Highlights:

• Proposed acquisition of Oilex’s Cooper-Eromanga Basin assets for between 24.4m to 34.5m shares in Armour Energy. 
• The acquisition acreage position involved is all in the South Australia Cooper Basin and is the 4th largest net acreage position in the South Australian Cooper Basin, and comes with significant existing 3D seismic coverage.
• Appointment of former Drillsearch Energy Limited Managing Director, Brad Lingo, as CEO of Armour Energy. 

Armour Energy has entered a conditional binding Term Sheet between Armour and Oilex to acquire all of Oilex’s interests in the Cooper Eromanga Basin. The Cooper Basin is one of Australia’s most prolific producing oil and gas provinces producing 1.5 billion barrels of oil equivalent and notably, the historic core of Santos’ onshore Australian production base. 

The acquisition will proceed subject to completion of due diligence and entering into of a detailed share sale agreement for the acquisition of all the issued capital in CoEra Limited, currently a wholly owned subsidiary of Oilex.

CoEra’s assets comprise a substantial footprint of exploration and production licences on the oil rich Western and Northern Flanks of the Cooper Basin. The basin historically has a high exploration success rate, low cost development pathways, and remains under-explored and under-developed. Proven oil fairways transect and lie adjacent to the licence areas subject of the proposed acquisition and the many nearby discoveries and fields provide analogues for future discoveries.

The assets include an approximate 79.33% interest in Petroleum Exploration Licence (“PEL”) 112 and PEL 144 (covering 1,086 km² and 1,166 km² respectively), together with an option to acquire the remaining 20.66% interest in each of these PEL’s. In addition, Armour will also acquire a 100% interest in 27 Petroleum Retention Licences (“PRL’s”) covering in total 2,445 km² including 792 km² of 3D Seismic, by assuming the obligations of Oilex under existing arrangements between Oilex and Senex Energy Ltd. These arrangements provide for the 27 PRL’s to be acquired for $27.00 together with the assumption of existing abandonment liabilities and the replacement of $1.2m in tenement bonds with the South Australian Government in due course. Senex will retain a 20% back in right at cost subject to certain conditions following the drilling of a well. 

Substantial historic seismic reinterpretation work, and the results of previous drilling in the area, have identified multiple leads and prospects. Armour’s ongoing work will re-revaluate the existing technical data and, as well as acquiring new data, will be aimed at identifying stratigraphic trends and opportunities in an area where oil migration is proven and pervasive. Large parts of the CoEra acreage are covered by 3D seismic and Armour will apply specific re-processing techniques to further enhance the understanding of the stratigraphic distribution of the multiple potential reservoir horizons and targets. The existing Paning Tight Gas discovery will be fully evaluated to identify the most effective development solution. 

The acquisition consideration includes the issue to Oilex (or its nominees) of a minimum of 24.5m shares and a maximum of 34.5m shares, subject to the VWAP of the Armour share price for a period of 90 days from the execution of the Term Sheet. The variance is designed to deliver a closing consideration of $906,500 in Armour shares to Oilex, subject to the aforementioned maximum and minimum parameters. Based on these parameters, Oilex would hold between 4% and 5.5% of Armour’s issued share capital post-acquisition. The issue of the shares to Oilex will be subject to any necessary shareholder or regulatory approvals, and the shares issued will also be subject to a 12 month voluntary escrow. 

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