Horizon Global
Annual Report 2019

Plain-text annual report

Horizon Oil Limited ABN 51 009 799 455 Annual Report 2019  Consistent growth in sales volumes for 5 consecutive years Material increase in sales revenue driven by record oil sales volumes Accelerated debt reduction with 68% reduction in net debt in FY19 Greater production and revenue diversification following acquisition of additional Maari interest in 2018 Maintenance of low operating costs driving record EBITDAX RECO RD SALES VO LUME 1.87 mmbbls RECORD SALES REVENUE US$122 million RECORD EBITDAX US$93 million 13% NET DEBT REDUC ED TO US$28 million 68% 22% UNDERLYING PROFI T BEFORE TAX US$37 million 97% 36% 2P RESERVES INCREASE ~95% reserves replacement 1.8mmbbls Contents 2019 Highlights Chairman and CEO's Report Reserves and Resources Statement Board of Directors Consolidated Results 1 2 7 12 12 Activities Review – Production – Development and Pre-development – Exploration Annual Financial Report 13 14 18 20 21 Directors’ Report Sustainability Report Shareholder Information Glossary Company Directory 22 44 102 104 105 2019 Highlights 1 OIL SALES (mmbbls) Maari Beibu REVENUE1 (US$m) EBITDAX (US$m) UNDERLYING PROFIT BEFORE TAX (US$m) Maari Beibu 1 Net of hedge settlements. Cost recovery entitlement 1.38 1.21 0.90 0.93 1.65 0.31 0.86 1.42 0.30 0.80 1.87 0.29 1.00 104.0 70.5 76.0 35.5 0.29 0.47 0.32 0.48 0.58 33.4 40.5 122.4 80.1 100.0 68.9 42.3 31.2 68.5 52.2 16.4 89.1 93.0 68.5 54.0 45.2 37.3 18.9 8.7 2.2 (8.7) FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 FY15 FY17 FY18 FY19 FY16 “ Our strengthened balance sheet and strong cashflow generation provides increasing capacity to identify and secure appropriate growth opportunities within our focus region to complement our existing oil production assets.” Areas of Operation China Block 22/12 (Production/Exploration) 26.95%/55% Papua New Guinea PDL 10 (Stanley) PRL 21 (Elevala/Ketu) PRL 28 (Ubuntu) PRL 40 (Puk Puk/Douglas) PPL 372 PPL 373 PPL 430* PPL 574 30% 30.15% 30% 20% 95% 100% 100% 80% * Licence PPL 430 expired post 30 June 2019. H o r i z o n O i l A n n u a l R e p o r t 2 0 1 9 New Zealand PMP 38160 (Maari/Manaia) 26% 2 Mike Harding Chairman Michael Sheridan Chief Executive Officer Chairman and Chief Executive Officer’s Report Dear Shareholders 2019 saw the continued realisation of Horizon Oil’s objectives of enhancing production, maintaining a low operating cost structure, controlled capital investment and strengthening the company’s balance sheet. Our conventional oil production assets, which are now largely ungeared, achieve average oil prices at or near dated Brent and have average operating costs less than US$20/bbl. They will continue to generate material cashflow in future years and, with an increasingly strengthening balance sheet, favourably position Horizon Oil for disciplined growth in our focus region of Asia Pacific. Horizon Oil’s full year results demonstrate the benefit of the Company’s low cost, conventional oil production portfolio which delivered: 13% increase in oil sales to a record 1.87 million barrels 22% increase in net revenues to a record US$122 million Average operating costs below US$20/bbl 36% increase in EBITDAX to record US$93 million 97% increase in underlying profit before tax to US$37 million 95% 2P oil reserves replacement Delivering on objectives We achieved solid performance in meeting or exceeding our core operating, financial and HSSE objectives for 2019. The strengthened balance sheet, continuing improvement in operating performance and the organic reserve replacement have put the Company in a solid position for 2020 and future years. Importantly, we experienced no lost time injuries at Horizon Oil’s operated and non-operated joint ventures during the year, with over 1 million man-hours worked across those projects. Pleasingly, there were no material spills to environment at any of Horizon Oil’s operated or non-operated projects during the year. Horizon Oil Annual Report 2019CHAIRMAN AND CHIEF EXECUTIVE’S REPORT 3 Field management Operating performance during the year was strong with an overall 22% increase in net production owing largely to active field management and the benefit of a full financial year’s production from the additional 16% interest in Maari/Manaia acquired in the second half of 2018. In Block 