2020 INVESTMENT
HIGHLIGHTS
— Strengthened balance sheet with return
to net cash despite economic headwinds
— Consistent strong production with sales
volume maintained above 1.4 mmbbls
— Accelerated debt reduction with 101%
reduction in net debt in FY20
— Maintenance of low operating costs
driving strong cashflow and EBITDAX
— 2P reserves added in China resulting
from exploration success and further
commitment to development
UNDERLYING PROFIT
BEFORE TAX
US$15 million
SALES VOLUME
1.43 mmbbls
RETURN TO NET CASH
US$0.5 million
Net Debt Reduction of
US$28.4 million
SALES REVENUE
US$84 million
2P RESERVES
~50%
reserves replacement ratio
EBITDAX
US$50.6 million
2020 Highlights
Chairman’s Message
CEO’s Message
Reserves and Resources Statement
Activities Review
Annual Financial Report
Shareholder Information
Glossary
Corporate Directory
1
2
3
4
10
16
113
116
117
Looking ahead, we intend to further strengthen the
Horizon balance sheet and to augment it by identifying
growth opportunities for the company.
OIL SALES
(mmbbls)
Maari
Beibu
REVENUE1
(US$m)
Maari
Beibu
Cost recovery entitlement
Cost recovery entitlement
1.87
0.29
1.00
1.65
0.31
0.86
1.43
0.83
1.38
0.90
1.42
0.30
0.80
0.58
0.60
0.47
0.48
0.32
122.4
19.2
60.9
84.0
0.1
46.8
42.3
37.1
100.0
18.0
50.9
31.2
76.0
35.5
40.5
68.5
14.2
38.0
16.4
EBITDAX
(US$m)
[Excl. cost recovery]
Cost recovery
93.0
19.2
73.8
68.5
18.0
50.5
50.6
0.1
50.5
54.0
54.0
45.2
14.2
31.0
FY16
FY17
FY18
FY19
FY20
FY16
FY17
FY18
FY19
FY20
FY16
FY17
FY18
FY19
FY20
1 Net of hedge settlements
UNDERLYING PROFIT
BEFORE TAX
(US$m)
(Excl. cost recovery)
Cost recovery
37.3
19.2
18.1
15.0
0.1
14.9
2.2
14.2
18.9
18.0
0.9
(12.0)
FY18
FY19
FY20
FY17
[8.7]
(8.7)
FY16
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 574
NEW ZEALAND
PMP 38160 (Maari/Manaia)
30%
30.15%
30%
20%
95%
100%
80%
26%
CHINA
PAPUA
NEW GUINEA
NEW ZEALAND
1 2 -
-
-
3 HORIZON OIL LIMITED
2020 RESERVES & RESOURCES STATEMENT
as at 30 June 2020
Highlights
5 Proved and Proved plus Probable Reserves (Horizon Oil share)
CHINA
Block 22/12
NEW ZEALAND
PMP 38160
Developed: WZ6-12 + WZ12-8W
Undeveloped: Infill drilling, WZ12-8E (Phase 1)
Total China (arithmetic summation)
Developed: Maari + Manaia
Closing Balance 30 June 2020 (arithmetic summation)
Contingent Resources (Horizon Oil share)
CHINA
Block 22/12
NEW ZEALAND
PMP 38160
PAPUA NEW GUINEA
PDL 10
PRL 21
PRL 28
PRL 40
WZ6-12 + WZ12-10-1 + WZ12-8E
Maari + Manaia
Stanley
Elevala-Ketu
Ubuntu
Puk Puk, Douglas, Weimang & Langia Fields
Closing Balance 30 Jun 2020 (arithmetic summation)
1P
Total
Liquids
(MMbbl)
2P
Total
Liquids
(MMbbl)
1.4
0.4
1.9
1.4
3.2
2C
Raw
Gas
(Bcf)
–
–
123
351
14
111
599
3.2
1.1
4.3
3.8
8.1
2C
Sales
Gas
(PJ)
–
–
110
371
14
109
604
2C
Total
Liquids
(MMbbl)
1.1
5.3
3.4
15.2
0.7
0.1
25.8
6 Reconciliation of Proved and Proved plus Probable Reserves
PRODUCTION
Total production of 1.5 MMbbl Net
Working Interest similar to prior year
(1.6 MMbbl Net Working Interest)
CHINA
At a 2P level, production of 0.9 MMbbl
Net Working Interest and a 0.5 MMbbl
downward revision in ultimate recovery
due to field performance, offset by the
transfer from contingent resources of
1.1 MMbbl associated with the addition of
the WZ12-8 East project and two planned
infill wells; similar changes at a 1P level.
NEW ZEALAND
No revisions were made to previous
1P or 2P ultimate recovery with the
reduction in reserves due to net
production of 0.6 MMbbl.
Proved and Proved plus Probable Reserves Reconciliation
Opening Balance 30 June 2019
Production (Net Working Interest)
Production (Cost Recovery oil entitlement)
Revisions of Previous Estimates
Economic Interest Adjustment
Transfers, Discoveries and Extensions
Acquisitions and Divestments
Closing Balance 30 June 2020
1P
Total
Liquids
(MMbbl)
2P
Total
Liquids
(MMbbl)
4.9
(1.5)
0.1
(0.8)
0.0
0.4
-
3.2
8.8
(1.5)
0.1
(0.5)
0.1
1.1
-
8.1
Reconciliation of Contingent Resources
CHINA
Transfer of 0.9 MMbbl to reserves
associated with the WZ12-8 East project
and one infill well, with two possible infill
wells remaining as contingent resources
at this time.
