24
29-Feb-24
29-Feb-24
29-Feb-24
29-Feb-24
29-Feb-24
Exercise
Price
$0.16
$0.08
$0.08
$0.05
$0.05
$0.05
$0.05
$0.05
$0.05
$0.05
$0.05
$0.05
$0.05
$0.05
$0.05
Number under
option
41,000,000
40,000,000
8,000,000
31,166,497
7,018,341
9,424,831
16,894,150
35,929,524
85,138,026
59,025,859
63,791,938
24,019,471
66,778,341
62,494,099
66,355,466
617,036,543
Indemnity and Insurance of Directors and 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 ensure 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.
44
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 2021 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.
As announced on 23 September 2021, Armour will re-stimulate the Warroon #1 well in partnership with a
private entity. The Warroon #1 Rewan sandstone was originally stimulated in November 2020 however
failed due to a frac gel issue which is the subject of a dispute notice with the contractor who performed
the stimulation. The Rewan sandstone remains an attractive candidate for production stimulation.
As announced on 27 September 2021, Armour completed a $8,200,000 placement. The raise comprised
of a $6,600,000 placement of shares and a $1,600,000 conditional placement (subject to approval at the
Annual General Meeting). For every three new shares issued under the placement and conditional
placement, the holder will also receive one attaching option exercisable at $0.05 and expiring 29
February 2024. These options are listed on the ASX with the ticker code AJQOA.
Armour have agreed with Tribeca to extend their facility with Armour to 31 December 2021.
The Northern Basin Business demerger and IPO is progressing with a pre-IPO raise by way of
Redeemable Exchangeable Notes underway. The Redeemable Exchangeable Notes are unsecured
and fully subordinated to the Secured Amortising Notes and Tribeca Facility, and subject to shareholder
approval will convert to McArthur Oil & Gas Limited shares upon IPO. This pre-IPO raise will allow
McArthur Oil and Gas to commence early planned works.
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 $5.6 million following a reduction
of $1.2 million during the year. 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.
Health & Safety
During the financial year, the Kincora Gas Project recorded 1 recordable incident. In early July 2021, Armour
achieved a TRIFR of zero. Armour Energy has not received any formal notices or penalties from regulatory
authorities during the period with inspections of our operating sites by Resources Safety & Health Queensland
(RSHQ) during the period determining no regulatory non-compliance. Armour continues to work with the
regulators to meet obligations and improve on our management systems.
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 Sustainability Report 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.
45
Non-Audit Services
The Company’s auditor, BDO, undertook some non-audit services during the year. 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 39 to the financial statements. The non-audit services totalling $2,475 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.
The Directors are of the opinion that the services as disclosed in Note 39 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.
46
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. Details of date of service is
included where service was for all or part of the FY21 year:
Name
Directors
Nicholas Mather
Roland Sleeman
Eytan Uliel
Stephen Bizzell
Executive KMP
Bradley Lingo
Michael Laurent
Toni Hawkins
Mark Greenwood
Karl Schlobohm
Former Executive KMP
Richard Aden
Position
Period of Service
Executive Chairman
Became KMP 1 July 2011
Independent Non-Executive Director
Independent Non-Executive Director
Non-Executive Director
Became KMP 17 October 2011
Became KMP 20 November 2017
Became KMP 8 March 2012
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
Chief Commercial Officer
Company Secretary
Became KMP 12 June 2020
Became KMP 1 July 20202
Became KMP 1 December 2020
Became KMP 1 June 2021
Became KMP 19 August 2011
Chief Financial Officer
Ceased KMP 7 August 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.
2 previously General Manager - Development (3 June 2019 to 30 June 2020)
47
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.
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; and
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; and
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.
48
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 periodically 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.
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 can 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 2021 is detailed on page 52 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; and
ensure total remuneration is competitive by market standards.
49
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 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; and
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 2021 is detailed on pages 52-53 of this Remuneration
report.
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. The termination provisions applicable are set out below.
Name
Position
Duration of service
Notice Period
Nicholas Mather
Bradley Lingo
Michael Laurent
Toni Hawkins
Mark Greenwood Chief Commercial Officer
Karl Schlobohm
Executive Chairman
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
Company Secretary
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
By Executive
12 months
6 months
3 months
3 months
3 months
3 months
By Company
12 months
6 months
3 months
3 months
3 months
3 months
Bonus payments and incentive criteria satisfaction are at the discretion of the Remuneration committee.
Salaried executives are entitled to their statutory entitlements of accrued annual leave and long service leave
together with any superannuation on termination.
No directors or key management personnel have entitlement to termination payments in the event of
removal for misconduct.
Chief Executive Officer Incentive Plan
Mr Lingo is entitled to a bonus, to be assessed annually by the Board, based on the following weighted KPI’s
and up to a maximum of $100,000.
No KPI’s
1 The Board approving a debt or equity refinancing of the FIIG Notes.
2
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.
3
TOTAL
Contributed
percentage
50%
25%
25%
100%
50
In addition to the bonus payment, Mr Lingo is entitled to the below Performance Shares:
No Performance Criteria
1
2
3
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.
4 The Board approving a refinancing of the FIIG Notes.
5
The Company achieving a stabilised flow rate of in excess of 14TJ’s per day from the
Kincora Gas Project.
6 On the first Commercial Discovery on any Licences other than.
(a) The Kincora Gas Project; and
(b) The CoEra Assets.
Number of
shares
900,000
1,800,000
1,350,000
1,350,000
900,000
900,000
Voting and comments made at the Company's 2020 Annual General Meeting
('AGM')
At the 2020 AGM, 97.9% of the eligible votes received supported the adoption of the remuneration report for
the year ended 30 June 2020. The Company did not receive any specific feedback at the AGM regarding its
remuneration practices.
51
Details of remuneration
Amounts of remuneration
The table below for the remuneration of KMP of Armour is prepared in accordance with the Australian Accounting Standards and Corporations Act 2001.
Directors:
N Mather
S Bizzell
R Sleeman
E Uliel
Year
2021
2020
2021
2020
2021
2020
2021
2020
Cash salary and
fees
$
168,000
203,000
40,000
48,333
40,000
48,333
40,000
48,333
Current other Key Management Personnel:
K Schlobohm
B Lingo
M Laurent*
T Hawkins**
M Greenwood***
Total Current KMP
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
40,000
50,000
276,708
13,800
339,361
279,635
150,292
20,032
1,114,393
691,434
Short-term benefits
Post-employment
benefits
Share-based
payments
Cash bonus
Non- monetary
Superannuation
Shares
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
24,069
817
47,074
20,650
15,581
N/A
4,809
N/A
91,533
21,467
$
-
-
-
-
-
-
-
-
-
-
24,309
1,288
22,156
20,772
13,059
2,695
62,219
22,060
$
-
-
-
-
-
-
-
-
-
-
92,102
5,382
60,950
-
35,094
58,333
246,479
5,382
Total
$
168,000
203,000
40,000
48,333
40,000
48,333
40,000
48,333
40,000
50,000
417,188
21,287
469,541
321,057
214,026
85,869
1,514,624
740,343
52
Previous other Key Management Personnel:
Year
Cash salary and
fees
R Aden**
Total KMP
2021
2020
2021
2020
41,497
322,825
1,155,890
1,014,259
Short-term benefits
Post-employment
benefits
Share-based
payments
Cash bonus
Non- monetary
Superannuation
Shares
Total
2,012
-
2,012
26,775
91,533
48,242
2,908
21,175
65,127
43,235
-
246,479
5,382
44,405
372,787
1,559,029
1,113,130
* Mr Laurent was employed from 26 March 2019 as Subsurface Manager but was subsequently promoted to GM Development effective 19 July 2019 and then promoted again to the COO effective 1
July 2020.
** Mr Aden was employed as CFO from 23 July 2019 to 07 August 2020. Mrs Hawkins commenced as CFO on 1 December 2020.
*** Mr Greenwood commenced as Chief Commercial Officer on 1 June 2021.
53
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; and
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'); and
For 30% of the potential maximum award, the overall corporate performance compared to
predetermined corporate performance targets but subject to satisfactory personal performance.
There were no bonuses awarded in financial year 2021.
For the year ended 30 June 2021 $287,615 of other employment benefits were taken as ordinary shares in lieu
of cash (2020: $72,916). The number of shares awarded was determined with reference to the share value
based on a 10-day volume weighted average price (VWAP) at the time of qualification for the share
allotment.
Options granted as part of remuneration for the year ended 30 June 2021
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 2021, there were no options granted as remuneration to Key Management
Personnel (2020: NIL). There are no options on issue over unissued ordinary shares in Armour Energy Ltd on 30
June 2021 to Key Management Personnel.
Performance Shares
There were no performance shares granted, vested or forfeited during the year.
KMP
Expected
vesting date
Grant date
Grant
number
Value per PS
at grant
date
Balance on
30 June 2021
B Lingo
B Lingo
B Lingo
B Lingo
B Lingo
B Lingo
30/06/2022
12/06/2025
30/11/2021
31/12/2021
31/12/2021
30/06/2023
12/06/2020
12/06/2020
12/06/2020
12/06/2020
12/06/2020
12/06/2020
900,000
1,800,000
1,350,000
1,350,000
900,000
900,000
7,200,000
$0.03
$0.02
$0.03
$0.03
$0.03
$0.03
900,000
1,800,000
1,350,000
1,350,000
900,000
900,000
7,200,000
54
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 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 (2020: NIL).
