HY20 RESULTS PRESENTATION
28 FEBRUARY 2020
HORIZON OIL LIMITED | ABN 51 009 799 455
01-
OVERVIEW
Recent Events Update
- Recent weeks challenging following media articles pertaining to PNG licence transactions dating back to 2011
- Strong and proactive Company and Board response to allegations
- Independent external investigation commenced with Herbert Smith Freehills and Deloitte
- Independent board committee established to oversee investigation
- CEO suspended on 12 February 2020, with new CEO Chris Hodge appointed
- Recent allegations exacerbated PNG challenges including licence tenure issues, lack of progress in commercialisation of the discovered resources and recent shift by PNG Government in requiring improved fiscal returns from resource projects. In light of the above matters and uncertainties, together with reference to comparable market transactions, led to a US$67.3 million impairment of the Group's PNG portfolio to a carrying value of US$5.7 million
- Base business strong with continued material cashflow generation until late into this decade
- Company remains poised for seizing growth opportunities
28 FEBRUARY 2020 PAGE 3
HY20 HIGHLIGHTS
Production Volume | Sales Revenue | EBITDAX |
754,862 bbls | US$53 million | US$31 million |
Net Debt Reduced | Underlying Profit after Tax | Cash on Hand |
US$7.4 million | US$6.2 million | US$22 million |
HY20 RESULTS PRESENTATION | 28 FEBRUARY 2020 | PAGE 4 | |
HY20 DELIVERING ON OBJECTIVES
STRONG PRODUCTION AND CASHFLOW PROVIDING PATHWAY TO FURTHER GROWTH
Strong | • | Continued strong high margin | |
production from Maari and | |||
Production & | Beibu | ||
Cashflow | • | Cash operating costs averaged | |
approximately US$20/bbl | |||
Progressive Debt Reduction
- Progressive debt reduction with Net Debt reduced to US$7.4 million
- On track to net cash by 30 June 2020
Drive Growth | • Drilling success in Block 22/12, | ||
leading to pursuit of further | |||
infill, appraisal and exploration | |||
opportunities | |||
• | Commenced evaluation of | ||
inorganic growth opportunities | |||
Sustainability | • | Continued sound HSSE | |
performance at Horizon Oil's | |||
operated and non-operated | |||
assets | |||
HY20 RESULTS PRESENTATION | 28 FEBRUARY 2020 | PAGE 5 | |
02-
FINANCIAL RESULTS
HY20 FINANCIAL RESULTS
(US$ million) | HY 2020 | HY 2019 | Change (%) | |
Production volume, bbls | 754,862 | 801,904 | [6%] | |
Sales volume, bbls | 770,744 | 1,021,218 | [25%] | |
Revenue | 52.7 | 63.6 | [17%] | |
EBITDAX | 31.3 | 44.3 | [29%] | |
Statutory (loss)/profit after tax | (62.8) | 20.1 | [>100%] | |
Add/(less) financing costs - unrealised | 1.7 | (11.4) | [115%] | |
movement in value of options | ||||
Add impairment expense | 67.3 | - | >100% | |
Underlying profit after tax | 6.2 | 8.7 | [28%] | |
Cash on hand | 22.1 | 20.4 | 8% | |
Cashflow from operating activities | 24.2 | 34.3 | [29%] | |
Net debt | 7.4 | 64.2 | (89%) | |
Sales volume reverted to approximate net working share of production following early recoupment of cost recovery entitlement in China.
Realised oil price of US$68.34 per barrel, inclusive of US$2.8 million hedging gain.
Operating costs of US$32.5 million were 12% lower than the prior year.
US$67.3 million non-cash impairment recorded on the Group's PNG assets.
A further US$20.0 million in debt repaid during the half-year. Net debt reduced by 89% to US$7.4 million.
