Annual Report and Notice of AGM 2016
Sydney, Oct 27, 2016 AEST (ABN Newswire) - Horizon Oil Limited (
ASX:HZN) (HZNFF:OTCMKTS) is pleased to provide its Annual Report and Notice of AGM 2016.
2016 Highlights
Oil Sales Revenue
Maintenance of robust revenue and cashflows, despite the low oil price environment, as a result of strong performance from producing assets and the Group's hedging program.
Cost Reduction
Significant decrease in costs resulting from reduced production costs, general and administrative expenses, and severe cuts in exploration and development expenditure.
Debt Levels
Significantly reduced gross debt levels arising from senior debt repayments and early redemption of approximately 25% of the convertible bonds.
Outlook
Continuing focus on cost control, oil production optimisation and debt reduction; planning for further field development in China; advancing the large gas and condensate reserves in PNG towards commercialisation.
Operational highlights over the reporting period are as follows:
China (Horizon Oil interest 26.95%)
- Continued strong production from the WZ 6-12 and WZ 12-8W fields in the Beibu Gulf, producing 9,300 bopd gross at year end (Horizon Oil share 2,500 bopd); 3.4 mmbo gross produced over FY2016 (0.90 mmbo net to Horizon Oil).
- WZ 12-8W-A6H appraisal/development well in WZ 12-10-2 field completed in December 2015 and brought on stream at 1,400 bopd gross.
- Horizon Oil's Block 22/12 production entitlement increased from 26.95% to over 35% of production revenue, following commencement of preferential cost recovery under the Petroleum Contract.
- Preparation of the development plan for the WZ 12-8E field continued, with FID expected in 2017.
New Zealand (Horizon Oil interest 10%)
- Maari Growth Projects program successfully completed in July 2015, returning gross field production to in excess of 16,000 bopd.
- Production during the year averaged 12,300 bopd (1,230 net to Horizon Oil), with 4.5 mmbo gross produced during FY2016 (0.45 mmbo net to Horizon Oil).
- FPSO Raroa's mooring system was repaired to ensure long term integrity of a core joint venture asset, with a significant portion of the costs expected to be recovered from insurance.
Papua New Guinea
- Commercial and technical negotiations progressed with OkTedi Mining Limited and regional mining operators with respect to gas sales from Stanley field (PDL 10 - Horizon Oil interest 30%) for power generation.
- Feasibility study for a Western Province based mid-scale LNG project progressed, with Elevala/Ketu fields (PRL 21 - Horizon Oil interest 27%) as the foundation gas resource.
The key objectives for PNG next year are to:
- Bring the design of the upstream pipeline and liquefaction components of the mid-scale LNG development scheme to near finalisation;
- Investigate market opportunities for the gas and initiate discussions with potential buyers; and
- Commence planning to finance the project. Horizon Oil will be entitled to cash and work carry payments of US$130 million from Osaka Gas, Co. Ltd. upon FID for the project, as well as reimbursement of prior costs by the PNG Government if, in the likely case, it exercises its 22.5% back-in right. In addition, we are examining the possibility of the pipeline installer and liquefaction plant supplier building and financing such plant and leasing it back to the upstream producers via a tariff.
While the mid-scale LNG project will be the main focus for the Company, we will continue to work with potential industrial buyers of gas directly from Stanley field - Ok Tedi Mining Limited and possibly the developers of the Frieda River project - for power generation. We remain committed to supplying PNG industrial and domestic consumers, with the attendant social, economic and employment benefits to the province and country that will result.
Of course while we are pursuing the greenfield mid-scale LNG project as our primary development option, we will remain open to participating in a brownfield expansion of the existing PNG LNG project, should that opportunity arise and the commercial terms be attractive. That option, which may be appealing from the point of view of reducing engineering and financial risk, is not something we can control. In any event having our own viable project as our base case is of fundamental importance.
To view the annual report, please visit:
http://abnnewswire.net/lnk/7077JT1M
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.
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