Quarterly Activities Report
- Revenue lifts 5.9% to US$19.0 million for June quarter 2017 (inclusive of hedge settlements), compared to the prior quarter. This results from oil sales of 378,254 bbls at an average realised oil price of US$50.21/bbl.
- FY 2017 revenue of US$68.5 million and net annual operating cash flow (see Note 1 below) of US$51.7 million (see Note 2 below).
- Horizon Oil's free cash flow break-even price, inclusive of all capital expenditure, is US$33/bbl.
- Cash at 30 June 2017: US$24.5 million.
- Voluntary prepayment of US$5 million of subordinated debt and available senior debt facility capacity increased after scheduled facility redetermination.
- Net debt further reduced to US$108.5 million. Stable financial position, with steadily decreasing debt and increased liquidity availability.
- Continued rigorous management of exploration and development costs, with capital costs of US$1.1 million in quarter incurred to progress the Western LNG project in Papua New Guinea and Maari/Manaia production enhancements.
PRODUCTION AND DEVELOPMENT
- Strong, long-lived production profile in China and New Zealand buoyed by a strategic stake in large oil and gas development in PNG.
- Sales for quarter of 378,254 bbls (see Note 3 below) (including cost recovery oil entitlement), an 8.2% increase on prior quarter. FY 2017 sales of 1.4 mmbo.
- Production for quarter of 283,442 bbls, a 3.6% increase on prior quarter. Annual production of 1.1 mmbo.
- Net production rate for the quarter in excess of 4,000 bopd, including additional priority cost recovery oil entitlement in Block 22/12.
- Average cash operating costs for the quarter of US$9.54/bbl (sales) and US$12.12/bbl (production), compared with guidance of US$12-13/bbl.
- Overall Development Plan for the WZ 12-8E field in Beibu Gulf is well advanced, with final investment decision scheduled in Q4 2017.
- Strategic enhancement of asset base. Further expansion and balancing of Horizon Oil's Western Province, PNG gas/condensate resources base with acquisitions of an additional 3.15% interest in PRL 21 (Elevala/Tingu and Ketu fields) and a 20% interest in PRL 40 (Puk Puk and Douglas fields), the latter exchanged for a 20% interest in PRL 28 (Ubuntu).
CHIEF EXECUTIVE OFFICER'S COMMENTS
The strong operational performance of Horizon Oil's assets in Block 22/12 (China) and Maari/Manaia field (New Zealand) has led to an 8% increase in sales to 378,254 bbls of oil, resulting in quarterly revenue of US$19.0 million, an increase of 5.9% from the prior quarter. The Company's revenue for the 2017 financial year was US$68.5 million.
With cash operating costs of approximately US$10/bbl sold, Horizon Oil's high gross margin and long life conventional oil fields continue to generate material free cash flow as demonstrated by improved net operating cash flow (see Note 4 below) of US$14.9 million for the quarter and approximately US$51.7 million (see Note 5 below) for the 2017 financial year.
This robust cash flow, particularly in the context of a free cash flow break-even price of US$33/bbl (see Note 6 below), enables the Company to comfortably maintain its debt reduction trajectory while progressing planning for the WZ 12-8E development in Block 22/12 in China with our partner CNOOC Limited. Because the development is incremental to existing production facilities and the mobile production platform will be leased, China field development costs will be comfortably funded from internally-generated cash flow.
In the last six months, Horizon Oil has successfully concluded a series of transactions which ensure that the Company is strategically positioned in each of the appraised gas fields composing the proposed Western LNG gas aggregation project in Western Province, Papua New Guinea. As a result, the Company has a material 28% interest in the aggregate gas/condensate resource and operates the core Elevala/Tingu and Ketu gas-condensate fields. Recent consolidation of ownership of gas condensate resources has also seen the entry of Kumul Petroleum Holdings Limited, PNG's National Oil Company, indicating strong support for the commercialisation of Western province gas fields from the PNG Government.
Horizon Oil's project team made very good progress during the quarter on planning for the three key elements of Western LNG - the upstream processing facilities, the gas and condensate export pipelines to Daru Island and the modular liquefaction facility to be located near Daru.
1. Net operating income after operating expenditure, excluding extraordinary items
3. Including Block 22/12 cost recovery oil entitlement
4. Net operating income after operating expenditure, excluding extraordinary items
6. Includes all capital expenditure
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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