22/12, China, our partner CNOOC continued to achieve excellent performance with underlying production increasing 16% on the prior year to 1.0 million barrels net to Horizon Oil. Drawing down an entitlement to just under 300,000 barrels in additional cost recovery oil, our resultant oil sales in Block 22/12 were 1.3 million barrels, generating very strong margins with operating costs below US$10/barrel sold. The field performance was enhanced early in the year with the drilling and completion of the two infill wells on the 12-8 West and 12-8 Mid fields, the initial flow rates of which exceeded expectations at 3,500 bopd. At Maari/Manaia fields in New Zealand, we enjoyed a further improvement on last year’s strong result with a 33% increase in our production entitlement to 600,000 bbls net to Horizon Oil. The additional underlying production from the 16% interest acquired in the second half of 2018 was complemented by increased water injection rates following the successful conversion of the MR5 well to a water injector in the first half of the year, together with a series of production optimisation activities. The net increase of 1.8 mmbl to our 2P oil reserves, which replaced the majority of our 2019 oil sales, is largely the outcome of the active field management programs at Beibu Gulf and Maari/Manaia fields, undertaken in conjunction with our operators CNOOC and OMV. The key contributing factors to the increase are sustained production at levels above earlier forecasts, planned improvements to water handling capacity at Beibu Gulf together with the benefit of additional water injection and enhanced well data gathering at Maari/Manaia. The joint venture was sharply focused during the year on cost reduction which, together with the increased production levels, reduced the operating cost per barrel at Maari/Manaia to less than US$25/bbl. 2019 saw the operating cost per barrel at Maari/ Manaia reduce to less than US$25/bbl. Horizon Oil Annual Report 2019 4 CHAIRMAN AND CHIEF EXECUTIVE’S REPORT Development and pre-development assets In China, development planning and final contract negotiations continued in respect of our WZ 12-8 East resource. At the same time the joint venture continues to refine our subsurface modelling for what is a complementary but complex resource. CNOOC continues to target first oil in early 2021 with a final decision anticipated later this year. Our assets in PNG constitute a large stake in substantial condensate rich gas resources on the pipeline route of ExxonMobil, Oil Search and Santos’ planned PNG LNG expansion infrastructure. The aggregate resource volumes of Horizon Oil’s PNG licences are 2,200 PJ of gas and 64 million barrels of condensate, of this 1,700 PJ of gas and all the condensate are held in the northern fields of Stanley, Elevala, Ketu and Ubuntu. Horizon Oil operates the Elevala, Ketu and Ubuntu fields. Our aggregate net interest in those resources is approximately 30%. Our core condensate rich gas resources lie to the south of the P’nyang gas field, which will provide the threshold volumes for the PNG LNG expansion train. The planned P’nyang to Kutubu gas and condensate pipelines pass within 20 km of our Ketu field. Recognition of the potential value of the PNG asset base may well occur as a result of advancing the commercialisation of the resources, progression of regional development and ongoing corporate activity in and around our asset base. Both the current and previous governments in PNG have made clear the nation’s strategic objective of ensuring third party access to the strategic infrastructure associated with LNG developments in the country. The clear objectives are capital efficiencies, expansion of national development opportunities and greater availability of domestic gas resources for existing and prospective domestic industry. The pathway to achieving these national objectives exists in the current legislative framework and the gas (i.e. project) agreements negotiated with the LNG developers at the start of projects. Recently, there has been considerable media attention in relation to the Papua LNG project on the PNG’s government’s focus on third party access to infrastructure and greater domestic market obligation in respect of gas supply. These matters will continue to be an area of attention as the P’nyang gas agreement