Armour Energy: Setting the Scene for Growth
Armour Energy
Setting the scene for growth
Armour Energy Limited (AJQ.ASX) is a junior energy producer and explorer with assets across northern, southern and eastern Australia. The company has been listed on the ASX since April 2012. The opportunity set for Armour through FY21 has the capacity to materially reshape the company financially by delivering cash flow growth, reducing debt and progressing a range of exploration options. Although significant exploration drilling may not occur until the end of CY21 and into 2022, the company is likely to be in a stronger position to work its assets at its own pace and to its own plan. We will be looking for delivery of the Kincora production growth plan which aims to more than double production, to 20TJd and growing over the next 18-24 months.
Scope
This report has been commissioned by Armour Energy to present investors with an analysis of the opportunities emerging for the company over the next 12 months. The company needs to deliver on its growth plans which should significantly improve its commercial positioning, but the oil and gas business is high-risk by definition. High risk investments should be a small part of a balanced portfolio.
Business model
Armour Energy is a junior oil and gas company holding a production base with expansion options; and an extensive exploration portfolio across three Australian states, dominantly focussed on exploring for gas. The portfolio consists of exploration plays, reflecting a mix of moderate risk and early exploration stage with transformational potential. The company is looking to leverage its production growth plan at Kincora to repair its balance sheet and service a more aggressive exploration strategy, without recourse to equity markets. Financing is always a concern at the small end and the company’s high working interests provide options through partnering.
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- Armour Energy: Setting the Scene for Growth04 Sep 2020