NEW ZEALAND
No revisions from prior estimates.
PAPUA NEW GUINEA
No revisions from prior estimates.
Contingent Resources Reconciliation
Opening Balance 30 June 2019
Revisions of Previous Estimates
Economic Interest Adjustment
Transfers, Discoveries and Extensions
Acquisitions and Divestments
Closing Balance 30 June 2020
2C
Total
Liquids
(MMbbl)
26.7
–
–
(0.9)
–
25.8
2C
Total
Raw Gas
(Bcf)
2C
Total
Sales Gas
(PJ)
599
604
–
–
–
–
–
-
–
–
599
604
7 Permits, Licences and Interests Held
PERMIT OR LICENSE
OPERATOR
MATERIAL PROJECTS
WORKING INTEREST (%)
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 6-12N, WZ 6-12S,
WZ 6-12Mid, WZ 12-8W &
W12-8E Fields
30 June 2020
30 June 2019
26.95%
26.95%
WZ 12-8 Development area
55.00%1
55.00%1
OMV
Maari and Manaia fields
26.00%
26.00%
Arran Energy
Stanley field
Horizon Oil
Horizon Oil
Horizon Oil
Horizon Oil
Horizon Oil
Horizon Oil
Arran Energy
Elevala-Ketu fields
Ubuntu field
Exploration activities
Exploration activities
Exploration activities
30.00%2,3
30.15%2,4
30.00%2
80.00%2
– 5
95.00%2,6
30.00%2,3
30.15%2,4
30.00%2
80.00%2
100.00%2
95.00%2,6
Exploration activities
100.00%2,6
100.00%2,6
Puk Puk, Douglas,
Weimang and Langia fields
20.00%2,3
20.00%2,3
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 28 January 2020 Arran Energy Niugini Pty Limited became Operator of PDL10 and PRL40.
4 The PRL 21 licensees have applied for a development licence. Tenure remains current, subject to PNG ministerial approval.
5 PPL 430 licence term expired on 24 July 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 2020.
8 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 2018.
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 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 1015 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. 1P reserves reported beyond the field, property
or project level aggregated by arithmetic summation may be
a very conservative estimate due to the portfolio effects of
arithmetic summation.
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 Gavin Douglas, Subsurface Manager of
Horizon Oil Limited. Mr Douglas is a full-time employee
of Horizon Oil Limited and is a member of the American
Association of Petroleum Geologists and the Society of
Petroleum Engineers. Mr Douglas’ qualifications include a
Master of Reservoir Evaluation and Management from the
Heriot Watt University UK, and more than 23 years of relevant
experience. Mr Douglas 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.
9 Block 22/12, Beibu Gulf, Offshore China
HORIZON INTEREST
%
PRODUCTION
EXPLORATION
26.95
55%
During the year, the Group's working interest share of
production from the Beibu Gulf fields was 907,886 barrels
of oil. Crude oil sales were 833,071 barrels at an average
price of US$50/bbl, exclusive of executed hedging. Gross
oil production for the 2020 financial year averaged 9,230
bopd, of which the Group’s working interest share was
2,487 bopd. The Group’s share of sales volumes over the
year was an average of 2,282 bopd. As anticipated, sales
volumes during the financial year reverted to being
materially in line with the Group’s net working interest
share of production owing to the recoupment of the
company’s remaining Block 22/12 exploration and
development cost recovery entitlement under the
petroleum sharing contract. Sales volumes attributable
to the cost recovery entitlement reduced to 2,474 bbls
during the year, compared with 288,454 bbls in the prior
year.
Production from the fields continued uninterrupted by
the COVID-19 pandemic, with production maintained
above budget. Workover campaigns were carried out
throughout the year to sustain production rates, with the
most recent program commencing shortly after period
end. This is focused on optimising downhole electrical
submersible pumps and adding perforations of
undrained oil zones with the objective of increasing gross
production from the field to over 10,000 bopd.
Average cash operating costs including workovers for the
year were US$11.38/bbl (produced). The strong
production result, coupled with the low cost of
production, ensured continued strong free cashflow
generation from the Beibu Gulf fields, despite the lower
oil price environment resulting from the COVID-19
pandemic.
The WZ6-12 M1 exploration well was successfully drilled
to a total depth of 2025mMD during the year, with the
well intersecting 65m of oil pay in the Oligocene-aged
Weizhou T30A, T31L, T31C and T32L sands. The WZ6-12 M1
well is located between the Weizhou 6-12 North and
South fields, with the joint venture advancing plans to
develop the discovery with an infill well drilled from the
WZ6-12 platform later in the 2020 calendar year.
11 12 HORIZON INTEREST
PRODUCTION
%
26
During the year the Group's working interest share of
production from the Maari and Manaia fields was 567,676
barrels of oil. Crude oil sales were 594,450 barrels at an
average effective price of US$56/bbl exclusive of
executed hedging. Average gross production from the
field over the year was approximately 5,982 bopd, of
which Horizon’s share was 1,555 bopd.
Production for the year exceeded budget, driven by well
optimisation activities including the installation of a
larger electric submersible pump (ESP) in the MR6a well
and continued water injection. Whilst production and
liftings from the Maari oil field continued largely
uninterrupted by the COVID-19 pandemic, temporary
shut-ins of production wells MR6A, MR7A and MR9
impacted production late in the year with the Operator
advancing plans to workover these wells.
