- Armour Energy (AJQ) is eyeing a demerger from its Northern Basin Oil & Gas Business into a newly formed ASX-lister
- AJQ directors have proposed the creation of McArthur Oil and Gas as a subsidiary to hold all assets and operations concerning its McArthur Basin oil and gas activities
- Under the demerger, Armour would acquire the existing Northern Basin Oil and Gas business for $40 million via an initial public offering and $65 million capital raise
- In a broader context, it represents Armour's bid to "unlock the value" of the McArthur Basin asset and remove its current debt burdens
- The Northern Territory situated resource touts prospective best estimates of 34 trillion cubic feet of conventional and unconventional gas and 1.2 billion barrels of oil
- Investors appear to have responded somewhat favourably to the announcement, with Armour Energy shares up 23.5 per cent trading at 4.2 cents
Armour Energy (AJQ) is eyeing a demerger from its Northern Basin Oil & Gas Business into a newly formed ASX-lister.
AJQ directors proposed the creation of McArthur Oil & Gas as a wholly owned subsidiary vehicle to hold all assets and operations of the Northern Basin
Business concerning the McArthur Basin.
Armour tips the new company to be the dominant exploration license holder in Northern Territory situated resource, with 13 permits covering roughly 89,000 square kilometres of the shale gas and oil tenement.
The basin touts prospective best estimates of 34 trillion cubic feet of conventional and unconventional gas and 1.2 billion barrels of oil and hydrocarbon liquids.
Under the proposal, McArthur Oil & Gas would enter into a conditional agreement to acquire the Northern Basin Business for $40 million, plus a minimum 33.3 per cent retained interest by Armour shareholders in the new venture.
The consideration received by Armour will be used to retire its outstanding debt.
The acquisition would be subject to the completion of an initial public offering (IPO) and subsequent ASX listing of McArthur Oil & Gas, which will seek to raise between $60 to $65 million to fund the purchase and McArthur's forward work programmes.
As part of the IPO, Armour intends to distribute McArthur Oil & Gas on a tax-effective in-specie basis.
Armour is looking to complete the proposed IPO and demerger by the end of the September quarter this year, but will require the all-clear from shareholders and the ASX as well as other regulatory approvals.
In a broader context, Armour Energy's Chief Executive Officer Brad Lingo said the move delivers two valuable outcomes for its shareholders.
"Through the proposed demerger the company is simultaneously delivering two value-creating outcomes for shareholders – unlocking the value of the Northern Basin Business...and removing the debt burden on the company so it can focus on delivering the operational performance from the Surat Basin," he commented.
"It is absolutely incumbent on the company to unlock this value for shareholders and there are clear markers on value presented by the other pure-play McArthur/Beetaloo Basin focussed companies," he explained.
Investors appear to have responded somewhat favourably to the announcement, with Armour Energy shares up 23.5 per cent trading at 4.2 cents at 2:57 pm AEDT.