Shareholdings
The details of all ordinary shares in Armour Energy Ltd as of 30 June 2021 held by Key Management Personnel
is set out below:
Key Management
Personnel
Balance at
1-Jul-20
Granted as/
in lieu of
compensation
Net changes
Balance at
Other
30-Jun-21
Directors
N Mather
S Bizzell
R Sleeman
Executive KMP
K Schlobohm
M Laurent
T Hawkins
R Aden
4,830,364
2,212,066
58,333
391,049
500,000
-
595,462
8,587,274
-
-
-
258,953
2,650,000
516,031
-
3,723,384
1,339,548
11,075,000
1,666
-
-
-
(595,462)
1,157,718
6,169,912
13,287,066
59,999
650,002
3,150,000
516,031
-
13,468,376
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 2021 (2020: NIL).
Option holdings
The details of all option holdings in Armour Energy Ltd as of 30 June 2021 held by Key Management Personnel
is set out below:
Directors/ Key
management
personnel
Directors
N Mather
S Bizzell
Executive KMP
K Schlobohm
M Laurent
Balance at
1-Jul-20
Net Change
other
Balance at
30-Jun-21
Total vested
Total Vested and
exercisable
591,197
6,276,505
6,275,937
26,929,819
6,867,134
33,206,324
6,867,134
33,206,324
6,867,134
33,206,324
900,000
250,000
(770,524)
-
129,476
250,000
129,476
250,000
129,476
250,000
8,017,702
32,435,232
40,452,934
40,452,934
40,452,934
"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.
55
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 2021 (2020: NIL).
Performance share holdings
The details of all performance shareholdings in Armour Energy Ltd as of 30 June 2021 held by Key
Management Personnel is set out below. The performance shares carry no dividend or voting rights. See
page 51 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
B Lingo
Balance at
Balance at
1-Jul-20
30-Jun-21
Total vested
7,200,000
7,200,000
7,200,000
7,200,000
1,350,000
1,350,000
Total Vested
and
exercisable
1,350,000
Total unvested
and un-
exercisable
5,850,000
1,350,000
5,850,000
Group performance and link to remuneration
During the financial year, Armour has generated losses as its principal activity was the discovery and
production of 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 2021 was 2.6
cents per share.
The earnings of Armour for the five years to 30 June 2021 are summarised below:
Sales revenue
Loss after income tax
2021
$’000
17,502
(11,594)
2020
$’000
21,104
(9,571)
2019
$’000
27,819
(11,684)
2018
$’000
14,749
(12,198)
2017
$’000
573
(11,475)
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:
$ cents
Share price at financial year end (cents)
2021
2.6
2020
2.0
2019
6.7
2018
9.0
2017
7.0
56
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 2021.
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 Amortising Notes, some of which
were subscribed for by key management personnel, as set out below.
Notes held at
the start of the
year
Number
Received as
part of
remuneration
Number
Additions
Disposals /
other
Number
Number
Notes held at
the end of the
year
Number
Corporate bond holdings
Stephen Bizzell
Corporate bond payments
Stephen Bizzell
100
-
-
-
100
Interest
Principal
$
$
7,166
31,696
Additions /
Disposals
Total paid
during 2021
$
-
$
38,862
No other directors and key management personnel held 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 ASX announcements on 27 July 2020 and 18 March 2021.
In December 2020, Armour Energy completed a $15,000,000 million capital raising and in March 2021 Armour
completed a $11,500,000 capital raising. Bizzell Capital Partners jointly lead both the capital raisings and was
paid capital raising fees totalling $468,505 (net of GST) on arm’s length terms (FY2020: 240,000).
As at 30 June 2021, Bizzell Capital Partners held 33,206,324 options, nil convertible notes, and 100 corporate
bonds (2020: 6 million unquoted options, nil convertible notes, and 100 corporate bonds). The corporate
bonds were purchased on the same terms and conditions as all other bondholders.
57
Samuel Holdings Pty Ltd
Samuel Holdings Pty Ltd is an entity controlled by Mr Nicholas Mather (Executive Chairman) who is the sole
director.
The Entitlement Offer ending in December 2020 was partly sub-underwritten by Samuel Holdings Pty Ltd (As
trustee).
Samuels Holdings Pty Ltd received a fee of five (5) percent of the sub-underwritten amount from Bizzell Capital
Partners. In addition, Armour issued four (4) Underwriter Options for every $1 of the sub-underwritten amount.
Other than the above, there were no other transactions with Key Management Personnel for the year ended
30 June 2021.
This concludes the Remuneration report, which has been audited.
58
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 2021
59
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 of Armour Energy Limited for the year ended 30 June 2021, 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 2021
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.
60
Financial Statements
For the year ended 30 June 2021
61
Consolidated Statement of Profit or Loss and Other Comprehensive
Income
Revenue
Revenue from contracts with customers
Cost of goods sold
Gross profit
Net gain on sale of assets
Other income
Interest revenue
Expenses
Exploration expenditure impairment
Finance costs
General and administrative expenses
Oil and gas expenditure impairment
Share-based payments
Loss before income tax expense
Income tax expense
Loss after income tax expense for the year attributable to the
owners of Armour Energy Limited
Other comprehensive income
Consolidated
30 June 2021
30 June 2020
Note
$’000
$’000
7
8
7
7
7
16
9
8
17
8
10
17,502
(22,151)
21,104
(19,484)
(4,649)
1,620
15,857
601
70
(853)
(6,316)
(4,338)
(11,500)
(464)
(11,592)
-
(11,592)
-
490
128
(720)
(7,192)
(3,348)
-
(73)
(9,095)
(476)
(9,571)
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
18
(637)
(1,487)
Income tax on items that may be reclassified to profit or loss
-
446
Other comprehensive income for the year, net of tax
(637)
(1,041)
Total comprehensive loss for the year attributable to the owners
of Armour Energy Limited
(12,229)
(10,612)
Cents
Cents
Basic loss per share
Diluted loss per share
11
11
(1.0)
(1.0)
(1.7)
(1.7)
62
These consolidated financial statements should be read in conjunction with the accompanying notes.
Consolidated Statement of Financial Position
Consolidated
30 June 2021
30 June 2020
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
Oil and gas assets
Other financial assets
Right-of-use 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
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued Capital
Reserves
Accumulated Losses
Total equity
Note
12
14
15
16
17
18
19
20
21
22
23
24
21
22
25
26
27
$’000
2,358
2,104
2,097
876
7,435
-
7,435
230
32,013
52,763
10,778
1,361
36
97,181
104,616
9,056
369
497
13,620
-
23,542
23,877
964
32
6,688
31,561
55,103
49,513
133,771
1,917
(86,175)
49,513
$’000
3,246
2,016
2,588
869
8,719
44
8,763
225
35,209
58,333
9,197
216
35
103,215
111,978
6,606
190
401
11,714
1,000
19,911
43,123
33
49
6,688
49,893
69,804
42,174
114,311
2,446
(74,583)
42,174
63
These consolidated financial statements should be read in conjunction with the accompanying notes.
Consolidated Statement of Cashflows
Consolidated
30-Jun-21
30-Jun-20
Note
$’000
$’000
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest paid on lease liability
Other Interest paid
Government grants
Net cash used in operating activities
13
Cash flows from investing activities
Refund/(payments) for security deposits
Payments for property, plant, and equipment
Payments for oil and gas assets
Payments for intangible assets
Grant funds received in relation to oil and gas assets
Proceeds from sale of exploration assets
Payments for acquisition of exploration and evaluation assets
Net cash from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Payment of principal portion of lease liability
Repayment of borrowings
Transaction costs on the issue of shares and notes
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the reporting
period
18,901
(21,995)
34
(65)
(4,461)
524
(7,062)
(1,414)
(30)
(11,436)
-
-
21,664
(4,011)
4,773
21,025
(262)
(18,800)
(562)
1,401
(888)
3,246
24,101
(17,488)
123
(22)
(6,572)
283
(2,856)
(193)
-
(22,005)
(225)
2,596
15,500
(2,497)
(6,824)
8,434
(192)
(3,850)
(691)
3,701
(5,979)
9,225
Cash and cash equivalents at the end of the reporting period
12
2,358
3,246
These consolidated financial statements should be read in conjunction with the accompanying notes.
64
Consolidated Statement of Changes in Equity
Issued capital
Reserves
Consolidated
Balance at 1 July 2020
Loss after income tax expense
Other comprehensive income, net of tax
Total comprehensive income
Transactions with owners in their capacity as owners:
Shares issued during the year
As a result of an asset acquisition
Share issue costs
Share-based payments
Balance at 30 June 2021
Consolidated
Balance at 1 July 2019
Loss after income tax expense
Other comprehensive income, net of tax
Total comprehensive income
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
Balance at 30 June 2020
$’000
114,311
-
-
-
19,460
907
(1,194)
287
133,771
Issued
capital
$’000
106,539
-
-
-
8,339
(708)
74
67
$’000
2,446
-
(637)
(637)
-
-
-
108
1,917
Reserves
$’000
3,268
-
(1,041)
(1,041)
-
213
-
6
Accumulated
losses
$’000
(74,583)
(11,592)
-
(11,592)
-
-
-
-
(86,175)
Total equity
$’000
42,174
(11,592)
(637)
(12,229)
19,460
907
(1,194)
395
49,513
Accumulated
Total equity
losses
$’000
(65,012)
(9,571)
-
(9,571)
-
-
-
-
$’000
44,795
(9,571)
(1,041)
(10,612)
8,339
(495)
74
73
42,174
65
These consolidated financial statements should be read in conjunction with the accompanying notes.
114,311
2,446
(74,583)
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
2021. 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 2021:
Is a general-purpose financial report.
Is prepared on a going concern basis (discussed further in Note 4).
1.
2.
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
b.