Continued cost savings initiatives were implemented by
the Operator, with average cash operating costs
maintained below US$25/bbl (sold) during the year.
Average cash operating costs decreased 17.6% for the
2020 financial year despite a modest 6% reduction in
production attributable to the temporary well shut-ins.
During the year 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, including acceptance of
Jadestone as operator by the Maari joint venture
partners, New Zealand Government approvals relating to
title transfer and change of operatorship and other
customary conditions on or before 15 November 2020.
Whilst the transaction continues to remain subject to
joint venture and New Zealand government approvals,
OMV and Jadestone progressed plans for operatorship
transition. OMV New Zealand will continue as operator of
the Maari Project until, and subject to, completion of the
proposed transaction.
13 Western Province, Papua New Guinea
HORIZON INTEREST
STANLEY FIELD (PDL 10)
%
30
ELEVALA/KETU FIELDS (PRL 21)
30.15
UBUNTU FIELD (PRL 28)
PUK PUK & DOUGLAS FIELDS (PRL 40)
30
20
In Papua New Guinea, Horizon 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. The Company holds
approximately 30% of the resource and is Operator of
two licences constituting the majority of the resource.
During the year, Arran Energy Pty Limited became the
legal and beneficial owner of Repsol Oil & Gas Niugini Pty
Ltd and Foreland Oil Limited, which hold PNG licence
interests, including PDL 10, PRL 21, PRL 28 and PRL 40.
As part of the transaction, Arran assumed operatorship
of PDL 10 and PRL 40. The new Operator of the PDL 10
licence articulated its proposal to progress a condensate
stripping operation at the Stanley field and to refine
development costs. The PDL 10 joint venture was also
encouraged by the recent receipt of correspondence
from the Papua New Guinea Petroleum & Energy Minister,
Hon. Kerenga Kua M.P. withdrawing the purported
notices of intention to cancel PDL 10 and PL 10, and
notice of cancellation of the Stanley Gas Agreement. The
Minister’s correspondence and the development options
for the Stanley field are being reviewed by the PDL 10
joint venture. Refinement of the engineering basis for a
PRL 21 condensate development encompassing the
Elevala and Ketu fields also continued during the year.
The condensate rich gas resources in the Stanley,
Elevala, Ketu and Ubuntu fields lie to the south of
ExxonMobil and Oil Search’s P’nyang gas field which is
planned to provide the threshold volumes for expansion
train 3 of the PNG LNG scheme. The planned pipeline
route from P’nyang to the PNG LNG facilities passes
within 20 kilometres of the Ketu field. Gas agreement
negotiations for the planned expansion of PNG LNG
continued during the year with the State publicly
expressing its strong encouragement for third party
access to the pipelines. On 31 January 2020 the Prime
Minister of PNG issued a media release stating that
negotiations on the P’nyang Gas Agreement had stopped
as the parties were unable to reach a mutually
acceptable commercial arrangement.
14 15 D
Directors
ubsidiaries it controlled at the end of, or during the financial year ended, 30 June 2020.
il
The following persons were directors of Horizon Oil Limited during the whole, or for part where noted, of the financial year
and up to the date of this report:
M Harding
C Hodge
G de Nys
S Birkensleigh
G Bittar
M Sheridan
C Hodge was a non-executive director up until 14 February 2020 when he was appointed as Chief Executive Officer and
Managing Director. He continues in office as at the date of this report. C Hodge replaced M Sheridan as
Executive Officer on 28 February 2020.
Review of operations
Principal activities
During the financial year, the principal activities of the Group continued to be directed towards petroleum exploration,
development and production.
A detailed review of the operations of the Group during the financial year is set out in the Activities Review on pages 10 to 15
of this annual financial report.
17 Group Financial Performance
Consolidated Statement of Profit or Loss and Other Comprehensive Income
2020 Profit Drivers
The Group reported a statutory loss before tax of US$44.2 million for the financial year (2019: profit US$48.4 million). The
loss result includes a non-
(2019: US$nil) and non-cash financing income of US$8.0 million (2019: US$11.2 million) associated with the revaluation of the
options issued under the subordinated loan facility, which once excluded results in an Underlying Profit Before Tax of
US$15.0 million (2019: US$37.3 million).
EBITDAX was US$50.6 million (2019: US$93.0 million), and EBIT was a loss of US$48.4 million (2019: US$49.0 million).
Included in the EBIT result is the non-
interests. Cashflows from operating activities of US$36.7 million (2019: US$72.8 million) and cash reserves enabled the
Group to meet its capital expenditure commitments and also repay a further US$24.0 million in debt during the financial
year.
EBITDAX, EBIT and underlying profit before tax are financial measures which are not prescribed by Australian Accounting
Standards and represent the profit under Australian Accounting Standards adjusted for interest expense, taxation expense,
depreciation, amortisation, and exploration expenditure (including non-cash impairments). The directors consider
EBITDAX, EBIT and underlying profit before tax to be useful measures of performance as they are widely used by the oil and
gas industry. EBITDAX, EBIT and underlying profit before tax information have not been audited. However, they have been
extracted from the audited annual financial reports for the financial years ended 30 June 2020 and 30 June 2019.
