Investor Presentaiton

Armour Energy and controlled entities Financial report continued Notes to the consolidated financial statements continued NOTE 18. NON-CURRENT ASSETS - OIL AND GAS ASSETS Oil & gas assets - at cost Less: Accumulated amortisation Consolidated 30 June 2020 $ 30 June 2019 74,394,404 (5,616,315) 68,778,089 53,072,117 (2,872,907) 50,199,210 armourenergy.com.au $ $ KEY JUDGEMENT - OIL AND GAS ASSETS The Group assesses impairment of oil and gas assets at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Where applicable, value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. KEY JUDGEMENT - GOVERNMENT GRANTS The Group was a successful applicant under the Federal Government Gas Acceleration Program (GAP), which is designed to provide businesses with funding grants to accelerate the responsible development of onshore natural gas for domestic gas consumers. The GAP grant will enable the Group to accelerate development of its Kincora Project reserves by accelerating the delivery of 3 production wells in the 2018/2019 drilling program. The Group received the first tranche of funding in June 2018 and the program finished in October 2019. AASB 120 - Accounting for Government Grants and Disclosure of Government Assistance defines grants related to assets as government grants whose primary condition is that an entity qualifying for them should purchase, construct, or otherwise acquire long-term assets. Subsidiary conditions may also be attached restricting the type or location of the assets or the periods during which they are to be acquired or held. In accordance with AASB 120, Management has determined that it is appropriate to deduct any grant monies received from the carrying amount of the asset, which is accounted for as an exploration and evaluation asset where it meets the relevant recognition criteria. NOTE 19. NON-CURRENT ASSETS - OTHER FINANCIAL ASSETS Less: R&D grants relating to Oil & gas assets (4,388,589) (2,416,043) Less: GAP grants relating to Oil & gas assets (6,056,116) (5,438,836) (10,444,705) (7,854,879) Ajuð ösn jeuudad to Movements in carrying amounts Balance at the beginning of the year Additions Disposals Depreciation charge Government Grants relating to Oil and Gas Assets 58,333,384 42,344,331 Consolidated 30 June 30 June 2020 $ 2019 42,344,331 21,322,289 30,987,611 15,666,066 (73,237) (2,743,408) (1,116,869) (2,589,828) (3,119,240) Consolidated 30 June 2020 $ 30 June 2019 $ 58,333,384 42,344,331 Financial assets at fair value through other comprehensive income Less: cumulative fair value movement 4,702,000 4,252,000 (3,614,490) 1,087,510 (2,126,990) 2,125,010 ACCOUNTING POLICY FOR OIL AND GAS ASSETS Capitalised oil and gas assets are development costs and expenditures incurred to develop new wells; to define further moveable hydrocarbons in existing tenement areas; to expand the capacity of the project and to maintain production. Development costs also includes costs transferred from the exploration and evaluation phase once production commences in the area of interest. Amortisation of oil and gas assets is computed by the units of production basis over the estimated proved and probable reserves. Proved and probable reserves reflect estimated quantities of economically recoverable reserves which can be recovered in the future from known mineral deposits. These reserves are amortised from the date on which production commences. The amortisation is calculated from recoverable proven and probable reserves and a predetermined percentage of the recoverable measured, indicated, and inferred resource. This percentage is reviewed annually. Restoration costs expected to be incurred are provided for as part of development phase that give rise to the need for restoration. These costs are amortised along with other capitalised oil and gas expenditures as described above. Financial assurances Security deposits 84 6,778,007 1,331,094 6,988,181 1,403,594 9,196,611 10,516,785 85

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