Australian Accounting Standards Board; and
International Financial Reporting Standards and Interpretations (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”).
6.
5. 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 28.
Is presented in Australian Dollars (“AUD”), which is both the Company’s and the Group’s presentation
currency. All values are rounded to the nearest thousand ($’000) except when indicated otherwise. 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' of amounts in the financial statements.
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.
7.
8. Presents reclassified comparative information where required for consistency with the current year’s
presentation.
9. 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 2020. None had a significant
impact on the Financial Statements.
10. Has not early adopted any standards and interpretations that have been issued or amended but are
not yet effective.
66
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.
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 32.
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 2021 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 can 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.
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.
67
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.
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.
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.
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.
The Group has achieved relatively stable production during the year ended 30 June 2021, resulting in
$17,502,000 of revenue. The group is forecasting to increase revenue over the coming 12 months by executing
a number of commercial arrangements to deliver work programs designed to exploit the Group's existing
flowing wells.
For the year ended 30 June 2021, the Group generated a consolidated net loss before tax of $11,592,000 and
incurred operating cash outflows of $7,062,000. As at 30 June 2021, the Group had cash and cash equivalents
of $2,358,000, net current liability of $16,107,000 and net assets of $49,513,000.
68
Whilst there is confidence in the performance of the Kincora Gas Plant and optimism for 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.
Cost Reductions
Armour is continuing to reduce costs across the business. Armour is seeking to reduce to the full extent possible
all overheads including contractors, administration costs and office rent. Armour is also aiming to reduce
operating expenditure at its Kincora Gas Project, while maintaining its ability to reliably maintain production in
a safe and environmentally compliant manner.
Capital Raising 2021
The capital program completed March 2021 raised $11,500,000 through a private placement. Shareholder
approval was necessary for the settlement of some of the placement amounts, which was received at an EGM
held on 11 June 2021.
The equity raised through the placement enabled the Company to focus on the demerger of the Northern
Basin business. These funds were also used for general working capital purposes and to provide some flexibility
in treasury management.
Subsequent to year end and as announced on 27 September 2021, Armour completed a further capital raise
of $8,200,000 through private placement. The raise comprised of $6,600,000 of new shares and $1,600,000 of
conditional placement (subject to approval at the Annual General Meeting).
Development Expenditure
Armour has had strong interest from parties to farm into its Surat and Cooper Basin assets. This would allow
Armour to focus on the following work programs:
Surat Basin Production Enhancement – a well stimulation program, the first of which will commence in
early October 2021
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
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. The Company is in the process of demerging its Northern Basin business to a new company McArthur Oil
& Gas.
2. The Company is in the process of raising pre-IPO funds through convertible notes in McArthur.
3. The cash generating ability of the Kincora Project is anticipated to increase as the Group moves ahead
with farmouts to undertake work programs and increase production.
4. 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.
69
5.
Increasing cashflow earnings – increasing production through delivering work programs; achieving cost-
saving target; pursuing higher gas and other products sales prices through proactive business
development and negotiations.
6. Proposed refinancing of maturing debt facilities.
As stated above, there are a number of progressed actions Armour can consider.
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
16
17
25
Exploration and evaluation assets
Oil and Gas assets
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, South Australia and Victoria, Australia.
Operating segments are determined on the basis of financial information reported to the Board.
For the year ended 30 June 2021, 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.
70
The chief operating decisions maker (CODM) reviews EBITDA (Earnings before Interest, Tax, Depreciation and
Amortisation) monthly. 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 2021 approximately 52% (2020: 58%) 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
71
Operating segment information
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
Total assets
Liabilities
Segment liabilities
Unallocated liabilities
Total liabilities
EEA
2021
$'000
-
-
-
-
(853)
15,857
-
-
15,004
2020
$'000
-
-
192
-
(720)
-
-
-
(528)
Surat
2021
$'000
17,502
17,502
869
(6,397)
(11,500)
-
69
(723)
(17,682)
2020
$'000
21,104
21,104
2,379
(2,950)
-
28
-
(1,942)
(2,485)
33,802
35,209
67,230
73,692
-
-
19,022
18,447
Corporate
2021
$'000
2020
$'000
Total
2021
$'000
-
-
(4,513)
(482)
-
-
1
(3,920)
(8,914)
-
-
-
-
(901)
(58)
-
-
127
(5,250)
(6,082)
-
-
17,502
17,502
(3,644)
(6,879)
(12,353)
15,857
70
(4,643)
(11,592)
-
(11,592)
101,032
3,584
104,616
19,022
36,081
55,103
2020
$'000
21,104
21,104
1,670
(3,008)
(720)
28
127
(7,192)
(9,095)
(476)
(9,571)
108,901
3,076
111,977
18,447
51,357
69,804
Net gain on sale of assets includes the sale of Armour’s interest in Murrungama, the South Nicholson Basin and 100% owned subsidiary Ripple Resources Pty Ltd.
See Note 7 for further details.
72
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.
Note 7. Revenue
Revenue from contracts with customers
The Group generated revenue from the sale of petroleum products that have similar performance obligations
and are goods that are transferred at a point in time.
Revenue from contracts with customers
Gas
LPG
Oil and Condensate
Consolidated
30 June 2021
$'000
30 June 2020
$'000
12,623
1,785
3,094
17,502
15,386
2,068
3,650
21,104
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 the 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. Payment is due by the
customer within 30 days from the end of the invoiced month.
Other Income
Net gain on sale of assets
Government grants
Interest Received
Other
Consolidated
30 June 2021
$'000
15,857
601
70
-
30 June 2020
$'000
-
455
127
36
16,528
618
73
Murrungama Gas Project
Armour entered into a Sale and Purchase Agreement with APLNG for Armour’s 10% interest for a total of
$4,000,000. An initial deposit of $500,000 was received in June 2020 and the remaining $3,500,000 was received
in August 2020. Armour held minimal cost on the balance sheet for this project.
South Nicholson Basin Assets
The original farm-in agreement between the Armour and Santo QNT Pty Ltd was amended to accelerate
payments relating to the permit transfer process. This resulted in an immediate cash payment of $6,000,000 in
August 2020.
In December 2020, the Group sold the remaining 30% interest in a portion of the South Nicholson Basin interests
to Santos. As consideration, Armour received an initial cash payment of $3,000,000 in December 2020 and the
balance of $9,164,000 in February 2021. Under this agreement Santos acquired 100% ownership of ATP 1087.
Santos also will acquire the application permit areas in Queensland ATP(A) 1192 and 1193 and the Northern
Territory tenement EP(A) 172 and 177. Armour retained full ownership and operatorship of ATP(A) 1107.
Ripple Resources
Ripple Resources Pty Ltd was sold to Auburn Resources Limited (Auburn). In consideration, Armour received
5,600,000 fully paid ordinary Auburn shares valued at $700,000. Following completion, Armour will hold
approximately 12.5% of Auburn’s issued share capital.
Government Grants
The Group was eligible for certain government support in response to the COVID-19 pandemic such as
JobKeeper and cash boosts from the Australian Taxation Office.
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.
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.
74
Note 8. Expenses
Loss before income tax includes the following specific
expenses:
Cost of goods sold
Operating expenses
Employee expenses
Oil and gas properties depreciation
Total cost of goods sold
General and administrative expenses
Employee expenses not included in operating expenses
Management fee
Consultancy and legal costs
Insurance not included in Cost of goods sold
Director fees
Depreciation and amortisation
Office equipment
Amortisation of intangibles
Other expenses
Total general and administrative expenses
Share-based payments
Total superannuation expense (included in costs of goods sold
and general and administrative expenses)
Consolidated
30 June 2021
$'000
30 June 2020
$'000
13,197
3,761
5,193
12,583
4,158
2,743
22,151
19,484
1,639
456
656
272
277
14
24
1,000
4,338
464
805
1,137
456
938
359
350
16
42
50
3,348
73
770
Employee benefits expenses
The Group’s accounting policy for liabilities associated with employee benefits are set out in Note 22 and
the share-based payments policy in Note 35.
