The plant is now fully operational and gas is being processed and sold through the company’s gas sales agreement with the Australia Pacific LNG joint venture (APLNG).
This achievement is viewed by Armour Energy as central to realising its transition to material production.
Investors respond positively to operational and corporate developments
Recommencement of gas production represents a significant de-risking of the project and this could have contributed to the positive share price response.
The intra-day high of $0.105 was just shy of the company’s 12 month high of $0.11, and represented a gain of more than 10% on the previous day’s close.
Making the transformation from a greenfields explorer to an exploration and production company in the resources sector often results in a rerating, and further upside is possible.
Kincora provides cash flow to fund growth
The Kincora Project provides Armour Energy with cash flow through production of gas condensate, LPG and oil.
This will assist with funding the company’s overall growth strategy, which includes becoming a significant oil and gas producer in the Roma region.
With the LPG system operational, gas production is expected to increase from 5 terajoules per day to 9 terajoules per day as production from all existing wells are brought online.
For the immediate future, Armour Energy intends to run the Kincora plant at a steady-state best suited to the existing infrastructure.
Meeting operational milestones paves the way for additional investment
With gas sales now derisked all precedents have been met for funds managed by MH Carnegie & Co to invest an additional $5 million through the purchase of convertible notes.
This will bring the group’s investment to $13.25 million, and the convertible note program to $38.5 million with a further $6.5 million still available for placement.
Confirmation of financing could be another catalyst which works in the company’s favour.