Investor Presentaiton

Armour Energy and controlled entities armourenergy.com.au Directors' report continued for the year ended 30 June 2020 MANAGING RISK Armour is a producing oil and gas Group operating in a volatile pricing market. Factors specific to Armour or those which impact the market more broadly, may individually or in combination impact the financial and operating performance of Armour. These events may be beyond the control of the Board or management of Armour Energy. The major risks associated with an investment in Armour are summarised below. OPERATING RISKS projec Armour has a single operation in production and is therefore reliant on continued performance of operations at the Kincora Gas project. There are numerous operating risks which may result in a reduction in performance that decreases Armour's ability to produce gas to meet customer shipping needs. The risks include, but are not limited to, factors such as weather conditions, machinery failure, critical infrastructure failure or natural disasters. Spech ப MARKET RISKS The key drivers for the business's financial performance are commodity price risk. Armour is not of a size to have influence on gas or other petroleum product prices and is therefore a price-taker in general terms. GEOLOGICAL RISKS Resource and Reserve estimates are prepared by external experts in accordance with the JORC code for reporting. The estimates are inherently subjective in some respects therefore there is a risk that the interpretation of data may not align with the future experienced conditions in the field. Due care is taken with each estimation. REGULATORY AND LAND ACCESS RISKS Armour's operations and projects are subject to State and Federal laws and regulation regarding environmental hazards. These laws and regulations set various standards regulating certain aspects of health and environmental quality, provide for penalties and other liabilities for the violation of such standards and establish, in certain circumstances, obligations to remediate current and former facilities and locations where operations are or were conducted. The ability to secure and undertake exploration and operational activities within prospective areas is also reliant upon satisfactory resolution of native title and management of overlapping tenure. To address these risks, Armour develops strong, long-term effective relationships with landholders, with a focus on developing mutually acceptable access arrangements as well as appropriate legal and technical advice to ensure it manages its compliance obligations appropriately. SAFETY RISK Safety remains of critical importance in the planning, organisation and execution of Armour Energy's exploration and operational activities. Armour is committed to providing and maintaining a working environment in which its employees are not exposed to hazards that will jeopardise an employee's health and safety, or the health and safety of others associated with our business. SOVEREIGN RISK Armour has limited influence over the direction and development of government policy. Successive changes to the Australian energy and resources policies, including taxation and innovation policies, have impacted Australia's global competitiveness and reduced the attractiveness of Australian fossil-fuel projects to foreign investors. Armour's view is that whilst there is currently a negative perception of fossil fuels, gas and LPG being less carbon intensive than alternate energy sources (such as thermal coal) will continue to play a significant role as both a domestic and export commodity. ACCESS TO CAPITAL On 30 June 2020, Armour remains well funded with cash reserves expected to be sufficient to meet the business's operating costs. Armour Energy's ability to effectively continue as an oil and gas producing business is dependent upon several factors, including the success of the Kincora Gas Plant, successful exploration and subsequent exploitation of Armour's tenements. Should these avenues be delayed or fail to materialise, Armour has a proven history of the ability to successfully raise additional funding through debt, equity or farm out/sell down to allow Armour to continue as a going concern and meet its debts as and when they fall due. A recent example of the ability to raise funding via equity was the announcement of the 18 September 2020 of the $15 million placement and entitlement offer. SUSTAINABILITY SOCIAL AND CORPORATE RESPONSIBILITY During the year, the Group invested in additional resources across multiple disciplines of Corporate, Subsurface and Geology, Operations, Land Access and Health and Safety. The Group now has 45 employees, of which 7 are women. The additional resources were required to support the Kincora Project and assist with achieving the milestones set out in the Group's growth strategy. Where possible, the Group will recruit local businesses, contractors and employees that can support the Kincora Project. For our development and exploration activities, wherever possible we source local materials such as gravel and construction water from our local landholders and local businesses. A strong presence in the Roma and Surat communities is a key focus for the Group, including fostering positive relationships with other key stakeholders such as landowners, governments, and community groups. 44 Armour minimises these risks by conducting its activities in an environmentally responsible manner, in accordance with applicable laws and regulations and where possible, by carrying appropriate insurance coverage. In addition, Armour engages experienced consultants and other technical advisors to provide expert advice where necessary. Armour maintains its Operational acreage across a large number of private landholders. Seamlessly interfacing with cattle and cropping routines is the result of open communication and relationships built on mutual trust and respect. Development and exploration schedules are developed in consultation with landholders to minimise local impacts to their business. 45

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