Note 9. Finance costs
Interest expense
Financing fees
Amortisation of debt facilities and associated issue costs
Unwinding of provision for contingent consideration
Consolidated
30 June 2021
$'000
3,918
725
1,673
-
30 June 2020
$'000
4,769
864
1,478
81
6,316
7,192
75
Note 10. Income tax
(a) Component of income tax expense (benefit)
Income tax expense 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 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 in calculating taxable income:
Share-based payments
Expenses not deductible for tax purposes
Current year tax losses not recognised
Prior year over (under)
Consolidated
30 June 2021 30 June 2020
$'000
$'000
-
-
-
-
476
476
30
30
(11,594)
(9,095)
(3,478)
(2,729)
113
(3,365)
2,173
1,192
22
-
(2,707)
3,788
(605)
Income tax expense
-
476
76
(b) 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
Unrealised FX Loss
Holloman Exploration License (Reset CB)
Holloman Tax Cost base (transaction costs)
Deferred tax asset
Deferred tax liability
Opening
balance
1-Jul-20
$'000
Net
charged to
income
$'000
Net
charged to
OCI
$'000
Net
charged to
equity
$'000
Closing
Balance
30-Jun-21
$'000
2,944
322
13
72
121
1,379
1,228
1,362
563
58
-
-
-
(2,251)
(23)
(2)
(23)
(61)
628
-
-
280
342
8
108
8
-
-
-
-
-
-
209
-
-
-
-
-
-
-
-
-
-
100
-
-
-
-
-
-
-
-
693
299
11
49
160
2,007
1,437
1,362
843
400
8
108
8
8,062
(986)
209
100
7,385
Exploration & Evaluation assets
(8,649)
Oil & Gas assets
Unrealised FX Gain
Leased Assets
Prepayments
Accrued Income
654
-
(67)
-
-
187
860
-
(344)
(12)
(14)
Deferred tax liability
(8,062)
677
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(8,462)
1,514
-
(411)
(12)
(14)
(7,385)
Net deferred tax
Deferred tax assets
not recognised
Unused tax losses
Capital raising costs in equity
Available for sale financial assets (Lakes Oil
shares)
-
(309)
209
100
-
53,318
7,243
-
-
-
-
-
-
697
-
60,560
333
-
333
697
Potential tax benefit at 30%
15,995
2,173
209
100
18,477
77
Opening
balance
Net charged
to income
Net charged
to other
comprehensi
ve income
Net charged
to equity
Closing
Balance
$'000
$'000
$'000
30-Jun-20
$'000
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
1-Jul-19
$'000
8,505
206
13
109
88
1,379
782
1,362
265
-
(5,561)
116
-
(37)
(41)
-
-
-
298
8
Deferred tax assets
12,709
(5,217)
Deferred tax liability
Exploration & Evaluation assets
(13,030)
Oil & Gas assets
Other
322
-
4,381
332
27
Deferred tax liability
(12,708)
4,740
-
-
-
-
-
-
446
-
-
-
446
-
-
-
-
-
-
-
-
74
-
-
-
-
50
2,944
322
13
72
121
1,379
1,228
1,362
563
58
124
8,062
-
-
(94)
(8,649)
654
(67)
(94)
(8,062)
Net deferred tax
1
(477)
446
30
-
Deferred tax assets not recognised
Unused tax losses
39,832
13,486
Potential tax benefit at 30%
11,950
4,045
-
-
-
-
-
-
53,318
15,995
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 as at 30 June 2021 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.
78
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.
79
Note 11. Earnings per share
Loss after income tax attributable to the owners of the parent
entity
Weighted average number of shares used in (thousands)
Basic earnings
-
- Diluted earnings
Earnings per share (cents) attributable to the ordinary equity
holders of the parent entity
Basic loss per share
Diluted loss per share
Consolidated
30 June 2021 30 June 2020
$'000
$'000
(11,592)
(9,571)
1,201,060
1,201,060
573,421
573,421
(1.0)
(1.0)
(1.7)
(1.7)
Options and rights are not considered dilutive as they are currently out of the money.
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 weighted average number of shares assumed to have been issued for no consideration
in relation to dilutive potential ordinary shares.
Note 12. Current assets – Cash and cash equivalents
Cash at bank and in hand
Other cash and cash equivalents
Consolidated
30 June 2021
$'000
2,311
47
30 June 2020
$'000
3,243
3
2,358
3,246
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 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.
80
Note 13. Cash flow information
(a) Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Net gain on sale of assets
Share-based payments
Impairment of exploration and evaluation expenditure
Impairment of oil and gas expenditure
Interest expense on borrowing facilities
Amortisation of borrowing facilities and issue costs
Unwinding of the discount on deferred consideration
Inventory adjustment
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
Consolidated
30-Jun-21
$’000
(11,594)
30-Jun-20
$’000
(9,571)
5,231
(15,857)
464
853
11,500
(1,937)
1,673
-
(114)
(7)
2,323
(88)
-
491
3,008
(28)
73
720
-
(1,203)
1,705
81
(220)
(345)
2,558
517
476
(627)
Net cash used in operating activities
(7,062)
(2,856)
Equity settled share-based payment transactions are disclosed in Note 35.
Apart from in Note 35, there are no other non-cash financing and investing activities to disclose.
(b) Reconciliation of liabilities arising from financing activities
Consolidated
Balance at 1 July 2019
Net cash used in financing activities
Amortisation
Balance at 30 June 2020
Borrowed Amounts
Net cash used in financing activities
Amortisation
Tribeca Loan
Corporate
Bonds
$’000
4,649
-
1,015
5,664
-
(1,367)
932
$’000
52,766
(3,850)
256
49,172
-
(17,433)
469
Balance at 30 June 2021
5,229
32,208
Other
Borrowed
funds
$’000
-
-
-
-
60
-
-
60
Total
$’000
57,415
(3,850)
1,271
54,836
60
(18,800)
1,401
37,497
81
Note 14. Current assets – Trade and other receivables
Trade receivables
Cash calls from JV parties
Cash call receivable - Lakes Blue Energy NL
Other receivables
Consolidated
30 June 2021
$'000
2,099
-
-
30 June 2020
$'000
1,734
98
61
2,099
5
2,104
1,893
123
2,016
Key judgement - 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 2021 (30 June 2020: 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 the estimated expected credit loss is not material
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 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 2021, included in trade receivables is one significant debtor accounting for approximately 57%
(2020: 57%) of the total trade receivables.
82
Note 15. Current assets – Inventories
Gas
Oil and Condensate
LPG
Materials & Consumables
Consolidated
30 June 2021
$'000
30 June 2020
$'000
198
46
6
1,847
2,097
315
44
6
2,223
2,588
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.
Note 16. Non-current assets - Exploration and evaluation assets
Exploration and evaluation assets
Less: Accumulated impairment
Movements in the provision for impairment amounts
Balance at the beginning of the year
Provisions raised
Consolidated
30 June 2021
$'000
30 June 2020
$'000
40,377
(8,364)
42,720
(7,511)
32,013
35,209
Consolidated
30 June 2021
$'000
30 June 2020
$'000
(7,511)
(853)
(6,790)
(721)
(8,364)
(7,511)
83
Movements in carrying amounts
Balance at the beginning of the year
Additions
Additions acquired with CoEra Pty Ltd¹
Government grants relating to Exploration and Evaluation assets
Farm-in agreement proceeds²
Disposals2,3
Provision for impairment
Consolidated
30 June 2021
$'000
30 June 2020
$'000
35,209
4,153
1,064
-
-
(7,560)
(853)
49,276
2,270
-
(617)
(15,000)
-
(720)
32,013
35,209
1Cooper Basin Assets
Armour acquired 100% of the issued capital of CoEra Limited, an Australian company previously a fully owned subsidiary of
Oilex Limited. CoEra’s assets include a substantial footprint of exploration licences on the oil rich Western and Northern Flanks
of the Cooper Basin. The Basin is one of Australia’s most prolific producing oil and gas province, which historically has a high
exploration success rate and low-cost development pathways. Armour issued 24,500,000 shares ($906,000) as consideration
for the purchase. In accordance with AASB 3, this transaction has been treated as an asset acquisition. The following table
shows the assets acquired and the purchase consideration at acquisition date.
Consideration paid for Cooper Basin Assets
Exploration Expenditure
Consideration Paid in Issued Shares for CoEra Limited
Payment to reimburse Oilex of licence fees and applications
Exercising the option to purchase the remaining 20% interest in the PELs
Payment to reimburse Senex of historical costs
Consideration Paid in Cash for CoEra Limited
Total Exploration assets acquired
Financial assurances
Security deposits (Paid in shares)
Payment to reimburse Terra Nova for the Financial Assurance held with South Australia’s
DEM (Paid in Cash)
Total Financial assurances acquired
Total consideration paid in issued shares
Total consideration paid in cash
Fair Value
$’000
827
827
127
60
50
237
1,064
79
21
100
906
258
Subsequent to the purchase of CoEra Limited and its subsidiaries, Armour applied to have CoEra Limited converted to a
proprietary company.
84
2 Ripple Resources
Ripple Resources Pty Ltd was sold to Auburn Resources Limited (Auburn). In consideration, Armour received 5,600,000 fully
paid ordinary Auburn shares worth $700,000. Following completion, Armour will hold approximately 12.5% of Auburn’s
issued share capital.
3South Nicholson Basin
In FY 2020, a farm-in agreement was executed between Armour and Santos QNT Limited (Santos) for 70% of Armour’s
South Nicholson Basin tenements, ATP1087, ATP1107, ATP1192 and ATP1193 (applications), and the Northern Territory
tenements EP172 and EP177, both of which are also in the application phase. An initial $15,000,000 was received as part
of the farm-in agreement.
In early FY 2021, the Company entered into an agreement with Santos to amend the South Nicholson Basin farm-in
agreement, resulting in an immediate cash payment of $6,000,000 as an acceleration of future contingent permit transfer
payments.
Armour entered into another agreement with Santos to sell its remaining 30% legal and beneficial interest in ATP 1087,
ATP(A)1192, ATP(A)1193, EP(A)172 and EP(A)177, and retain 100% of ATP 1107, for an additional $12,164,000.
The disposal represents the sale of the net cost remaining of these abovementioned assets (Ripple Resources and South
Nicholson Basin) after considering the R&D Exploration Grant received from the government in relation to ATP 1087 and
the $15,000,000 cash payment received for the original Farm-in Agreement made during the 2020 financial year.
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.
Provision for Impairment of Exploration and Evaluation assets
In FY 2020 an impairment of $721,000 related to the Group’s interest in Ripple Resources was recognised. In FY
2021 Ripple Resources was sold to Auburn Resources Limited.
In accordance with the Group’s accounting policy, the Exploration and Evaluation assets were tested for
indicators of impairment at 30 June 2021. The Group determined that there was a trigger present for Surat Basin
ATP 2028 as the appeal made to the government in relation to its determination of the Potential Commercial
Area (PCA) application was withdrawn. Therefore, it was determined that it was appropriate for an impairment
to be recognised in relation to Surat Basin ATP 2028 as the carrying value of the Group's interest exceeded what
is expected to be its recoverable amount. As such, an impairment provision of $853,000 was recorded during
the year ended 30 June 2021.