Basic earnings per share for the financial year were a loss of 4.18 US cents based on a weighted average number of fully
and partly paid ordinary shares on issue of 1,303,481,265 shares.
Sales and Production Growth
The Group concluded a strong financial year despite the economic challenges resulting from the COVID-19 pandemic, with
net production of 1,475,562 barrels of oil (2019: 1,604,578 barrels), a modest reduction from the prior comparative period
owing to natural reservoir decline and temporary well shut-ins in New Zealand. Sales volumes were 1,427,521 bbls (2019:
1,866,581 bbls) which, as anticipated, reverted to being materially
entitlement under the petroleum sharing contract. Sales volumes attributable to the cost recovery entitlement reduced to
2,474 bbls (2019: 288,454 bbls) during the financial year.
18 Crude oil sales revenue of US$84.0 million (2019: US$122.4 million) was generated during the financial year resulting from a
net realised oil price of US$58.86 per barrel (2019: US$65.57 per barrel), inclusive of hedge settlements. Whilst oil prices
were materially impacted by the collapse in oil demand resulting from the COVID-19 pandemic during the second half of
the financial year, revenue was supported by t
Throughout the year 53% of sales were
hedged (2019: 53%) with a hedging gain of US$9.1 million (2019: loss US$4.3 million) realised on 760,000 barrels hedged at a
weighted average price of US$64.05 per barrel (2019: 980,000 barrels at US$64.79 per barrel).
Operating costs for the period were US$53.4 million, 21% lower than the prior comparative period (2019: US$67.4 million)
driven by continued cost optimisation initiatives, particularly at Maari, combined with a lower amortisation charge.
General and Administrative Expenses
General and administrative expenses were higher than the prior comparative period at US$4.5 million (2019: US$3.8 million)
owing to ad-hoc legal costs pertaining to the PNG investigation conducted during the period. These ad-hoc costs were
partially offset by a continued focus on costs and reduced headcount following the COVID-19 pandemic. This expense
comprised net employee benefits expense of US$2.3 million (including non-cash share-based payment expense of US$0.6
million), corporate office expense of US$1.8 million, depreciation of US$0.4 million, and rental expense of US$0.1 million.
Insurance Expense
Insurance expense of US$2.1 million (2019: US$1.9 million) in the period reflected increased premiums associated with a
deterioration in insurance markets.
Exploration and Development Expenses
Exploration and development expenses of US$5.0 million (2019: US$4.6 million) were
and PNG assets. During the period there was continued focus on infill, appraisal and exploration opportunities in and
China
s, in particular in China. The objective is to integrate any commercial discoveries, such
as the drilling success at the WZ 6-12 M1 well, into the existing Block 22/12 development to sustain production rates late
into the decade.
Impairment of Non-Current Assets
Included in the result was US$67.3 million of non-cash
development assets in Papua New Guinea. The impairment assessment conducted in respect of the period considered
challenges faced by the Company in PNG, including unresolved licence tenure issues, the lack of progress in
commercialisation of the discovered resources in the Western Province of PNG, and the recent shift by the PNG
Government in requiring improved fiscal returns from resource projects. Reference was also made to comparable market
transactions. In light of these matters and uncertainties, the Group impaired its PNG exploration and development assets
during the year to a carrying amount of US$5.8 million.
Other Income
Other income was minimal in the current year, with the US$4.4 million recorded in the prior financial period generated from
insurance recoveries associated with the repairs to the Maari water injection flow line, production and test riser, and
wellhead platform which were performed during the 2016 and 2017 financial years.
Finance Costs
repayment of debt during the period and reduced global interest rates has further reduced interest and other financing
costs. Other non-cash financing income of US$8.0 million (2019: US$11.2 million) associated with the revaluation of the
options issued under the subordinated loan facility was recorded during the financial period.
The progressive
19 Income and Royalty Tax
The net income and royalty tax expense of US$10.9 million (2019: US$12.6 million) incurred during the financial year
included a current tax expense of US$5.9 million, a deferred income tax expense of US$2.0 million and a royalty related tax
expense of US$2.9 million. The net income tax expense was driven by cash taxes of US$4.3 million in China and US$1.6
million in New Zealand. Royalty tax expense of US$2.9 million reflected cash and deferred royalty tax associated with the
Maari/Manaia field.
Consolidated Statement of Financial Position
At 30 June 2020, total assets were US$171.6 million (2019: US$262.7 million) and total liabilities were US$88.8 million (2019:
US$141.3 million), resulting in a reduction in net assets to US$82.9 million (2019: net assets of US$141.3 million).
The reduction in assets is primarily due to the non-cash impairment expense of US$67.3 million, coupled with the
amortisation of the producing oil and gas assets. The reduction in total liabilities primarily reflects the US$24.0 million of
debt repayments made during the financial period, combined with the US$8.0 million non-cash revaluation of the options
issued under the subordinated debt facility.
At 30 June 2020, the Group had a working capital surplus of US$15.3 million (2019: US$13.9 million) resulting predominately
from the strong cash flow generation which was offset by the US$24.0 million in debt repayments.
At 30 June 2020, the Group returned to a net cash position of US$0.5 million, based on nominal amounts drawn down,
which represented a 101% reduction in the net debt position from 2019 of US$28.0 million. Net cash of US$0.5 million
comprised of cash and cash equivalents held of US$25.9 million (2019: US$21.5 million) offset by borrowings of US$25.4
million (2019: US$49.4 million). At financial year end, borrowings consisted US$25.4 million principal outstanding on the
US$95 million Syndicated Revolving Cash Advance Facility executed with senior lenders in November 2018.
