Australia’s Armour Energy plans to demerge Northern Basin assets

Australian Natural gas liquids company Armour Energy has announced plans to demerge its Northern basin oil and gas business.

The firm will launch a new wholly-owned subsidiary, named McArthur Oil & Gas, to hold the demerged business, which will be listed separately on the Australian Stock Exchange.

The demerger will be executed via an in-specie share distribution to existing shareholders.

The move is part of the company’s plan to focus on continued production improvement within the Surat Basin, and work in exploration potential in the Surat and Cooper basins.

A separate conditional deal will be signed by McArthur Oil & Gas to acquire the Northern Basin business from Armour Energy for A$40m ($31.22m).

Proceeds from the demerger will be used by Armour to reduce its net debt.

In the Northern Basin, the Australian company owns and operates 14 permits, covering an area of around 96,900km².

It also has six exploration permits and seven exploration permit applications in the Northern Basin’s McArthur Basin, as well as an exploration permit application, spanning around 7,900km², in the South Nicholson Basin in Queensland.

Armour Energy plans to retain a minimum stake of 33.3% in McArthur Oil & Gas, subject to the initial public offering completion (IPO) and ASX listing of the newly created company.

McArthur Oil & Gas intends to raise A$60m ($46.8m)-A$65m ($50.7m)from IPO to advance the development of the oil and gas assets in the Northern Basin as well as future work programmes.

Armour Energy CEO Brad Lingo said: “The company has been well aware that the value of the Northern Basin Business has not been reflected in the company’s share price and market capitalisation as it competes with the demands of the company’s Surat Basin operations and the company’s financial position.

“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.”