85
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 2021, the facts
and circumstances 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 farm-in 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 farm-in 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.
Note 17. Non-current assets - Oil and gas assets
Oil & gas assets - at cost
Less: Accumulated amortisation
Less: Provision for impairment
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
Depreciation charge
Provision for impairment
Government Grants relating to Oil and Gas Assets
Consolidated
30 June 2021
$'000
85,517
(10,809)
(11,500)
63,208
(4,389)
(6,056)
(10,445)
52,763
30 June 2020
$'000
74,394
(5,616)
-
68,778
(4,389)
(6,056)
(10,445)
58,333
Consolidated
30 June 2021
$'000
30 June 2020
$'000
58,333
11,123
(5,193)
(11,500)
-
52,763
42,344
21,322
(2,743)
-
(2,590)
58,333
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.
86
Amortisation of oil and gas assets is computed by the units of production basis over the estimated proved and
probable (2P) 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.
Provision for impairment of oil and gas assets
Recognition and measurement
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.
Calculating the Group’s recoverable amount
The recoverable amount is the higher of an asset’s:
a) fair value less cost of disposal
b) its value in use
Oil & Gas assets are assessed on a cash generating unit (CGU) basis. A CGU is the smallest identifiable group of
assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups
of assets. Management has determined Surat’s fields to be the Group’s CGU with shared management and
personnel and operating as one cash operating unit. Individual assets within a CGU can become impaired if its
future use changes or if the benefits from ongoing use is expected to be less than the carrying value of the
individual asset.
Valuation method
As part of the Group’s impairment assessment management consider the future demand for its products,
impact of any changes in economic, regulatory or legal environment and other indicators such as market
capitalisation and reserve updates.
The value in use is calculated using expected future cash flows from continuing use of the CGU, including the
anticipated capital expenditure to achieve this and its ultimate disposal. The cashflows are discounted to their
present value using a post-tax discount rate reflecting the current market assessment of time value of money
and the risks specific to the asset or CGU.
The future cash flows are most sensitive to estimates of future commodity prices, foreign exchange rates and
discount rates.
Future commodity prices are based on the Group’s current best estimate of expected market prices with
reference to current spot rates, forward curves and external market analysis.
Foreign exchange rates are based on external market forward indexes from a few of the big four banks
estimates.
87
The discount rate applied of 10% to the future cash flows are based on the weighted average cost of capital,
adjusted for the Group’s known risks.
The following represents inputs to the future cash flows:
Commodity & Fx Assumptions
FY 2022
FY 2023
FY 2024
Longer-term
Oil $USD/bbl
Contracted Gas $AUD/GJ
Spot Market Gas $AUD/GJ
LPG $USD/T
USD/AUD fx rate
61.98
6.26
6.84
488.47
1.25
61.39
6.38
7.23
431.80
1.25
68.98
6.51
7.96
530.60
1.33
Increased by
inflation each
year after
1.33
The assessment of the value in use and the decline in production performance in some of Surat Basin production
wells indicated the recoverable amount of the Group’s Surat Basin CGU could require an impairment for the
year ended 30 June 2021.
Upon further assessment there were a number of assets held as part of the oil and gas assets with historical costs
dating pre-July 2018. As these specific assets are not currently producing and with the changing market, it is not
expected that these historical costs will be recovered. As such, the Group has recorded an impairment of
$11,499,000 relating to oil and gas assets.
In the event that future circumstances change from these assumptions, the recoverable amounts of the CGU
could change materially and result in further impairment losses or the reversal of impairment losses.
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.
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 18. Non-current assets - Other financial assets
Financial assets at fair value through other comprehensive income
Less: cumulative fair value movement
Financial assurances
Security deposits
Consolidated
30 June 2021
$'000
30 June 2020
$'000
5,402
(4,252)
1,150
5,613
4,015
4,702
(3,615)
1,087
6,779
1,331
10,778
9,197
88
As part of the purchase of the Cooper Basin Assets, an additional $540,000 of financial assurances were
accounted for consisting of $100,000 relating to the PELs in Holloman Petroleum Pty Ltd and $440,000 entered
into by Armour on behalf Cordillo Energy Pty Ltd for the 27 Northern Fairway PRLs.
The increased Security Deposit also represents the changes to the Secured Amortising Notes requirements, a
new Interest Reserve Account, in the name of the Note Trustee, was created to hold a deposit equal to three
times the amount of interest that would be payable on the immediately following interest payment date. As
at 30 June 2021, this deposit was $2,339,000.
As a result of the sale of ATP 1087, the deposit of $221,000 held for its rehabilitation was returned to the group.
Financial assurances and security deposits are cash backed bank guarantees.
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 2021
$'000
30 June 2020
$'000
1,087
700
(637)
2,125
450
(1,488)
1,150
1,087
Financial assets at fair value through other comprehensive income comprise:
• Ordinary shares in LKO, which were fully impaired during the year due to uncertainty of its relisting
•
LKO convertible notes, which are secured by all of LKO’s assets. LKOs existing tenements are current
and all in good standing
The additions during the year for the shares received in Auburn Resources NL for the sale of Ripple
Resources Pty Ltd
•
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 28 for detail of the
Group's fair value accounting policy.
Security deposits and financial assurances are measured at amortised cost.
89
Note 19. Non-current assets - right-of-use assets
Motor vehicles - right-of-use
Less: Accumulated depreciation
Consolidated
30 June 2021
$'000
30 June 2020
$'000
2,055
(694)
1,361
626
(410)
216
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.
Note 20. Current liabilities - Trade and other payables
Trade payables
Deposits Held
Accrued expenses
Other payables
GST payable
Unearned Income
Other tax liabilities
Trade payables
Consolidated
30 June 2021
$'000
30 June 2020
$'000
3,820
2,075
1,938
1,009
124
59
31
9,056
3,548
-
2,250
601
183
-
24
6,606
Deposits held are funds received from investors as part of the March 2021 private placement. The shares were
issued subsequent to year-end on 8 July 2021.
Refer to Note 29 for further information on financial risk management.
90
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 28.
Trade payables are non-interest bearing and are generally on 30-60 days terms. Due to their short-term nature
trade and other payables are not discounted.
Note 21. Current and non-current liabilities - lease liabilities
Current Lease liability
Non-Current Lease liability
Consolidated
30 June 2021
$'000
30 June 2020
$'000
369
964
1,333
190
33
223
Refer to note 29 for further information on financial risk management.
Accounting policy for lease liabilities
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 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.
Note 22. Current and non-current liabilities - Employee benefits
Current Employee Benefits
Non-Current Employee Benefits
Consolidated
30 June 2021
$'000
30 June 2020
$'000
497
32
529
401
49
450
91
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
Long-term employee benefits
The liability for long service leave not expected to be settled within 12 months of the reporting date are
recognised in non-current liabilities, provided there is an unconditional right to defer settlement of the liability.
The liability is measured as the present value of expected future payments to be made in respect of services
provided by employees up to the reporting date using the projected unit credit method. Consideration is given
to expected future wages and salary levels, experience of employee departures, and periods of service.
Expected future payments are discounted using market yields at the reporting date on Australian corporate
bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash
outflows.
Note 23. Current liabilities – Borrowings
Tribeca Loan Facility
Secured Amortising Notes
Secured Amortising Notes - issue costs
Other facilities
Consolidated
30 June 2021
$'000
5,229
8,800
(469)
60
13,620
30 June 2020
$'000
5,664
6,050
-
-
11,714
The Group complied with all relevant covenant requirements of the Tribeca loan facility and Secured
Amortising Notes during the year ended 30 June 2021.
Facility terms and security disclosures
Tribeca loan facility
On 26 July 2018, Armour Energy Limited and its subsidiary, Armour Energy (Surat Basin) Pty Ltd (Armour Surat)
entered into a credit facility agreement (Tribeca Facility Agreement) with Equity Trustees Limited (in its capacity
as the trustee of the Tribeca Global Natural Resources Credit Fund) and Tribeca Global Natural Resources Credit
Master Fund (together Tribeca) for the provision of an environmental bonding finance facility. The Facility is
secured by a guarantee from the Company, in seven 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 with the maturity date now extended to 31 December 2021. 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.
92
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
Repayments during the year at NPV
Amortisation of conversion rights
Amortisation of issue costs
Note 24. Non-current liabilities – Borrowings
Total secured liabilities
Secured Amortised Notes
Secured Amortised Notes - issue costs
Consolidated
30 June 2021
$'000
30 June 2020
$'000
6,759
(137)
(2,893)
(1,261)
2,739
22
5,229
6,759
(137)
(2,893)
-
1,886
49
5,664
Consolidated
30 June 2021
$'000
30 June 2020
$'000
24,917
(1,040)
45,100
(1,977)
23,877
43,123
Refer to Note 29 for further information on financial risk management.
Total current and non-current
Secured Amortising Notes
Face value of Secured Amortising Notes
Issue costs of Secured Amortising Notes
Amortisation of Secured Amortising Notes costs
Consolidated
30 June 2021
$'000
30 June 2020
$'000
33,717
(2,351)
842
32,208
51,150
(2,351)
373
49,172
Facility terms and security disclosures
Secured Amortising Notes
In FY 2019, Armour Energy Limited announced a $55 million Secured Amortising Notes facility, refinancing all
outstanding convertible notes on issue and providing additional funding for exploration and general working
capital.
The main terms of the Secured Amortising Notes are as follows:
Issue date of 29 March 2019, with 55,000 new $1,000 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.
93
The Maturity Date for the notes is five years from issue date.