is negotiated. Access to strategic infrastructure would facilitate the prospect of Horizon Oil’s gas resources being available to satisfy the growing demand and increasing calls in PNG for gas to be made available for power and other onshore industrial development, whether such development serves an export or PNG domestic market, by way of greater domestic market obligations. The prospect of our material resources directly or indirectly offsetting the PNG LNG expansion project’s domestic market obligations would overcome the diminution of their resource available for LNG production with our surplus volumes available to meet their future demands for gas feedstock. Repsol, on behalf of the PDL 10 joint venture, continued engagement with the PNG Petroleum Minister in relation to the correspondence received regarding satisfaction of licence conditions. The formal dispute resolution process which the joint venture was compelled to initiate under the terms of Stanley gas agreement in November 2018 remains on foot while the parties also endeavour to resolve the matter directly. Horizon Oil Annual Report 2019CHAIRMAN AND CHIEF EXECUTIVE’S REPORT 5 Capital management The strong free cashflow in 2019 facilitated the simplification of Horizon Oil’s capital structure. During the year, we entered into a new US$95 million senior debt facility on substantially improved terms, enabling the consolidation and reduction of debt, with funding costs reduced to LIBOR +2.75%. The improved financing structure and free cashflow enabled a 68% reduction of net debt to US$28 million at 30 June 2019, well ahead of previous forecasts, and allows us to confidently predict that we will be in a net cash position in mid calendar 2020. Horizon Oil maintains a prudent approach to addressing its exposure to oil price and foreign exchange movements with the continued application of our rolling hedging program. At 30 June 2019, the Company had oil price swaps in place for 480,000 bbls out to 31 March 2020 at an average price of US$69.43, inclusive of credit and other fees. This secures revenue of approximately US$33.3 million over the 9 month period. We further mitigate risk by acquiring loss of production insurance. The improved financing structure and free cashflow enabled a 68% reduction of net debt to US$28 million at 30 June 2019, well ahead of previous forecasts. Board renewal There was further renewal of the board during 2019 with Mike Harding and Chris Hodge joining as non-executive directors. Mike assumed the role of chairman of Horizon Oil at the 2018 annual general meeting on John Humphrey’s retirement from the Company’s board. Horizon Oil has benefited greatly over many years from John’s experience, pragmatism and intellect. His contribution to the Company’s growth and successful navigation through challenging periods has been material and his counsel and collegiate approach have been greatly appreciated by the board and management. Mike and Chris’ deep industry knowledge and technical skills complement the Company’s lean and experienced board. Their addition provides the board with the appropriate skills mix with board members respective technical disciplines covering sub-surface assessment, engineering, operational and commercial management, finance, legal and business development. Our small skilled complement of personnel assists in maintaining low general and administrative costs, which include the insurance costs noted above. The merit of the loss of production insurance and other operational insurances was demonstrated with the insurance recoveries of approximately US$5 million in respect of repairs in 2016 to the Maari/Manaia facilities. Most of the reimbursement was received in the 2019 financial year and resulted from considerable commercial and technical effort by Horizon Oil’s finance and technical teams, achieving a good outcome for the Company. Horizon Oil Annual Report 2019 6 CHAIRMAN AND CHIEF EXECUTIVE’S REPORT Sustainability Outlook Strong production and cashflow providing pathway to growth The Company’s very strong operating and financial performance in 2019 has built upon and extended the good results of recent years. We will continue to enhance production levels at our oil fields in China and New Zealand through the optimisation activities, together with infill, appraisal and