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AJQ - ARMOUR ENERGY LIMITED


crooky
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Post the proposed demerger, Armour will be left with a considerable production infrastructure, established and growing production, a gas storage facility and considerable exploration ground all within immediate proximity to the proposed Australia Gas Hub at Wallumbilla. Armour Energy owns and operates the Kincora Gas Plant (KGP) along with a number of producing Gas fields over 60klms of the Roma Shelf associated pipelines and compressors along with the Newstead Gas Facility that can hold up to 10Pj of Gas.

 

The fields produce wet gas which is stripped of condensate at the plant and subsequently sold into the east coast gas market via Armour’s pipeline to the Wallumbilla Hub. At present the KGP can produce up to 12Tj per day but is targeting much higher volumes.

The key asset of Armour is the Kincora production facility that currently produces a modest cash profit at project level based on current production of 6 -8Tj per day. The economics of Kincora improve materially with the potential removal of having to service the A$43m debt at 8.75%.

 

Armour has considerable and highly prospective exploration ground in direct proximity to the Kincora production facility. Armour has in place the established infrastructure to materially increase production volumes from this exploration ground to an intended 14Tj per day. At 14 Tj without having to service the $43m debt, would see Armour generating material free cash flow and enable the company to be a self-funded developer/ explorer with an enviable asset base.

 

Armour currently has a tenement package of 3000sq klm and has several high profile targets. Armour sold its 10% interest in Petroleum lease 1084 (PL 1084) known as the Murrungama block to APLNG last year for $4m. The Murrungama block covered some 18sq km.

 

Shareholders will receive shares in the new listed company that will trade at a discount to its listed peers. Shareholders will also maintain their current shareholding in Armour but will see the company have minimal debt , which they are currently servicing at circa 8.75% of debt of $43m. Whilst the company has been able to pay down this debt from an initial $60m to now sit at $43m , the near elimination of this debt will see Armour emerge as profitable producer at greater than 6tj per day with a well-articulated strategy to achieve 12-14 tj of production per day which would see Armour highly profitable at a corporate level able to self-fund its exploration assets and also have an unencumbered gas storage facility with a high strategic value and in direct proximity to what the federal government has labelled “the Australian gas hub†at Wallumbilla.
- wrote one broker
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