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 25. Non-current liabilities - Provision for restoration and abandonment
Consolidated
30 June
2021
$'000
6,688
30 June
2020
$'000
6,688
Restoration and abandonment
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 the
Financial Provisioning Scheme in accordance with legislative requirements as required. For the provision
recognised at 30 June 2021, 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.
94
Note 26. Equity - Issued capital
Issued and paid up capital
Consolidated
30-Jun-21
30-Jun-20
30-Jun-21
30-Jun-20
Shares
Shares
$'000
$'000
Ordinary shares - fully paid
1,529,816,120
779,247,711
Share issue costs
Recognition of deferred tax asset relating to share
issue costs
-
-
-
-
141,876
(10,194)
121,222
(9,000)
2,089
2,089
1,529,816,120
779,247,711
133,771
114,311
Movements in ordinary share capital
Details
Balance
Shares issued for cash (Entitlement Offer)
Shares issued under employment contracts
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
Balance
Shares issued for cash (Entitlement Offer)
Shares issued for cash (Entitlement Offer)
Shares issued for cash (Entitlement Offer)
Shares issued for cash (Placement)
Shares issued for cash (Placement)
Shares issued under services contracts
Date
Shares
#
1-Jul-19
509,437,570
30-Sep-19
80,000,000
5-Nov-19
1,164,384
23-Jun-20
165,273,600
30-Jun-20
23,372,157
30-Jun-20 779,247,711
18,849,710
12-Aug-20
24-Aug-20
33,788,306
17-Sep-20
67,859,048
18-Sep-20
29,893,030
23-Sep-20
146,158,694
29-Sep-20
2,173,913
Shares issued under Share and Purchase Agreement
15-Oct-20
24,500,000
Shares issued for cash (Placement)
Shares issued under employment contracts
Shares issued under employment contracts
Shares issued for cash (Entitlement Offer)
Shares issued under employment contracts
Shares issued under employment contracts
Shares issued for cash (Placement)
Shares issued under employment contracts
Shares issued under employment contracts
Share issue costs
Balance
16-Oct-20
56,374,176
19-Oct-20
2,650,000
20-Nov-20
1,019,623
23-Dec-20
112,800,818
8-Jan-21
8-Jan-21
360,000
88,011
24-Mar-21
249,976,294
1-Apr-21
360,000
1-Apr-21
3,716,786
Issue
price
$0.05
$0.06
$0.02
$0.02
$0.02
$0.02
$0.02
$0.02
$0.02
$0.02
$0.04
$0.02
$0.02
$0.02
$0.02
$0.02
$0.06
$0.04
$0.02
$0.03
Value
$'000
106,539
4,000
68
3,801
538
(709)
74
114,311
434
777
1,561
688
3,362
50
907
1,297
61
33
2,594
7
5
8,749
7
123
(1,195)
30-Jun-21 1,529,816,120
133,771
95
Ordinary shares
Ordinary shares participate in dividends and the proceeds on winding up of Armour Energy Ltd. At shareholder
meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one
vote on show of hands.
Options
The following share options were on issue at reporting date.
Grant Date
31/07/2018
01/10/20191
17/12/20191
23/06/20202
30/06/20202
12/08/20202
24/08/20202
17/09/20202,3
01/10/20202
19/10/20202
22/12/20202
24/03/20214
Balance
Expiry Date
Number
#
31/07/2021
41,000,000
30/09/2023
40,000,000
30/09/2023
8,000,000
29/02/2024
31,166,497
29/02/2024
29/02/2024
7,018,341
9,424,831
29/02/2024
16,894,150
29/02/2024
35,929,524
29/02/2024
144,163,885
29/02/2024
87,811,409
29/02/2024
66,778,341
29/02/2024
62,494,099
550,681,077
Exercise
price
$
$0.16
$0.08
$0.08
$0.05
$0.05
$0.05
$0.05
$0.05
$0.05
$0.05
$0.05
$0.05
vested
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
1 In 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 unlisted option exercisable at 8 cents (through to 30 September 2023) for every two shares
subscribed, resulting in 40,000,000 unlisted options being issued. This private placement was managed by Bizzell Capital Partners Pty Ltd
(BCP). As part of the capital raising fee for their services, BCP was entitled to 8,000,000 options exercisable at 8 cents (through to September
2023).
2 In June 2020, the company announced a further capital raising program, which ended in December 2020. There was an attaching option
for every two New Shares issued under the Entitlement Offer and / or Placement available to both institutional and retail eligible shareholders.
There was a total of 397,186,978 options issued exercisable at 5 cents and expiring 29 February 2024 as part of this program.
3 In addition to the placements, there was 2,000,000 unlisted options issued as a share-based payment on 17 September 2020.
4 The private placement in March 2021 included an attaching option for every four new shares issued. This issuance was of the existing listed
series (ASX: AJQOA) which are exercisable at 5 cents and expiring 29 February 2024.
In total, there were 423,496,239 options issued in financial year 2021, 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.
96
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 are shown in equity as a deduction, net of tax,
from the proceeds.
Note 27. 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 2021
$'000
30 June 2020
$'000
(5,977)
4,903
98
2,893
1,917
(5,340)
4,887
6
2,893
2,446
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.
97
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
$'000
(4,299)
(1,487)
446
-
Balance at 1 July 2019
Revaluation - gross
Deferred tax
Share-based payments
$'000
4,674
-
-
213
Share-based
payments
option reserve
Performance
shares reserve
Balance at 30 June 2020
(5,340)
4,887
Revaluation - gross
Share-based payments
(637)
-
-
16
Balance at 30 June 2021
(5,977)
4,903
Equity
conversion
right - Tribeca
Loan
$'000
2,893
-
-
-
Total
$'000
3,268
(1,487)
446
219
2,893
2,446
-
-
(637)
108
2,893
1,917
$'000
-
-
-
6
6
-
92
98
Note 28. 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
Financial assets (liabilities) at fair value through
other comprehensive income
Year
2021
2020
Consolidated
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
-
-
1,150
1,150
1,087
1,087
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.
As part of the annual review of Lakes Blue Energy’s investment it was determined that it was appropriate for an
impairment to be recognised due to the uncertainty of Lakes Blue Energy’s relisting. As such, the investment in
shares was fully written off during the year ended 30 June 2021. The convertible notes are secured by the assets
of Lakes Blue Energy and deemed to be recoverable.
98
The financial asset held at 30 June 2021 are shares held in Auburn Resources NL. These shares were received for
the sale of Ripple Resources Pty Ltd. The level 3 inputs used in determining the fair value of the Auburn Resources
NL investment is based on seed capital raising programs held in August and September 2021. This program
issued shares with an issue price of 12.5 cents per share.
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.
Note 29. Financial risk management
General Objectives, Policies and Processes
The Group's principal financial instruments consists of deposits with banks, receivables, other financial assets,
payables, borrowings, and secured amortising notes.
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 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 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. 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.
99
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.
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 adjusted annually for the Consumer Price Index (CPI) and some of which are
set with reference to the variable Australian domestic gas price.
To manage these exposures, forward Australian domestic price forecasts are monitored regularly and reported
to the board.
Commodity price risk
The Group is exposed to the risk of fluctuations in prevailing market commodity prices on the gas and associated
liquid products it produces. The Group is not of a size to have influence on gas or other petroleum product prices
and is therefore a price-taker in general terms. The Group manages this risk by continuously monitoring actual
and forecast commodity prices and analysing the impact these changes will have on profitability and cashflow.
Interest rate risk
Interest rate risk arises principally from cash and cash equivalents. The Company's secured amortising notes 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 and financial assurances are held with Australian financial institutions to mitigate credit
risk, being Macquarie Bank (local currency short term rating A-2) and Westpac (local currency short term rating
A-1+).
Refer to Note 14 for credit risk exposure of trade and other receivables.
100
Liquidity risk
Liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and
payable.
The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets
and liabilities.
Liquidity risk is the risk that the Group may encounter difficulties raising funds to meet financial obligations as
they fall due. The objective of managing liquidity risk is to ensure, as far as possible, that the Group will always
have sufficient liquidity to meets its liabilities when they fall due, under both normal and stressed conditions.
Liquidity risk is reviewed regularly by the Board.
For further details on liquidity risk refer to the tables below.
Financing arrangements
The Group had no access to undrawn borrowing facilities at the end of the reporting period (2020: nil).
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The
tables have been prepared 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
Remaining
contractual
maturities
Year
%
$'000
$'000
$'000
$'000
Non-derivatives
Non-interest bearing
Trade payables
Deferred
consideration
2021
2020
2021
2020
Interest-bearing - fixed rate
2021
Tribeca facility
Secured Amortising
Notes
Capital lease
2020
2021
2020
2021
-
-
-
-
9.00%
9.00%
8.75%
8.75%
16.30%
9,056
6,606
-
1,000
5,516
608
11,462
10,363
-
-
-
-
-
-
6,803
12,299
25,209
-
-
-
-
-
-
-
-
15,236
27,970
-
-
2020
16.30%
2021
Lease liability
33
1,695
189
Interest payable on the Secured Amortising Notes is quarterly in arrears. The Secured Amortising Notes mature
on 29 March 2024. The Group manages liquidity risk by monitoring forecast cash flows and liquidity ratios such
as working capital.
33
391
156
1,009
-
295
33
8.88%
6.30%
2020
9,056
6,606
-
1,000
5,516
7,411
38,997
63,542
-
101
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed.
