PERTH (miningweekly.com) – ASX-listed Armour Energy on Wednesday announced plans for a demerger and separate ASX listing for its Northern basin oil and gas business.

Armour holds six granted exploration permits and seven exploration permit applications in the McArthur basin, covering some 89 000 km² in the Northern Territory, along with its 7 900 km² holdings in Queensland.

Under the proposed demerger, a new wholly-owned subsidiary, called McArthur Oil & Gas, would hold all of the assets and operations of the Northern basin business. McArthur would enter into a conditional agreement to acquire the Northern basin business for a A$40-million consideration, plus a minimum 33.3% retained interest by Armour in McArthur, subject to the completion of an initial public offering (IPO) and an ASX listing of McArthur.

It is hoped that the IPO will raise between A$60-million and A$65-million in proceeds to fund both the acquisition of the Northern basin business, and to fund forward work programmes for McArthur.

As part of the IPO, and subject to shareholder approval, Armour would distribute shares in McArthur on an in-specie basis by way of a return of capital to existing shareholders, and would provide shareholders with a direct interest in two separately listed companies.

Armour told shareholders that it would also provide shareholders with a priority entitlement to participate in the McArthur IPO raising.

“The proposed demerger of the Northern basin business exploration and the development of the existing gas discoveries through McArthur Oil & Gas is a great opportunity to unlock significant value for shareholders,” said CEO Brad Lingo.

“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 demand 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 other pure play McArthur/Beetaloo basin-focused companies.”

Lingo said that through the proposed demerger, the company was delivering two value creating outcomes for shareholders by unlocking the value of the Northern basin business, and delivering it directly to shareholders, and removing the debt burden on the company so it can focus on delivering the operational performance from the Surat basin and building on the untapped exploration potential of both the Cooper and Surat basins.

Following the completion of the demerger, Armour would focus on its exploration in the Surat and Cooper basins and continued production enhancement within the Surat basin.

If the demerger and IPO prove successful, the company would use the proceeds received from McArthur to retire a portion or all of its outstanding debts.