HY20 RESULTS PRESENTATION | 28 FEBRUARY 2020 | PAGE 7 | |
HY20 KEY CASHFLOW DRIVERS
US$ MILLION
2.8 | |||||||||||||||||||
-19.0 | |||||||||||||||||||
-7.3 | |||||||||||||||||||
49.9 | -2.2 | -20.1 | |||||||||||||||||
24.2 | |||||||||||||||||||
-1.1 | -2.4 | ||||||||||||||||||
21.5 | 22.1 | ||||||||||||||||||
Cash & cash Crude oil sales | Hedging | Operating | Corporate & | Interest | Net cash | Debt | Investment in | Exploration | Cash & cash | ||||||||||
equivalents at | settlements | costs (excl | tax | inflows from | repayment & | oil & gas and | expenditure | equivalents at | |||||||||||
30 June 2019 | amortisation) | operating | lease costs | other assets | 31 December | ||||||||||||||
activities | 2019 |
Strong net operating cashflow generation used to materially reduce debt
Disciplined investment in exploration and development activities to drive growth
Reduced interest costs and maintenance of low general & administrative expenditure
HY20 RESULTS PRESENTATION | 28 FEBRUARY 2020 | PAGE 8 | |
HY20 UNDERLYING PROFIT DRIVERS
14 US$m
12 | |
10 | 8.7 |
8 | |
6 | |
4 | |
2 | |
0 | |
-2 | |
-4 | |
-6 | |
-8 | |
-10 |
(0.7) | (1.8) | 6.4 | |
[13.9] | |||
4.6 | |||
6.2 | |||
[3.2] |
6.2 |
Underlying | Cost recovery | Production Volume Net realised oil | Operating costs Other income/costs Exploration and | Financing costs |
Profit after tax | volumes recouped | price, inclusive of | development | |
for HY 2019 | hedge settlements | expenses |
Underlying
Profit after tax
for HY 2020
The impact of recoupment of cost recovery volumes substantially mitigated by higher realised oil price and lower operating costs
Cost discipline maintained with low general | Financing costs reduced following | |
& admin expenditure and modest | refinancing and repayment of debt | |
exploration/development expenditure | ||
HY20 RESULTS PRESENTATION | 28 FEBRUARY 2020 | PAGE 9 | |
CALENDAR YEAR FINANCIAL HIGHLIGHTS
OIL SALES (mmbbls) | REVENUE1 (US$m) | ||||||||||||
130 | 80 | ||||||||||||
120 | 24.5 | 4.2 | 70 | ||||||||||
0.39 | 110 | ||||||||||||
5-year average: 1.55 mmbbls | 0.06 | ||||||||||||
100 | 60 | ||||||||||||
90 | |||||||||||||
0.15 | 0.29 | 80 | 59.0 | 59.1 | 50 | US$/bbl | |||||||
US$m | |||||||||||||
60 | |||||||||||||
0.97 | 0.92 | 70 | 48.5 | 7.3 | 15.2 | 40 | |||||||
0.86 | 0.89 | 50 | 30 | ||||||||||
0.82 | 34.6 | ||||||||||||
40 | |||||||||||||
42.6 | 20 | ||||||||||||
30 | |||||||||||||
48.2 | |||||||||||||
0.65 | 0.63 | 20 | 43.6 | 43.8 | |||||||||
0.48 | 24.4 | 10 | |||||||||||
0.34 | 10 | ||||||||||||
0.29 | 15.5 | ||||||||||||
0 | 0 | ||||||||||||
CY 2015 | CY 2016 | CY 2017 | CY 2018 | CY 2019 | CY 2015 | CY 2016 | CY 2017 | CY 2018 | CY 2019 | ||||
Beibu cost recovery | Beibu | Maari | Beibu cost recovery | Beibu | Maari | Net realised sales price 1 | |||||||
1 inclusive of hedge settlements |
Oil sales volume above 5-year average level with early recoupment of cost recovery volume
Base sales revenue exclusive of cost recovery increased for both Beibu and Maari driven by higher net realised oil price
Greater production and revenue diversification following acquisition of additional Maari interest in 2018
HY20 RESULTS PRESENTATION | 28 FEBRUARY 2020 | PAGE 10 | |
CALENDAR YEAR FINANCIAL HIGHLIGHTS
EBITDAX AND COST PER BBL | UNDERLYING PROFIT BEFORE TAX (US$m) | |||||||||||
90 | 88.3 | 30 | ||||||||||
34.8 | ||||||||||||
80 | 77.3 | 80.0 | 32.1 | |||||||||
25 | ||||||||||||
70 | ||||||||||||
60 | 51.3 | 20 | ||||||||||
US$m | 50 | US$/bbl | ||||||||||
40.5 | 15 | 5.9 | ||||||||||
40 | 6.1 | |||||||||||
30 | 10 | |||||||||||
20 | 5 | |||||||||||
10 | -11.1 | |||||||||||
0 | 0 | |||||||||||
CY 2015 | CY 2016 | CY 2017 | CY 2018 | CY 2019 | CY 2015 | CY 2016 | CY 2017 | CY 2018 | CY 2019 | |||