Note 30. 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
Principal place of business /
Country of incorporation
Ownership interest
30-June-2021
30-June-2020
%
%
Armour Energy (Victoria) Pty Ltd
Victoria / Australia
Armour Energy (Surat Basin) Pty Ltd
Queensland / Australia
Armour Energy (Queensland) Pty Ltd
Queensland / Australia
Ripple Resources Pty Ltd
Queensland / Australia
McArthur Oil and Gas Limited
Queensland / Australia
McArthur NT Pty Ltd
CoEra Pty Ltd
Cordillo Energy Pty Ltd
Queensland / Australia
South Australia/ Australia
South Australia/ Australia
Holloman Petroleum Pty Ltd
South Australia/ Australia
100.00%
100.00%
100.00%
-
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
-
-
-
-
Note 31. Interests in joint operations
Information relating to joint operations that are material to the Group are set out below:
Name
Principal place of business /
Country of incorporation
Ownership interest
30-June-2021
30-June-2020
PL 1084 (Sykes Block)
Queensland, Australia
ATP119P South - Waldegrave
Queensland, Australia
ATP119P South - Snake Creek East
Queensland, Australia
ATP 212P - PL 30
ATP212P - PL512, PPL22
Weribone Pooling Area
PCA157 Bainbilla Block
ATP 754P
ATP 1087
PEP 169
PEP 166
Kanywataba Block
Queensland, Australia
Queensland, Australia
Queensland, Australia
Queensland, Australia
Queensland, Australia
Queensland, Australia
Victoria, Australia
Victoria, Australia
Uganda
%
-
46.25%
25.00%
90.00%
84.00%
50.64%
24.75%
50.00%
-
51.00%
25.00%
16.82%
%
10.00%
46.25%
25.00%
90.00%
84.00%
50.64%
24.75%
50.00%
30.00%
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.
102
Note 32. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/ (Loss) after income tax
Parent
30-June-2021
$'000
30-June-2020
$'000
(8,638)
(12,147)
Other Comprehensive income for the year, net of tax
Total Comprehensive income
(637)
(9,275)
(1,041)
(13,188)
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
Parent
30-June-2021
$'000
30-June-2020
$'000
941
792
85,897
90,565
12,491
2,135
36,385
51,345
133,771
114,311
(5,975)
(5,338)
4,903
98
2,893
4,887
5
2,893
(86,176)
(77,538)
49,512
39,220
103
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
As at 30 June 2021, 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 2021 and 30 June 2020.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2021 and 30
June 2020.
Note 33. 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 30.
Joint Operations
Interests in joint ventures are set out in Note 31.
Key management personnel
Disclosures relating to key management personnel are set out in Note 34 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 Ltd1
Payment for services from other related party - Bizzell Capital Partners2
Consolidated
30 June 2021
30 June 2020
$
$
456,000
468,505
456,000
336,039
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 (2020:
$38,000). For the year ended 30 June 2021 $456,000 (2020: $456,000) was paid or payable to DGR Global for the provision of
the Services. The total amount outstanding at year end was $243,424 (2020: $167,200). As at 30 June 2021 DGR Global held
4,550 secured amortising notes totalling $4,550,000 (2020: 8,750). The notes were purchased on the same terms and
conditions as other noteholders.
2 Armour entered into an agreement with Bizzell Capital Partners Pty Ltd as Lead Manager for the capital raising programs.
In December 2020, Armour Energy completed a $15 million capital raise program. Bizzell Capital Partners was joint lead
manager of the private placement and was paid a capital raising fee totalling $241,960 (net of GST) on arm’s length terms.
104
In March 2021, Armour Energy completed an $11.5 million capital raise program. Bizzell Capital Partners was joint lead
manager of the private placement and was paid a capital raising fee totalling $226,545 (net of GST) on arm’s length terms.
As at 30 June 2021, Bizzell Capital Partners held 6 million unquoted options, 26,392,319 Quoted options and 100 secured
amortising notes (2020: 6 million unquoted options and 100 secured amortising notes). The notes were purchased on the
same terms and conditions as all other bondholders.
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:
Secured amortising notes holdings
Stephen Bizzell
Notes held
at the start
of the year
Number
Additions
Disposals/
Other
Number
Number
Notes held at
the end of the
year
Number
100
-
-
100
No other directors and key management personnel held any debt instruments in the Company at the start,
during or at the end of the year.
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
Consolidated
30 June 2021
$
1,155,890
65,127
246,479
30 June 20201
$
1,741,662
73,720
72,916
91,533
48,242
1,559,029
1,936,540
1 Note 30 June 2020 does not reconcile to the Remuneration Report as various key management personnel who were not
employed during the 2021 financial year have not been included.
Refer to the Remuneration Report on pages 47 to 58.
105
Note 35. 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 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
Issued during the year
Expired during the year
2021
WAEP
$0.33
$0.05
$0.33
2021
Number
6,750,000
2,000,000
(6,750,000)
2020
WAEP
2020
Number
$0.30
17,375,000
$0.28
(10,625,000)
-
Outstanding and exercisable at the end of the year
$0.05
2,000,000
$0.33
6,750,000
There were no options issued to employees and Directors under the Armour Energy Employee Share Option Plan
during 2021 (2020: NIL). The options issued during the year are part of an independent contractor agreement.
The options outstanding as at 30 June 2021 have a weighted average remaining contractual life of 2.67 years
and exercise price of $0.05.
On 17 September 2020, the company issued 2,000,000 options as part of an independent contractor
agreement. The fair value of these options at grant date was $0.0080. 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
2,000,000
$0.050
$0.021
17/09/2020
29/02/2024
84.811%
-
0.24%
$0.0080
106
Other option issues
The following table illustrates the number of, and movements in, other options issued for commercial
consideration during the year.
The other options outstanding as at 30 June 2021 have a weighted average remaining contractual life of 0.22
years and exercise price of $0.07.
2021 WAEP
30 June 2021 2020 WAEP
30 June 2020
Consolidated
Balance at the start of the year1
Granted during the year2
Expired during the year
Number
49,000,000
$0.15
-
-
Exercisable at the end of the year
$0.15
49,000,000
The opening balance of options were issued in two tranches:
$0.17
$0.08
$0.27
$0.15
Number
43,000,000
8,000,000
(2,000,000)
49,000,000
1 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). These options expired on 31 July 2021.
2 Bizzell Capital Partners managed the private placement that closed 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.
Performance rights shares
The following table illustrates the number of, and movements in, performance shares issued for during the year.
Consolidated
30 June 2021
$
30 June 2020
$
Balance at the start of the year
7,200,000
-
Granted during the year
Expired during the year
-
-
7,200,000
7,200,000
-
7,200,000
There was $92,000 included in share-based payments to recognise the value of the performance shares for
the year ended 30 June 2021.
Share-based payment expense
Equity settled share-based payments
For the year ended 30 June 2021 $287,000 of employment benefits were taken as ordinary shares in lieu of cash
(2020: $68,000).
Option expense
There was a $16,000 option expense recognised in the statement of profit or loss for the year ended 30 June
2021 (2020: NIL).
107
Performance shares expense
There was a $92,000 option expense recognised in the statement of profit or loss for the year ended 30 June
2021 (2020: $5,000).
The balance of the share-based payment expense relate to shares not yet issued at 30 June 2021.
Share issue costs
There were approximately 14.3m ordinary shares issued ($284,000) in lieu of cash for invoices related to the
management of the capital raises performed during the year.
Other share-based payment transactions
The Group issued $906,000 in Armour shares for the purchase of the Cooper Basin entities. See Note 16 for further
details.
The Group received $700,000 in Auburn Resources shares as consideration for the sale of Ripple Resources.
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 or
supplier 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.
The 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 36. Commitments
Exploration Expenditure Commitments
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
Consolidated
30 June 2021
30 June 2020
$’000
$’000
14,952
114,722
2,127
131,801
13,451
33,038
-
46,489
108
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 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.
Of the $129,674,000 minimum required in the coming six years, $49,030,000 are commitments for the McArthur
Basin tenements. These permits are in the process of being demerged through a new company McArthur Oil &
Gas.
Note 37. 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.
Armour are currently disputing the determination of the Queensland Government in relation to ATP 2028 and
ATP 2029. Armour took action against the State’s Land Court for five parcels of land. Armour has withdrawn from
Surat Basin’s ATP 2028 but remains confident in relation ATP 2029. Management remains confident that the
appeal will be successful and for both parties to pay for their own costs incurred. As such it is improbable that
any outflow of economic resources will be required to settle any obligation and therefore no contingent liability
has been recognised.
Other than the above, the Group had no other contingent assets or liabilities at 30 June 2021.
Note 38. Events after the reporting period
Other than the below subsequent events, no other matter or circumstance has arisen since 30 June 2021 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.
As announced on 23 September 2021, Armour will re-stimulate the Warroon #1 well in partnership with a
private entity. The Warroon #1 Rewan sandstone was originally stimulated in November 2020 however
failed due to a frac gel issue which is the subject of a dispute notice with the contractor who performed
the stimulation. The Rewan sandstone remains an attractive candidate for production stimulation.
As announced on 27 September 2021, Armour completed a $8,200,000 placement. The raise comprised
of a $6,600,000 placement of shares and a $1,600,000 conditional placement (subject to approval at the
Annual General Meeting). For every three new shares issued under the placement and conditional
placement, the holder will also receive one attaching option exercisable at $0.05 and expiring 29
February 2024. These options are listed on the ASX with the ticker code AJQOA.
Armour have agreed with Tribeca to extend their facility with Armour to 31 December 2021.
The Northern Basin Business demerger and IPO is progressing with a pre-IPO raise by way of
Redeemable Exchangeable Notes underway. The Redeemable Exchangeable Notes are unsecured
and fully subordinated to the Secured Amortising Notes and Tribeca Facility, and subject to shareholder
approval will convert to McArthur Oil & Gas Limited shares upon IPO. This pre-IPO raise will allow
McArthur Oil and Gas to commence early planned works.