Consolidated Statement of Cash Flows
2020 Cash Drivers
Net cash generated from operating activities was 50% lower for the financial year at US$36.7 million (2019: US$72.8 million)
due to the lower oil prices following the COVID-19 pandemic and reduced sales volumes. As foreshadowed and previously
communicated, sales volumes reduced owing to the full recoupment of the C
and development cost recovery entitlement under the petroleum sharing contract. Following the recoupment early in the
20 production. The free cash available after operating and investing activities enabled further debt reduction with a net
outflow of US$24.0 million from financing activities for the period.
Corporate
Debt Facilities
At 30 June 2020
of US$28.0 million), a reduction of US$28.4 million during the financial year. The net cash position comprises cash and
cash equivalent assets held of US$25.9 (30 June 2019: US$21.5 million) offset by the nominal value of borrowings drawn
down of US$25.4 million (30 June 2019: US$49.4 million) on the Syndicated Revolving Cash Advance Facility. Details of the
further reduced to a net cash position of US$0.5 million (30 June 2019: net debt
are set out in Note 18.
Oil Price Hedging
At 30 June 2020, the Group had 220,000 barrels of crude oil hedged through Brent oil price swaps (30 June 2019: 480,000
barrels) at a weighted average price of approximately US$36/bbl. Subsequent to period end, a further 180,000 barrels of
crude oil were hedged through Brent oil price swaps at a weighted average price of approximately US$45/bbl. During the
financial year, 760,000 barrels of oil price derivatives were settled, securing revenue of US$48.7 million.
Group business strategies and prospects for future financial years
d
and growth program and retire debt. That program is directed to bring
-lived
New Zealand and Papua New Guinea, and identify suitable inorganic growth opportunities.
The Company has a conservative and selective exploration policy with specific focus on plays providing material scale and
upside. The reserves and contingent resources in the
commodity price upside, especially oil price and production growth.
The achievement of these strategic objectives may be affected by macro-economic and other risks including, but not
limited to, global growth, volatile commodity prices, exchange rates, climate change, access to financing and political
these objectives; key risks of which include production and development risk, exploration and drilling risks, joint operations
risk, and geological risk surrounding resources and reserves.
The Group has various risk management policies and procedures in place to enable the identification, assessment and
mitigation of risks that may arise. Whilst the Group can mitigate some of the risks described above, many are beyond the
e
Corporate Governance Statement.
Outlook
It is expected that the 2021 financial year and beyond will be underpinned by continued strong oil production from the
Continued water injection at Maari combined with the progressive planned
development of WZ 12-8E oil field in China and other infill well opportunities, are forecast to materially offset the longer
term reduction in production associated with natural reservoir decline. In the near term, strong cashflow generation is
forecast to continue albeit at a slightly reduced rate owing to the lower oil price environment resulting from the COVID-19
pandemic
debt levels and funding for the Block 22/12 infill drilling and WZ 12-8E oil field development. Whilst we acknowledge the
current challenges faced in Papua New Guinea, we continue to focus on progressing opportunities to realise value from our
PNG resources in the near term.
21 -term focus is on:
– Optimising production performance from the Beibu and Maari/Manaia fields through various well intervention activities;
– Successfully executing the Block 22/12 infill drilling program;
– Progressing the Block 22/12 WZ 12-8E field development;
– Continued evaluation of growth opportunities to completement the Group s existing oil producing assets; and
– Progressing opportunities
Significant changes in the state of affairs
PNG Investigation
payment to acquire a 10 percent licence interest in PRL 21 in the Western Province of Papua New Guinea during 2011. Given
transaction occurred more than 8 years ago, the Horizon Board initiated an immediate and in-depth investigation. The
investigation, which included a forensic review of all aspects of the transaction, was conducted by Herbert Smith Freehills
and Deloitte with the oversight of an Independent Board Committee (IBC). The investigation was to examine whether the
The investigation was
concluded in June 2020 with Horizon confirming that the investigation did not establish any breach of Australian foreign
bribery laws. At the date of this report, Horizon is not aware of any regulatory investigation into these matters involving the
Company in Australia or Papua New Guinea.
Other than the matters noted above and disclosed in the review of operations, there have not been any other significant
changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
Other than the matters noted above and disclosed in the review of operations, there has not been any matter or
circumstance which has arisen since 30 June 2020 that has significantly affected, or may significantly affect:
[1] -
[2] - the results of those operations in future financial years; or
[3] -
financial years.
Environmental regulation
The Group is subject to significant environmental regulation in respect of exploration, development and production
activities in all countries in which it operates
committed to undertaking all of its exploration, development and production activities in an environmentally responsible
manner.
China, New Zealand, and Papua New Guinea. Horizon Oil Limited is
The Directors believe the Group has adequate systems in place for managing its environmental requirements and is not
aware of any breach of those environmental requirements as they apply to the Group.
Reporting currency
22 Information on Directors
Chairman, Independent Non-Executive Director Mike Harding
Responsibilities:
Mr Harding has been Chairman of Horizon since November 2018. He is Chairman
Experience:
Directorships:
Remuneration and Nomination Committees.
Mr Harding has held management positions around the world with British
Petroleum (BP), including President and General Manager of BP Exploration
Australia.