EBITDAX | Cash opex/produciton bbl | G&A and others/production bbl |
Continued strong EBITDAX driven by sustained production and maintenance of low operating costs
Maintenance of low general and administrative expenditure
Underlying profit of US$34.8 million with continued cost discipline
HY20 RESULTS PRESENTATION | 28 FEBRUARY 2020 | PAGE 11 | |
CALENDAR YEAR FINANCIAL HIGHLIGHTS
FREE CASH FLOW (US$m) | NET DEBT (US$m) | |||
127.7 | ||||
120.8 | ||||
65.5 | 67.6 | 62.7 | 94.3 | |
40.2 | ||||
35.3 | ||||
64.2 | ||||
-18.7 | -5.8 | |||
-35.6 | ||||
-42.5 | -13.7 | |||
CY 2015 | CY 2016 | CY 2017 | CY 2018 | CY 2019 | 7.4 | ||||||||||||||
Investing CF | Operating CF | FCF* | CY 2015 | CY 2016 | CY 2017 | CY 2018 | CY 2019 | ||||||||||||
- Free Cash Flow represents cash flows from operating activities less investing cash flows (net of acquisition payments)
Sustained growth in free cash flow with disciplined investment in exploration and development activities
Accelerated debt reduction following 2018 refinancing which consolidated debt, simplified capital structure and lowered funding costs
89% reduction in net debt for CY19 and on track to Net Cash position by 30 June 2020
HY20 RESULTS PRESENTATION | 28 FEBRUARY 2020 | PAGE 12 | |
03-
OUTLOOK & PORTFOLIO UPDATES
OVERVIEW OF PORTFOLIO
- Asia Pacific focus
- Material joint venture interests
- High margin, long life oil production assets in China and New Zealand generating strong cashflow
- Significant holding in material condensate rich gas resources and adjacent exploration acreage in PNG
Block 22/12 (Beibu Gulf] 26.95% / 55%
PDL 10 (Stanley) | 30% |
PRL 21 (Elevala/Ketu) | 30.15% |
PRL 28 (Ubuntu) | 30% |
PRL 40 (Puk Puk/Douglas) | 20% |
PPL 372 | 95% |
PPL 373 | 100% |
PPL 574 | 80% |
PMP 38160 (Maari/Manaia) 26%
HY20 RESULTS PRESENTATION | 28 FEBRUARY 2020 | PAGE 14 | |
2P Reserves: 4.4 mmbbls
2C Resources: 2.0 mmbbls
As at 30 June 2019
HY20 RESULTS PRESENTATION | 28 FEBRUARY 2020 | PAGE 15 | |
CHINA BLOCK 22/12
BLOCK 22/12 PRODUCTION HISTORY & OUTLOOK
16,000 | |
14,000 | |
12,000 | |
10,000 | |
8,000 | |
6,000 | |
4,000 | Average daily gross production |
2020 Production | |
2,000 | Historical average |
- | Sep-2013Dec-2013Mar-2014Jun-2014Sep-2014Dec-2014Mar-2015Jun-2015Sep-2015Dec-2015Mar-2016Jun-2016Sep-2016Dec-2016Mar-2017Jun-2017Sep-2017Dec-2017Mar-2018Jun-2018Sep-2018Dec-2018Mar-2019Jun-2019Sep-2019Dec-2019 |
Mar-2013Jun-2013 |
Annual | Average | • | Current gross daily production rate | |
Gross | Daily Gross | |||
above 10,000 bopd - above average | ||||
Production, | Production, | |||
historical daily production rate. | ||||
mmbbls | bopd | |||
CY 2013 | 3.02 | 9,882 | • | Production rates maintained since |
CY 2014 | 4.08 | 11,194 | first production over 6 years ago | |
through infill and nearfield drilling, | ||||
CY 2015 | 3.43 | 9,404 | installation of additional water | |
handling capacity and production | ||||
CY 2016 | 3.28 | 8,981 | ||
optimizing well workovers. | ||||
CY 2017 | 3.04 | 8,326 | • | Maturing plans for further infill drilling, |
CY 2018 | 3.60 | 9,857 | ||
together with WZ 12-8E field | ||||
development production to offset | ||||
CY 2019 | 3.43 | 9,399 | ||
natural reservoir decline. | ||||
Average | 3.41 | 9,570 | ||
Block 22/12 continues to generate approximately 60-70% of Horizon Oil cashflow
Long life production - current WZ 6-12 and WZ 12-8 field lives forecast to 2028
Low cash operating costs - currently less than US$15/bbl produced
Current WZ 6-12 and WZ 12-8 field abandonment costs prepaid in sinking fund
HY20 RESULTS PRESENTATION
CHINA BLOCK 22/12
During HY20
- Crude oil sales were 410,811 barrels with cost recovery volumes of 2,474 barrels at a net realised price of US$65.19 per barrel.