exploration opportunities conducted in-field or near-field. These activities will serve to mitigate natural reservoir decline. Average operating costs are expected to remain below US$20/bbl in the near term and we will continue our disciplined approach to capital expenditure. We continue to be encouraged by the improved and sustained performance at Maari/Manaia. Field management activities underway or to be undertaken in FY 2020 include well equipment upgrades, workovers, production optimisation following installation of permanent multi-phase metering and greater focus on water injection. Furthermore, the strengthening technical engagement amongst the joint venture continues to generate good results. The CNOOC-led joint venture is currently undertaking a work program which includes the workover of 3 wells, installation of enhanced water handling capacity, additional wells slots on the WZ 6-12 platform for proposed infill wells to be drilled in calendar 2020 and a near field appraisal well. If successful, the associated resource could be tied back to existing infrastructure. Our balance sheet continues to strengthen and we forecast many years of production and strong cashflow ahead in Block 22/12 and Maari/Manaia. Our condensate and gas interests in PNG present great opportunity for the Company. Significant developments will take place in coming years around our PNG asset base and we anticipate the composition of our joint ventures will change in the near future. These matters will have an impact on the manner and timing of the commercialisation of our PNG resources. Finally, our strengthened balance sheet and strong cashflow generation provides increasing capacity to identify and secure appropriate growth opportunities within our focus region to complement our existing oil production assets. We will be disciplined in our assessment of opportunities and the execution of any associated transaction. Our Sustainability Report in following pages provides succinct coverage of the Company’s performance and focus areas in respect of safety, security, environment and climate change, community and people and governance. Key highlights include: Maintenance of strong safety and health performance across our operations Enhancements to our information technology systems to increase the resilience of the business against cyber security threats and loss of business continuity Our comprehensive program of environmental baseline monitoring showed no material environmental impact from our activities in PNG and there were no losses of containment to the environment in our production operations We have implemented a governance framework to assess and evaluate material risks to our operations arising from climate change. Our reporting framework aligns with the G20’s Task Force on Climate Related Financial Disclosure (TCFD) and we are progressively working towards improved disclosures. Our high level impact assessment of climate related risks and opportunities for our business over the short, medium and longer term, is set out in the Sustainability Report. H o r i z o n O i l A n n u a l R e p o r t 2 0 1 9 Horizon Oil Limited ABN 51 009 799 455 2019 Reserves and Resources Statement as at 30 June 2019 Highlights STRONG PERFORMANCE FROM PRODUCING CONVENTIONAL OIL ASSETS IN CHINA AND NEW ZEALAND WITH NET PRODUCTION INCREASED BY 22% TO 1.6 MMBBL AND AVERAGING 4,400 BOPD NET TO HORIZON OIL PROVED PLUS PROBABLE RESERVES (2P) OF OIL EQUAL TO 8.8 MMBBL AFTER REVISIONS TO PREVIOUS ESTIMATES OF 2.1 MMBBLS FY19 PRODUCTION INCREASED FOLLOWING IMPROVED DATA GATHERING, PRODUCTION OPTIMISATION ACTIVITIES AND CONTINUOUS WATER INJECTION INTO THE MAARI MOKI RESERVOIR IN NEW ZEALAND WITH SOLID BASE PRODUCTION, HORIZON OIL CONTINUES TO MATURE VALUE ACCRETIVE CONTINGENT PROJECTS ACROSS CHINA AND NEW ZEALAND 7 H o r i z o n O i l A n n u a l R e p o r t 2 0 1 9 Horizon Oil Limited 2019 Reserves and Resources Statement as at 30 June 2019 Proved and Proved plus Probable Reserves (Horizon Oil share) CHINA Block 22/12 NEW ZEALAND PMP 38160 Closing Balance 30 June 2019 WZ 6-12 + WZ 12-8W Maari + Manaia Contingent Resources (Horizon Oil share) CHINA Block 22/12 NEW ZEALAND PMP 38160 PAPUA NEW GUINEA PDL 10 PRL 21 PRL 28 PRL 40 Closing Balance 30 June 2019 WZ 6-12 + WZ 12-8W + WZ 12-8E Maari + Manaia Stanley Elevala-Ketu