Mr Harding is currently the Chairman of Downer and a Director of Cleanaway
Waste Management Limited. He is a former Chairman of Lynas Limited, Roc Oil
Company Limited, Clough Limited and ARC Energy Limited and a former Director
of Santos Limited.
Qualifications:
Mr Harding holds a Master of Science, majoring in Mechanical Engineering.
Managing Director, Chief Executive Officer
Chris Hodge
Responsibilities:
Experience:
Directorships:
Qualifications:
Mr Hodge has been Managing Director and Chief Executive Officer of Horizon since
February 2020, and a Director since April 2019.
Management and Disclosure Committees.
petroleum geophysicist. Mr Hodge held senior managerial and consulting
positions in major petroleum exploration and production companies, including
E&P Advisor to both Mitsubishi and Mitsui in Australia, Managing Director of
Adelphi Energy and Exploration Manager of Ampolex. He played a significant part
in the growth of each of these companies through a mix of successful
exploration, field development and acquisition.
Mr Hodge is a former Director of Roc Oil Company Limited and Xstate Resources.
Mr Hodge holds a Master of Science, majoring in Structural Geology and Rock
Mechanics and a Graduate Diploma of Applied Finance. He is a Member of the
Petroleum Exploration Society of Australia (PESA) and the American Association of
Petroleum Geologists (AAPG).
Non-executive Director
Gerrit de Nys
Responsibilities:
Mr de Nys has been a Director of Horizon since June 2007. He is Chairman of
Experience:
Directorships:
Qualifications:
and Nomination Committees.
Mr de Nys has over
contracting and natural resource investment management.
Mr de Nys is a Director of various IMC Pan Asia Alliance Group subsidiaries,
companies
Group. Mr de Nys is a former Director of SOCAM Development Limited.
Mr de Nys holds a Bachelor of Technology (Civil Engineering). He is a Fellow of the
Institution of Engineers, Australia, a past Fellow of the Australian Institute of
Company Directors and a retired Chartered Professional Engineer.
23 Independent Non-Executive Director
Sandra Birkensleigh
Responsibilities:
Ms Birkensleigh has been a Director of
Nomination Committees.
Experience:
Directorships:
Qualifications:
and corporate governance with PricewaterhouseCoopers including as Global Lead for
Governance Risk & Compliance, National Lead for Partner Risk and Controls Solutions and a
Service Team Leader for Performance Improvement.
Ms Birkensleigh is a Director of Auswide Bank Limited, MLC Limited, 7-11 Holdings and its
Centre and a Council Member of the University of the Sunshine Coast. Ms Birkensleigh is
Chair of the Audit and Risk Committee of the University of the Sunshine Coast, Chair of the
Audit and Risk Committee of the Public Trustee of Queensland and an Independent Member
of the Audit Committee of the Reserve Bank of Australia. Ms Birkensleigh is a Former
Director of Plum Financial Services Limited.
Ms Birkensleigh is a Chartered Accountant and holds a Bachelor of Commerce. She is a
Graduate Member of the Australian Institute of Company Directors.
Non-executive Director
Greg Bittar
Responsibilities:
Experience:
Directorships:
Qualifications:
substantial shareholder IMC Pan Asia Alliance Group.
Mr Bittar has extensive experience in public and private markets mergers and acquisitions,
capital markets and strategic advisory assignments across a range of sectors including
general industrials, metals and mining, mining services and energy. Mr Bittar has worked for
Bankers Trust, Baring Brothers Burrows and Morgan Stanley.
Mr Bittar is Chairman of Trek Metals Limited, and former Chairman of Millennium Minerals
Limited.
Mr Bittar holds a Master of Finance from London Business School, a Bachelor of Economics
and a Bachelor of Laws (Hons).
Alternate Director for Greg Bittar
Bruno Lorenzon
Responsibilities:
Experience:
Qualifications:
Company Secretary
Responsibilities:
Experience:
Mr Lorenzon has been an Alternate Director for Greg Bittar since March 2017.
Mr Lorenzon is Head, Group Corporate Finance for the IMC Pan Asia Alliance Group and has
experience in investments, strategy and corporate finance in the
resources sector both in Australia and overseas. He has worked for the IMC Pan Asia Alliance
Group for the past 10 years and previously worked for Vale in Brazil and Rio Tinto in Australia
in roles encompassing strategic planning, mergers and acquisitions and business
development.
Mr Lorenzon is a Chartered Financial Analyst and holds a Master of Business Administration
and Bachelor of Civil Engineering.
Kylie Quinlivan
Ms Quinlivan has been General Counsel and Company Secretary of Horizon since July 2018.
Ms Quinlivan is a corporate lawyer with expertise in public markets mergers and acquisitions
and private transactions, corporate fund raising and corporate governance across a range of
sectors, particularly oil and gas. She has over 14
including first tier Corporate M&A practice at Minter Ellison, Sydney.
as a corporate lawyer
Qualifications:
Ms Quinlivan holds a Master of Laws and Bachelor of Commerce.
Assistant Company Secretary
Kyle Keen
Responsibilities:
Experience:
Qualifications:
Mr Keen joined Horizon in February 2018 as Finance Manager and has been the Assistant
Company Secretary since November 2018.
Mr Keen is a Chartered Accountant with expertise in external audit across a range of sectors,
in particular oil and gas. He has 9
practices such as EY, United Kingdom and KPMG, South Africa.
including working in first tier auditing
Mr Keen holds a Bachelor of Accounting (Hons) and is a member of the South African
Institute of Chartered Accountants.