- Production from the Group's interest in the Beibu Gulf fields was 444,740 barrels of oil with average gross production rate of 8,969 bopd.
- Cash operating costs remained below US$15 per production barrel.
- Successful exploration drilling of the WZ 6-12 M1 well results in an additional 0.6 mmbbls gross 2C contingent resources, 0.2 mmbbls net to HZN.
Outlook
- Maturing plans for evaluation of nearby prospects during the 2020 calendar year, with the intention to integrate any commercial discoveries with the recent WZ 6-12 M1 discovery and other infill well targets.
HY20 RESULTS PRESENTATION
CHINA BLOCK 22/12
BLOCK 22/12
WZ 12-8E Project
- Basic engineering for the development has been completed.
- The development of WZ 12-8E is planned with a new wellhead platform tied back to the existing WZ 12-8W platform. The new platform will be leased by the joint venture, reducing upfront capital costs.
- FID for the development is expected later this financial year.
- First oil is expected to commence mid-2021 calendar year.
- Total development costs net to Horizon Oil are forecast to be less than US$20 million, with the majority phased throughout the 2021 and 2022 calendar years.
HY20 RESULTS PRESENTATION
2P Reserves: 4.4 mmbbls
2C Resources: 5.5 mmbbls
As at 30 June 2019
MAARI/MANAIA FIELDS
HY20 RESULTS PRESENTATION | 28 FEBRUARY 2020 | PAGE 19 | |
NEW ZEALAND
MAARI/MANAIA PRODUCTION HISTORY & OUTLOOK
12,000
10,000
8,000
bopd | 6,000 | |||||||||||||||||||||
4,000 | ||||||||||||||||||||||
Average daily gross production | ||||||||||||||||||||||
2,000 | ||||||||||||||||||||||
2020 Production | ||||||||||||||||||||||
Historical average | ||||||||||||||||||||||
0 | ||||||||||||||||||||||
2017-Jan | 2017-Mar | 2017-May | 2017-Jul | 2017-Sep | 2017-Nov | 2018-Jan | 2018-Mar | 2018-May | 2018-Jul | 2018-Sep | 2018-Nov | 2019-Jan | 2019-Mar | 2019-May | 2019-Jul | 2019-Sep | 2019-Nov | 2020-Jan | ||||
Annual Gross Production, | Average Daily Gross Production, | |
mmbbls | bopd | |
CY 2017 | 2.94 | 8,064 |
CY 2018 | 2.28 | 6,256 |
CY 2019 | 2.44 | 6,675 |
Average | 2.55 | 6,998 |
- Current gross daily production rate approx. 7,000 bopd - in line with average historical daily production rate over the last 3 years.
- Overall production decline rate reduced through continued water injection and production optimizing well workovers.
- Potential new operator targeting long term maintenance of production levels, operating cost reductions and field life extension to 2031 and beyond.
Maari/Manaia continues to generate approximately 30-40% of Horizon Oil cashflow
CY19 production 7% above CY18
- strong response from water injection
Long life production
- current production licence and reserves forecast to end of 2027 with potential to extend
Cash operating costs - US$25 - 30/bbl
HY20 RESULTS PRESENTATION
NEW ZEALAND
MAARI/MANAIA FIELDS
During HY20
- Crude oil sales were 359,933 barrels at a net realised oil price of US$71.9 per barrel.
- Production from the Group's interest in Maari and Manaia fields was 310,122 barrels of oil with average gross production rate of 6,482 bopd, 11% higher than HY2019. The increased production was driven by well optimization activities and continued water injection.
- Cash operating costs were US$26.90 per barrel (US$30.3 per barrel including workovers).
- In November 2019, Jadestone Energy Inc. (AIM:JSE, TSXV:JSE) announced that it had executed a conditional sale and purchase agreement to acquire OMV New Zealand Limited's 69% interest in the Maari project. The completion of the proposed transaction will occur upon satisfaction of conditions on or before 15 November 2020.
Outlook
- JV continues to focus on production optimisation and life extension planning following the continued strong production performance.