Ubuntu Puk Puk, Douglas, Weimang & Langia 2C Total Liquids mmbbl 2.0 5.5 3.4 15.2 0.7 0.1 26.9 1P Total Liquids mmbbl 2P Total Liquids mmbbl 3.0 1.9 4.9 2C Raw Gas bcf - - 123 351 14 111 599 4.4 4.4 8.8 2C Sales Gas PJ - - 110 371 14 109 604 8 H o r i z o n O i l A n n u a l R e p o r t 2 0 1 9 9 Reconciliation of Proved and Proved plus Probable Reserves PRODUCTION: strong net production of 1.6 mmbbl with a further 0.31 mmbbl of cost-recovery oil in China with average daily production entitlement approximately 5,200 bopd net to Horizon Oil including adjustment for cost- recovery barrels in China. CHINA: upward revision of 1P reserves by 1.6 mmbbl and of 2P reserves of 1.4 mmbbl following review of actual field performance, and acceleration of cost-recovery barrels due to continued strong production performance and higher realised oil prices. NEW ZEALAND: upward revisions of 1P reserves by 0.7 mmbl and of 2P reserves by 0.6 mmbbl following improved data gathering, production optimisation activities and continuous water injection. 1 Cost recovery oil is reconciled as an Economic Interest Adjustment. Proved and Proved plus Probable Reserves Reconciliation Opening Balance 30 June 2018 Production (Net Working Interest) Production (Cost Recovery oil entitlement) Revisions of Previous Estimates Economic Interest Adjustment Closing Balance 30 June 2019 1P Total Liquids mmbbl 4.8 (1.6) (0.3) 2.3 (0.2) 4.9 2P Total Liquids mmbbl 8.9 (1.6) (0.3) 2.1 (0.3) 8.8 Reconciliation of Contingent Resources CHINA: a reduction of 1 mmbbl associated with the WZ 12-8 East project following reassessment of oil recovery, partially offset by maturation of infill wells in WZ 6-12 and the WZ 12-10-1 project. NEW ZEALAND: an increase of 1.3 mmbbl associated with asset life extension and maturation of infill opportunities in Maari and Manaia. PAPUA NEW GUINEA: an increase of 99 PJ of sales gas and a decrease of 0.3 mmbbl condensate associated with the acquisition of a 20% economic interest in PRL 40 and divestment of a 20% interest in PRL 28. Contingent Resources Reconciliation Opening Balance 30 June 2018 Revisions of Previous Estimates Economic Interest Adjustment Transfers, Discoveries and Extensions Acquisitions and Divestments Closing Balance 30 June 2019 2C Total Liquids mmbbl 27.0 0.3 (0.3) - (0.3) 26.7 2C Total Raw Gas bcf 2C Total Sales Gas PJ 497 505 - - - 102 599 - - - 99 604 H o r i z o n O i l A n n u a l R e p o r t 2 0 1 9 10 HORIZON OIL LIMITED 2019 RESERVES AND RESOURCES STATEMENT as at 30 June 2019 Permits, Licences and Interests Held Permit or License Operator Material Projects Working Interest (%) 30 June 2019 30 June 2018 CHINA Block 22/12 NEW ZEALAND PMP 38160 PAPUA NEW GUINEA PDL 10 PRL 21 PRL 28 PPL 574 PPL 430 PPL 372 PPL 373 PRL 40 CNOOC WZ 6-12 North & South, WZ 12-8 West & Mid fields 26.95% 26.95% WZ 12-8 East field 55.00%1 55.00%1 OMV Maari and Manaia fields 26.00% 26.00% Repsol Stanley field Horizon Oil Elevala-Ketu fields Horizon Oil Ubuntu field Horizon Oil Exploration activities Horizon Oil Exploration activities Horizon Oil Exploration activities Horizon Oil Exploration activities Repsol Puk Puk, Douglas, Weimang and Langia fields 30.00%2 30.15%2,4 30.00%2 80.00%2 100.00%2,5 95.00%2,6 100.00%2,6 20.00%2,3 30.00%2 30.15%2,4 50.00%2 80.00%2 100.00%2 95.00%2 100.00%2 - 1 China National Offshore Oil Corporation (‘CNOOC’) is entitled to participate at up to a 51% equity level in any commercial development within Block 22/12. 2 PNG government may appoint a state nominee to acquire up to a 22.5% participating interest in any commercial development within the PNG licence areas. 3 On 6 November 2017, Horizon Oil (Papua) Limited, a wholly owned subsidiary of Horizon Oil Limited, entered into a sale and purchase agreement with Kumul Petroleum Holdings (Kumul) to acquire a 20% interest in PRL 40 (Puk Puk, Douglas, Weimang and Langia fields) and divest of a 20% interest in PRL 28. Consideration for the acquisition was in the form of an exchange. The transaction was completed on 30 April 2019. The effective date of the sale and purchase was 31 May 2017. 4 The PRL 21 licensees have applied for a development licence. Tenure remains current, subject to PNG ministerial approval. 5 Subsequent to 30 June 2019, the PPL 430 licence term expired. The licence had no identified reserves or contingent resources at 30 June 2019. 