24 Directors held the following number of fully paid ordinary shares:
ORDINARY SHARES
DIRECT
INDIRECT
TOTAL
-
-
-
-
-
-
-
-
-
-
2,203,639
2,203,639
-
-
-
-
-
-
DIRECTOR
M Harding
C Hodge
G de Nys
S Birkensleigh
G Bittar
B Lorenzon (as alternate)
Meetings of Directors
financial year, and the numbers of meetings attended by each Director were:
BOARD
AUDIT
COMMITTEE
RISK MANAGEMENT
COMMITTEE
REMUNERATION
AND NOMINATION
COMMITTEE
DISCLOSURE
COMMITTEE
Number of meetings held:
Number of meetings attended by:
M Harding
G de Nys
S Birkensleigh
G Bittar
C Hodge2
B Lorenzon (as alternate for G Bittar)
M Sheridan4
111
11
11
11
10
10
7
5
3
3
3
3
2
1
2
2
2
2
1
3
3
3
3
1
23
1
5
5
4
1
1
Eleven Board meetings were held during the period, with an additional six Board meetings held exclusively for Independent Non-Executive Directors
during the financial year.
2 C Hodge attended audit committee meetings in his capacity as Chief Executive Officer of Horizon Oil Limited and is not a member of the audit
committee.
3 C Hodge attended the remuneration and nomination committee meetings in his capacity as chair of the committee and as an Independent Non-
Executive Director prior to his appointment as Chief Executive Officer.
4 M Sheridan attended an audit committee meeting in his capacity as Chief Executive Officer of Horizon Oil Limited and was not a member of the
audit committee.
25 Corporate Governance
The Company and the Board are committed to achieving and demonstrating the highest standards of corporate
interests of shareholders. The Corporate Governance Statement was approved by the Board on 27 August 2020.
website at www.horizonoil.com.au. A description of the Company's main corporate governance practices is set out in the
Corporate Governance Statement. All these practices, unless otherwise stated, were in place for the full financial year and
rd
edition, released in March 2014.
Sustainability Reporting
This year Horizon has increased its focus on sustainability and engaged a sustainability consultant to undertake a
materiality review of the environmental, social and governance issues arising from our operations. Our materiality review
is our first step in building an environment, social and governance (ESG) framework and action plan for the Company.
Horizon is reporting for the first time against the recommendations of the Task Force on Climate-Related Financial
Disclosures (TCFD). We are also participating in the Carbon Disclosure Project (CDP) in 2020. This is consistent with
Principle 7.4 of the ASX Corporate Governance Council Principles and Recommendations (fourth edition), which
recommends that ASX listed entities disclose any material exposure to environmental or social risks, and how the
company manages or intends to manage those risks.
www.horizonoil.com.au.
Remuneration Report
This Remuneration Report (Report) outlines the remuneration arrangements for the Key Management Personnel (KMP) of
the Company for the financial year ended 30 June 2020. This Report
audited in accordance with section 308(3)(c) of the Corporations Act 2001. The Report is structured as follows:
[1] -
Individuals covered by the Remuneration Report
[2] - Executive remuneration framework
[3] - Actual remuneration of executives
[4] - Contractual arrangements for executives
[5] - Performance and financial year remuneration outcomes
[6] - Non-executive Director remuneration
[7] - Statutory and share-based reporting
Individuals Covered by the Remuneration Report
The Group is required to prepare a Report in respect of KMP, those persons who have the authority and responsibility for
planning, directing, and controlling the activities of the Company and the Group, either directly or indirectly, being:
– Directors; and
– Other Key Management Personnel
26 The table below outlines the KMP movements during the financial year:
NAME
DIRECTORS
Mike Harding
Chris Hodge1
Michael Sheridan2
Gerrit de Nys
TITLE
PERIOD AS KMP
Chairman (non-executive)
Full financial year
Director (executive)
Director (executive)
Director (non-executive)
Full financial year
Up to 28 February 2020
Full financial year
Full financial year
Sandra Birkensleigh
Director (non-executive)
Greg Bittar
Bruno Lorenzon
OTHER KMP (EXECUTIVES)
Richard Beament
Kylie Quinlivan
Kelvin Bramley
Andrew McArdle3
Director (non-executive)
Full financial year
Alternate Director (non-executive)
Full financial year
Chief Financial Officer
Full financial year
General Counsel/Company Secretary
Full financial year
General Manager - PNG
Full financial year
Chief Operating Officer
Up to 19 December 2019
1
C Hodge served as an Independent Non-executive Director until his appointment as Chief Executive Officer and Managing Director effective
14 February 2020.
2 M Sheridan ceased to be a Director and KMP effective 28 February 2020.
3 A McArdle ceased to be a KMP effective 19 December 2019.
Executive Remuneration Framework
[2.1] - How does Horizon determine remuneration outcomes?
appropriate for the results delivered. The Board, through its Remuneration and Nomination Committee, continues to
. The remuneration
remuneration.
– Good reward governance principles:
– competitiveness and reasonableness;
– acceptability to shareholders;
– performance linkage / alignment of executive compensation;
– transparency; and
– capital management.
– focuses on sustained growth in shareholder value; and
–
interests:
–
–
– rewards capability and experience;
– reflects competitive reward for contribution to growth in shareholder wealth;
– provides a clear structure for earning rewards; and
– provides recognition for contribution.
