AJQ - final Administrators report

final report from Administrators is in.
recommendation for ADZ over DGR proposal.
I don't see in ADZ proposal any reference to DGR's 21 million notes. Could be worst case scenario

https://www.mcgrathnicol.com/creditors/armour-energy-group


Which option do the

Administrators recommend

creditors vote for at the

Second Meetings of

Creditors?

Based on the current position, the Administrators recommend the following

entities enter into a DOCA:

▪Armour Energy Surat Pty Ltd (AE Surat);

▪Armour Energy (Victoria) Pty Ltd (AE Victoria);

▪CoEra Pty Ltd (CoEra);

▪Holloman Petroleum Pty Ltd (Holloman); and

▪Cordillo Energy Pty Ltd (Cordillo).

The Administrators recommend the following entities be placed into liquidation:

▪Armour Energy Limited (AEL);

▪McArthur Oil & Gas Ltd (MOG); and

▪McArthur NT Pty Ltd (MNT).

This section aims to provide creditors with answers to key questions they may have in relation to the

administration, the Administrators’ findings and other contents of this Report.240112-ARMOGRO01-Administrators Report-EXTENDED-DRAFT-SR 7

Question Answer

Why have the Administrators

made these

recommendations?

The Administrators have received competing proposals involving DOCAs from

each of DGR Global Limited (DGR) (DGR Transaction) and ADZ Energy Pty Ltd

(ADZ) (ADZ Transaction).

Each of the two proposals are mutually exclusive and conditional on the entirety

of the proposal being accepted for all entities within the Armour Energy Group.

That is, if either of the proposals is accepted, it must be accepted in full for all of

the entities within the Armour Energy Group and it is not possible to accept only

part of the proposal for a subset of the entities within the Armour Energy Group.

While on its face, the DGR Transaction could result in a superior financial

outcome for certain creditors, the Administrators are unable to recommend the

DGR Transaction because:

▪it requires an extended period of time for completion (c.6 weeks or more);

▪funding would be required to sustain the business and assets through to the

proposed completion date and DGR has no agreement with the Receivers as

to the quantum of funding or basis on which funding may be provided;

▪funding for ongoing operations is due to be exhausted by 22 January 2024

and there exists material risk to the Armour Energy Group’s business and

asset value if an outcome regarding Armour Energy Group’s future is not

determined before that date;

▪it remains materially uncertain regarding the funding required to ultimately

effectuate the proposal (and therefore return to creditors).

Accordingly, based on the facts before them, the Administrators recommend the

ADZ Transaction for reasons that include:

▪it is capable of completion within the current funding constraints and

operational risks advised by the Receivers;

▪it provides greater certainty for the future of the business of the Armour

Energy Group within an appropriate time when compared to the DGR

Transaction or a liquidation of all Armour Energy Group companies; and

▪no creditor is in a worse-off position when compared to a liquidation of each

of the Armour Energy Group companies, as it provides an equivalent or

financially superior return compared to a liquidation for:

−the Secured Amortising Noteholders across the entirety of the Armour

Energy Group;

−priority employee creditors in AEL and AE Surat;

−all creditors of AE Surat; and

−certain creditors of AEL.

The balance of the creditors of AEL are no worse off pursuant to the ADZ

Transaction when compared to a liquidation in the absence of the ADZ

Transaction and the ADZ Transaction reduces competing claims to other

recoveries that may ultimately be made.