109
Note 39. 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.
Consolidated
30 June 2021
$
30 June 2020
$
Audit services - BDO Audit Pty Ltd
Audit or review of the financial statements
93,141
88,642
Other services - BDO Audit Pty Ltd and related entities
Grant funding audit
Other non-audit services*
Total Non-Audit Services
-
2,475
2,475
6,700
24,905
31,605
Total
95,616
120,247
*The non-audit services included the advice on the redemption of the convertible notes and whistleblowing
services.
Note 40. 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 2020-1 - Classification Of Liabilities As Current Or Non-Current
AASB 2018-6 - Definition Of A Business
Annual Improvements to IFRS Standards 2018–2020
Interpretation 23 Uncertainty over Income Tax Treatments
These pronouncements 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.
110
Armour Energy Limited
Directors’ Declaration
30 June 2021
The Directors' of the Group declare that:
a) 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;
b) 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;
c) the attached financial statements and notes give a true and fair view of the Group's financial position
as at 30 June 2021 and of its performance for the financial year ended on that date; and
d) 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 2021
111
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 2021, the
consolidated statement of profit or 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:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its
financial performance for the year ended on that date; and
(ii)
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 (including Independence Standards) (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.
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.
112
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.
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 17 in the financial report.
Our procedures included but were not limited to:
The Group has significant oil and gas assets,
which represent a major portion of total
assets.
Due to the quantum of this asset and the
subjectivity involved in assessing the asset
for impairment – especially as a result of the
downturn in the oil and gas industry during
the period due to COVID-19 - we have
determined this is a key audit matter.
Evaluating management’s assessment if any
impairment indicators in accordance with AASB
136 Impairment of Assets have been identified
across the Group’s oil and gas projects.
Comparing oil and gas price assumptions against
third-party forecasts 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
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.
113
Carrying value of exploration and evaluation assets
Key audit matter
How the matter was addressed in our audit
Refer to Note 16 in the financial report.
The carrying value of the Group’s exploration
and evaluation asset is impacted by the
Group’s ability, and intention, to continue to
explore. During the year, the Group continued
to focus on its Northern Australia gas
exploration projects.
The carrying value of the exploration and
evaluation assets was a key audit mater due
to the significance of the total balance in the
statement of financial position and the level
of procedures undertaken to evaluate
managements application of the requirements
of AASB 6 Exploration for the Evaluation of
Mineral Resources in light of any indicators of
impairment that may be present.
Our procedures included, but were not limited to
the following:
Obtaining evidence that the Group has valid
rights to explore in the areas represented by
the capitalised exploration and evaluation
expenditure by obtaining supporting
documentation such as license agreements and
also considering whether the Group maintains
the tenements in good standing
Making enquiries of management with respect
to the status of ongoing exploration programs
in the respective areas of interest and
assessing the Group’s cash flow budget for the
level of budgeted spend on exploration
projects and held discussions with
management of the Group as to their
intentions and strategy.
Enquiring of management, reviewing ASX
announcements and reviewing directors'
minutes to ensure that the Group had not
decided to discontinue activities in any
applicable areas of interest and to assess
whether there are any other facts or
circumstances that existed to indicate
impairment testing was required.
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.
114
Other information
The directors are responsible for the other information. The other information comprises the
information in the Annual report for the year ended 30 June 2021, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
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 at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our auditor’s report.
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.
115
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 47 to 58 of the directors’ report for the
year ended 30 June 2021.
In our opinion, the Remuneration Report of Armour Energy Limited, for the year ended 30 June 2021,
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 2021
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.
116
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 13 September 2021.
%
35.2%
13.8%
34.1%
8.8%
4.8%
3.3%
100.0%
22.7%
%
86.4%
9.1%
4.6%
-%
-%
-%
Distribution Schedules
AJQ – Armour Energy Limited fully paid ordinary shares
Range
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
Unmarketable Parcels
Securities
% No. of holders
1,594,025,685
97.3%
22,168,522
19,412,152
1,508,301
335,620
11,166
1,637,461,446
3,402,043
1.4%
1.2%
0.1%
-%
-%
100.0%
0.2%
731
286
709
183
99
69
2,077
471
Unlisted options exercisable at $0.0782 expiring 30 September 2023
Range
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
Securities
% No. of holders
47,585,000
335,000
80,000
-
-
-
99.1%
0.7%
0.2%
-%
-%
-%
38
4
2
-
-
-
48,000,000
100.0%
44
100.0%
Unlisted options exercisable at $0.05 expiring 29 February 2024
Range
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
Securities
% No. of holders
2,000,000
100%
-
-
-
-
-
-%
-%
-%
-%
-%
2,000,000
100%
1
-
-
-
-
-
1
%
100%
-%
-%
-%
-%
-%
100%
117
AJQOA – quoted options exercisable at $0.05 expiring 29 February 2024
Range
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
Unmarketable Parcels
Securities
% No. of holders
521,588,935
99.2%
190
2,897,256
1,248,803
168,836
124,571
8,142
0.6%
0.2%
0.0%
-%
-%
526,036,543
1,708,420
100.0%
0.3%
37
41
22
43
12
345
121
%
55.1%
10.7%
11.9%
6.4%
12.5%
3.5%
100.0%
35.1%
Substantial holders
The Company is aware of the following substantial holdings:
Name
DGR Global Limited (per notice received 9 July 2021)
David Rooke (per notice received 16 October 2020)
Tenstar Trading Limited (per notice received 23 September 2020)
Mr Paul Cozzi (per notice received 23 July 2021)
Ordinary
Shares –
Number Held
313,171,246
66,127,375
65,759,455
97,154,036
Issued
Capital %
19.4%
11.2%
6.1%
6.0%
118
Twenty largest holders of each quoted class (as at 13 September 2021)
Ordinary Shares (AJQ)
Name
DGR GLOBAL LIMITED
ROOKHARP CAPITAL PTY LIMITED
CITICORP NOMINEES PTY LIMITED
MR PAUL COZZI
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
ASLAN EQUITIES PTY LTD
CHOICE INVESTMENTS DUBBO PTY LTD
MR GRAEME ANDREW BEARDSLEY & OAKLEY MORAN TRUSTEE CPY LTD
PMK PROPERTIES PTY LTD
OILEX LTD
MR TONY ADAMS
MR SIMON WILLIAM TRITTON
PINEMONT TECHNOLOGIES AUSTRALIA PTY LTD
MR PETER MAROUN KAHWAJI
RAPLON PTY LTD
UBS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
STATION CAPITAL PTY LTD
DR DENNIS RICHARD LOWE & MRS YVONNE LOWE
HAYES INVESTMENTS CO PTY LTD
Total of Twenty Largest Holders
Total Shares Held
Number held
313,171,246
121,279,122
116,892,409
101,143,214
56,928,723
56,560,290
32,720,702
22,000,000
19,000,000
17,030,847
17,000,000
15,012,608
14,080,216
14,000,000
13,208,381
12,420,696
11,167,379
10,807,453
9,673,913
9,000,000
983,097,199
Issued
capital %
19.1%
7.4%
7.1%
6.2%
3.5%
3.5%
2.0%
1.3%
1.2%
1.0%
1.0%
0.9%
0.9%
0.9%
0.8%
0.8%
0.7%
0.7%
0.6%
0.5%
60%
1,637,461,446
100%
119
Listed options (AJQOA)
Name
DGR GLOBAL LIMITED
BIZZELL CAPITAL PARTNERS PTY LTD
ANTIBELLA PTY LTD
ROOKHARP CAPITAL PTY LIMITED
JLO ENTERPRISES PTY LTD
MR TONY ADAMS
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CS THIRD NOMINEES PTY LIMITED
MR GRAEME ANDREW BEARDSLEY & OAKLEY MORAN TRUSTEE CPY LTD
DR DENNIS RICHARD LOWE
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
TENSTAR TRADING LIMITED
SAMUEL HOLDINGS PTY LTD
CHOICE INVESTMENTS DUBBO PTY LTD
DR DENNIS RICHARD LOWE & MRS YVONNE LOWE
BAM OPPORTUNITIES FUND PTY LTD
MR PAUL COZZI
UBS NOMINEES PTY LTD
JETAN PTY LIMITED
Total of Twenty Largest Holders
Total Listed Options Held
Voting Rights
All ordinary shares carry one vote per share without restriction.
Restricted securities
There are no restrictions over any security holdings as at 13 September 2021.
Number held
Issued Options
%
105,526,146
20.1%
42,155,319
26,821,840
22,751,704
20,793,514
19,000,000
18,622,516
14,496,170
11,726,565
10,000,000
9,832,773
8,671,229
8,194,931
7,538,602
7,142,857
7,037,838
6,771,739
6,676,398
6,533,753
5,776,398
366,070,292
526,036,543
8.0%
5.1%
4.3%
4.0%
3.6%
3.5%
2.8%
2.2%
1.9%
1.9%
1.6%
1.6%
1.4%
1.4%
1.3%
1.3%
1.3%
1.2%
1.1%
70%
100%
120
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
Level 27
111 Eagle Street
BRISBANE QLD 4000
GPO Box 5261
BRISBANE QLD 4001
Telephone
+61 7 3303 0620
Email
info@armourenergy.com.au
Share Registry
Auditor
Solicitors
Link Market Services Limited
Level 21
10 Eagle Street
BRISBANE QLD 4000
BDO Audit Pty Ltd
Level 10
12 Creek Street
BRISBANE QLD 4000
Hopgood Ganim 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
121
118