HY20 RESULTS PRESENTATION
2C Resources: Liquids: 26.9 mmbbls Raw gas: 599 bcf
As at 30 June 2019
HY20 RESULTS PRESENTATION | 28 FEBRUARY 2020 | PAGE 22 | |
PNG
During HY20
- In Papua New Guinea, Horizon Oil continued planning for the commercialisation of the gross appraised resource of 2,200 PJ of sales gas and 64 million barrels of associated condensate in four petroleum licences in the foreland basin of Western Province.
- During the period, activities to optimise and refine the engineering basis for a condensate development at Elevala and Ketu continued.
Outlook
- Whilst the Group's PNG assets have significant potential value, there remain challenges to realising value in the short term. Accordingly, this led to the Group impairing its PNG assets in the period down to US$5.7 million.
HY20 RESULTS PRESENTATION
OUTLOOK & TARGETS
STRONG PRODUCTION AND CASHFLOW PROVIDING PATHWAY TO FURTHER GROWTH
Strong Operating | • Pursue and promote production | |
enhancement opportunities at | ||
Cashflow | Maari/Manaia and Beibu fields | |
• Strong hedge position - 270,000 | ||
bbls hedged to 30 June 2020 at | ||
US$68.35/bbl | ||
• Maintenance of low operating costs | ||
with disciplined and focused infield/ | ||
near field exploration/appraisal | ||
program | ||
Strengthen Balance Sheet
- Continued strong cashflow generation allowing for progressive reduction in debt
- Forecast net cash position by 30 June 2020
Drive Growth | • Execute WZ 12-8E development | ||
combined with pursuit of further | |||
infill, appraisal and exploration | |||
opportunities in China | |||
• | Pursue inorganic growth | ||
opportunities | |||
Sustainability | • Focus on continued safe operations | |
• Climate-change resilience reporting | ||
HY20 RESULTS PRESENTATION | 28 FEBRUARY 2020 | PAGE 24 | |
FY20 GUIDANCE
STRONG PRODUCTION AND CASHFLOW PROVIDING PATHWAY TO FURTHER GROWTH
PRODUCTION
(NET WORKING INTEREST VOLUMES) | 1.4 - 1.5 mmbbls |
SALES
(VOLUMES) | 1.4 - 1.5 mmbbls |
REVENUE
US$90 - 100 million | EBITDAX |
US$50 - 60 million
- The above Guidance represents forward looking statements. Such statements relate to future events and expectations and as such involve known and unknown risks and uncertainties. Actual results, actions and developments may differ materially from those expressed or implied by these forward looking statements depending on a variety of factors. Refer to disclaimer on the following slide.
HY20 RESULTS PRESENTATION | 28 FEBRUARY 2020 | PAGE 25 | |
DISCLAIMER
Statements contained in this material, particularly those regarding the possible or assumed future performance, costs, dividends, returns, production levels or rates, prices, reserves, potential growth of Horizon Oil Limited, industry growth or other trend projections and any estimated company earnings are or may be forward looking statements. Such statements relate to future events and expectations and as such involve known and unknown risks and uncertainties. Actual results, actions and developments may differ materially from those expressed or implied by these forward looking statements depending on a variety of factors.
While every effort is made to provide accurate and complete information, Horizon Oil accepts no responsibility for any loss, damage, cost or expense incurred by you as a result of any error, omission or misrepresentation in information in this presentation.
In this presentation, references are made to EBITDAX, Underlying Profit and Free Cashflow, which are financial measures which are not prescribed by Australian Accounting Standards:
- EBITDAX represents the profit adjusted for interest expense, taxation expense, depreciation, amortisation, and exploration expenditure (including non-cash impairments)
- Underlying profit represents the profit adjusted for the unrealised movement in the value of options issued under the subordinated loan facility, unrealised movements and gains associated with convertible bonds and non-cash impairments
- Free Cash Flow represents Cashflow from Operating Activities less Investing cashflows (net of acquisition payments)
All references to dollars in the presentation are United States dollars unless otherwise noted.
HY20 RESULTS PRESENTATION | 28 FEBRUARY 2020 | PAGE 26 | |
Authorisation
This ASX announcement is approved and authorised for release by the Horizon Oil board.
FOR MORE INFORMATION
PLEASE CONTACT US
CHRIS HODGE | Horizon Oil Limited |
P +61 2 9332 5000 | Level 6, 134 William Street |
info@horizonoil.com.au | Woolloomooloo NSW 2011 |
Australia | |
horizonoil.com.au |
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Horizon Oil Limited published this content on 28 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 February 2020 00:10:11 UTC