6 The PPL 372 and 373 licensees have applied for an extension and variation of the licences. Tenure remains current, subject to PNG ministerial approval. The licences had no identified reserves or contingent resources at 30 June 2019. H o r i z o n O i l A n n u a l R e p o r t 2 0 1 9 HORIZON OIL LIMITED 2019 RESERVES AND RESOURCES STATEMENT as at 30 June 2019 11 Notes 1 2 3 4 5 6 7 8 9 All estimates are prepared in accordance with the Society of Petroleum Engineers (SPE) Petroleum Resources Management System (PRMS) revised 2007. Relevant terms used in this statement, capitalised or otherwise, have the same meaning given to those terms in the SPE PRMS. Reserves are those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations by application of development projects, but which are not currently considered to be commercially recoverable owing to one or more contingencies. Contingent Resource estimates quoted for China have assumed China National Offshore Oil Corporation (‘CNOOC’) participation at 51%. CNOOC is entitled to participate at up to a 51% equity level in any commercial development within Block 22/12. Contingent Resource estimates quoted for PNG do not assume PNG State Nominee participation at this time. The PNG government may appoint a state nominee to acquire up to a 22.5% participating interest in any commercial development within the PNG licence areas. Liquids are equal to the total of oil, condensate and natural gas liquids where 1 barrel of condensate or natural gas liquids equals 1 barrel of oil. Raw Gas is natural gas as it is produced from the reservoir which may include varying amounts of heavier hydrocarbons which liquefy at atmospheric conditions, water vapor and other non-hydrocarbon gases such as hydrogen sulphide, carbon dioxide, nitrogen or helium. Sales Gas represents volumes that are likely to be present in a saleable product. Sales Gas are reported assuming average values for fuel, flare and shrinkage considering the variable reservoir fluid properties of each constituent field on an energy basis the customary unit is PJ. PJ means petajoules and is equal to one quadrillion joules. 10 11 12 13 14 Depending on the asset, either deterministic estimates or probabilistic estimates have been used to calculate the petroleum reserves, contingent resources and prospective resources in this statement. Reported estimates of petroleum reserves and contingent resources have been aggregated by arithmetic summation by category. Estimates are reported according to Horizon Oil’s economic interest, this being Horizon Oil’s net working interest as adjusted for entitlements (Economic Interest Adjustment) under production- sharing contracts and risked-service contracts; and are reported net of royalties and lease fuel up to the reference point. For New Zealand, the reference point is defined as the outlet of the Raroa Floating Production Storage and Offtake (FPSO) facility. For China the reference point is the exit flange of the loading hoses at Weizhou Terminal. Horizon Oil employs a Reserves Management System to ensure the veracity of data used in the estimation process. This process includes review by senior staff where data is endorsed for inclusion in the estimating process. Estimates are reviewed annually, at a minimum, with interim reviews as required, to respond to any material changes. Horizon Oil undertakes semi-regular external reviews to complement its own internal process. The estimates of petroleum reserves and resources contained in this statement are based on, and fairly represent, information and supporting documentation prepared by staff and independent consultants under the supervision of Mr Andrew McArdle, Chief Operating Officer of Horizon Oil Limited. Mr McArdle is a full-time employee of Horizon Oil Limited and is a member of the Society of Petroleum Engineers. Mr McArdle’s qualifications include a Master of Engineering from the University of Western Australia, Australia and more than 15 years of relevant experience. Mr McArdle consents to the use of the petroleum reserves and resources estimates in the form and context in which they appear in this statement. 