Significant Production Milestone at Beibu Gulf Fields
Up until this point, the Block 22/12 participants have been paying a fixed operating tariff of US$4.75 per barrel to China National Offshore Oil Corporation (CNOOC) for transportation of oil through CNOOC's Weizhou pipeline, storage and loading facilities. This amount is part of the total cash operating cost which has averaged approximately US$12 per barrel over the current financial year.
Having reached the 13.9 million barrel cumulative production milestone, the fixed tariff for all future production will reduce to US$0.50 per barrel and the total per barrel operating cost will reduce accordingly.
Not only does Horizon Oil receive the benefit of reduced operating cost for its 26.95% working interest share of oil production, the additional effect is an increase in funds in the cost recovery pool under the Petroleum Contract, to which the Company currently has a 55% entitlement. The net result is an expected increase in cash flows to Horizon Oil of approximately US$0.5 million per month.
The Beibu Gulf fields continue to produce in line with or above forecast levels, at a current rate of 8,500 bopd gross. CNOOC has done a commendable job in operating the fields safely and efficiently to date.
About Horizon Oil Ltd
Horizon Oil Limited (ASX:HZN) (OTCMKTS:HZNFF) is an ASX-listed petroleum exploration and production company, with a geographic focus on the Asia-Pacific region. The company currently produces over 4,000 barrels of oil per day net from its fields in New Zealand and China, which generated over US$80 million in net operating income after operating expense for the year ended 30 June 2015. Further development candidates remain in and around these producing fields.
Horizon Oil maintains prudent policies of oil price hedging and loss of production insurance to ensure that sufficient cash flow is generated to meet the funding requirements of its growth program.
The company holds a large undeveloped reserves and contingent resource position in Western Province, onshore Papua New Guinea. These are liquids-rich gas resources and reflect Horizon Oil’s strategy to focus on Asian gas for growth. Gas constitute about 2/3 of the reserves and resource base. Commercialisation pathways for the gas are emerging.
Although Horizon Oil anticipates continuing strong cash generation over the medium term from its existing producing fields, these developed reserves account for only 10% of total reserves and resource base. The focus going forward will be on new field development, funded largely from existing production cash flow.
Horizon Oil Ltd