15 Some totals in the tables may not add due to rounding. H o r i z o n O i l A n n u a l R e p o r t 2 0 1 9 Board of Directors Mike Harding Chairman Michael Sheridan Chief Executive Officer Gerrit de Nys Director Sandra Birkensleigh Director Gregory Bittar Director Chris Hodge Director Consolidated Results Revenue from continuing operations Cost of sales (includes amortisation) Gross profit Other income General and administrative expenses Exploration and development expenses Impairment of non-current assets Financing costs (includes project facility and convertible bonds) Financing costs (unrealised movements in value of options) Unrealised movement in value of convertible bond conversion rights Gain on buyback of convertible bonds during the period Other expenses Profit/(loss) before income tax expense Net tax (expense)/benefit Profit/(loss) for the financial year Profit/(loss) attributable to members of Horizon Oil Limited 2019 US$’000 2018 US$’000 2017 US$’000 2016 US$’000 2015 US$’000 122,401 (67,354) 55,047 4,427 (5,661) (4,592) - (11,748) 11,157 - - (221) 48,409 (12,583) 35,826 35,826 100,044 68,534 75,952 103,950 (55,686) (43,768) (60,179) (59,970) 44,358 24,766 15,773 43,980 835 (5,985) (5,761) - (14,345) (20,464) - - (218) (1,580) (1,019) (2,599) (2,599) 15 3,638 (6,440) (1,250) (8,094) (1,852) 6,842 (7,569) (16,222) - (147,515) - (14,481) (17,264) (17,360) 1,400 530 - (386) 4,154 - 5,322 1,193 (927) (149,726) (4,490) 5,201 (336) (336) (144,525) (144,525) - 9,063 - (983) 17,751 556 18,307 18,307 12 H o r i z o n O i l A n n u a l R e p o r t 2 0 1 9 Activities Review 2019 Production Development and Pre-development Exploration China Papua New Guinea Papua New Guinea Block 22/12 Beibu Gulf Western Province PNG Western Province PNG Horizon Oil Interest Horizon Oil Interest Horizon Oil Interest Production Exploration 26.95% PDL 10, Stanley Field 30% PPL 574 55% PRL 21, Elevala and Ketu Fields 30.15%* PPL 430 PRL 28, Ubuntu Field 30%* PPL 372 PRL 40, Puk Puk/Douglas Fields 20% PPL 373 * Operator * Operator New Zealand PMP 38160, Maari and Manaia fields, offshore Taranaki Basin Horizon Oil Interest Production 26% 80%* 100%* 95%* 100%* 13 H o r i z o n O i l A n n u a l R e p o r t 2 0 1 9 14 I I I A C T V T E S R E V E W I China BEIBU GULF Block 22/12 Beibu Gulf Production Exploration Horizon Oil Interest 26.95% 55% P R O D U C T O N I During the year, the Group’s crude oil sales from the Beibu Gulf fields increased by 10% to 1,290,632 barrels at an average price of US$66.31/bbl, exclusive of executed hedging. Sales volumes were composed of working interest share of production totalling 1,002,178 barrels, and 288,454 barrels of cost recovery oil. The Group’s share of sales volumes over the year was an average of 3,536 bopd. Average production over the year was 10,188 bopd, of which the Group’s working interest share was 2,746 bopd. February 2019 i a . 9 1 0 2 y r a u r b e F _ p a m a n h C _ N Z H i Pip elin es to W eizh o u T er m in al MR9 MR6A N 5km (26.95%) MR1 MR2 MR7A MR4 MR8A MR3 MR5 (26.95%) MR10 6-12 Production Area Beibu Gulf MN1 PAPUA NEW GUINEA Wellington Tasman Sea WZ 12-1 Map Area NEW ZEALAND Auckland 100km Map Area Tasman Sea 500km Legend Legend Producing Oil Field Oil Field Discovered Oil Field Development Area Legend Production Area i l Legend H o r Producing Oil Field i z o Discovered Oil Field n O Development Area A n Production Area n u Oil Pipeline a R Gas Pipeline e p o Proposed 12-8E flowline r t 2 0 1 9 l Oil Pipeline Gas Pipeline Proposed 12-8E flowline Oil Field Oil Producer Water Injector Horizon Oil Petroleum Licence Oil Producer 12-8 Water Injector Production Area Horizon Oil Petroleum Licence (26.95%) N 2km Producing Oil Field Discovered Oil Field Development Area Production Area Oil Pipeline Gas Pipeline Proposed 12-8E flowline Legend Oil Field Gas Field PMP 38160 (26%) WZ 12-3 WZ 12-10-1 WZ 12-8W WHP Oil Pipeline MANAIA Proposed Oil Pipeline Gas Pipeline Proposed Gas Pipeline Rivers Township (26.95%) Horizon Oil Prospecting Licences Horizon Oil Development/ Retention Licences N 50km Wewak Map Area Madang Proposed WZ 12-8E WHP Oil Pipeline Lae Daru Gas Pipeline Port Moresby 500km Gulf of Papua Block 22/12 12-8 Development Area WZ 6-12SWZ 6-12NBlock 22/12WZ 12-8EWZ 12-8MWZ 12-8W China 10% increase in oil sales to 1.3 mmbo with underlying production increasing 16% Beibu Gulf operating costs remained below US$10/bbl 16% UNDERLYING PRODUCTION

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