27 [2.2] - Remuneration policy and link to performance
The remuneration framework is designed to recognise performance during the financial year (Short-Term Incentives (STIs))
and maximise shareholder value (Long-Term Incentives (LTIs)). Executive remuneration is comprised of fixed and variable
remuneration mix of maximum incentive payments as a percentage of total remuneration. Annual incentives have been
established to drive performance without encouraging undue risk taking. The remuneration mix for the financial year is
shown in the table below.
nd LTIs. The graph below sets out the proportion of fixed and variable
Chief Executive Officer
Performance-based
Total Fixed Remuneration (TFR)
50%
Maximum STI
25%
Maximum LTI1
25%
Other Executive KMP
Total Fixed Remuneration (TFR)
70%
Maximum STI
15%
Maximum LTI1
15%
1 Fair value of LTI determined at 1 July in accordance with the Long Term Incentive Plan.
[2.3] - Elements of remuneration
FIXED REMUNERATION (FR)
What is Fixed
Remuneration?
Fixed Remuneration (TFR), together with non-monetary benefits.
TFR is base salary plus superannuation. Non-monetary benefits include car parking, insurances and other
expenses inclusive of fringe benefits tax. Executive remuneration (which is set and paid in Australian
Dollars (A$)) and other terms of employment are reviewed annually by the Remuneration and Nomination
Committee having regard to relevant comparative information.
Link to strategy and
performance
Competitive TFR is paid to ensure that the Group can attract and retain suitable executives to deliver the
strategic goals. Fixed Remuneration is reviewed annually by the Remuneration and Nomination
C
qualification and individual performance.
ted skill, experience and
SHORT-TERM INCENTIVE (STI)
Objective
The STI provides all Executives with an opportunity to earn an annual incentive which is delivered in cash.
The STI award is determined by the Board following the end of the financial year having regard to Group
performance over the financial year.
How is the STI linked to
performance?
The STI is designed to motivate and reward Executives for contributing to the delivery of annual business
performance. Key Performance Indicators (KPIs) are determined each financial year and approved by the
Board. The
against these KPIs is reviewed annually.
How is performance
measured for the STI?
Awards are made annually with performance measured over the twelve months to 30 June and are
aligned to the attainment of
. Awards under the
plan are determined and paid (in cash) in the first quarter of the new financial year. Actual performance
against financial, non-financial and individual measures is assessed at the end of the financial year. In
assessing the achievement of measures, the Remuneration and Nomination Committee may exercise its
discretion to adjust outcomes for significant factors outside the control of management that contribute
positively or negatively to results.
STI opportunity
Other Executives TFR.
28 LONG-TERM INCENTIVE (LTI)
Objective
The LTI plan aims to align Executive remuneration with the creation of shareholder value.
How is the LTI linked to
performance?
LTI vesting is linked to absolute Horizon share performance, and Horizon share performance relative to the
S&P ASX 200 Energy Index.
Form of LTI grant?
LTIs are awarded as performance rights, known as share appreciation rights (SARs).
SARs vest over a three to
Shareholder Return (TSR
Energy Index (Index), with the level of outperformance determining the proportion of SARs that vest.
The SAR value on vesting is calculated as the difference between the Horizon share price at allocation,
and the Horizon share price at exercise. The Company may settle the SAR value in cash or shares or a
combination, in the Bo
What are the
performance measures
applied to the LTI?
The Board considers that the absolute and relative TSR performance hurdles effectively align the interests
of Executives with
shareholders, by motivating Executives to achieve superior outcomes. TSR is
a robust and transparent means of measuring shareholder returns.
SARs vest over a three to five-year period on fulfilment of two performance criteria:
vest is calculated as follows:
if Horizon
•
•
•
linear pro rata calculation.
TSR) must exceed 10%; and
SX 200 Energy Index, whereby the proportion of SARs that
vest;
the Index, 100% vest; and
percentage vest based on a
Performance fourteen percent above the Index equates to a performance level likely to exceed the 75th
percentile of market returns of companies in the Index (weighted by company size).
Performance period?
SARs will first be tested for vesting at 3 years from award; and thereafter re-tested every 6 months until
5 years from award.
What is the LTI
opportunity?
The CEO has an LTI opportunity equal to 50% of TFR, and other Executives have an LTI opportunity equal to
The number of SARs issued to an Executive in a relevant year is calculated by dividing the monetary value
determined by an independent expert each year using a Monte Carlo simulation.
Treatment of
incentives on cessation
of employment
When do SARs lapse?
exercisable, become exercisable.
SARs will lapse:
– where the SAR has not vested, 5 years after award or such longer period necessary for the Executive to
freely deal in Horizon securities in accordance with the Securities Trading Policy;
– the Board exercises its discretion to lapse the SARs on cessation of employment;
– the Board exercises its discretion to lapse the SARs for serious misconduct or fraud by an Executive; or
– the Executive provides a notice to Horizon that they wish the SARs to lapse.
Effect of take-over or
change of control of
Company, death or
disablement
In the event of a takeover or change of control event, the Board will either have the discretion or be
required (if a change of control occurs) to determine a special retesting date for
SARs.
For example, the Board will have discretion to determine a special retesting date where a takeover bid is
made for the Company. In that case, the special retesting date will be the date determined by the Board.
Where a statement is lodged with the ASX that a person has become entitled to acquire more than 50% of
the Company, the Board will be required to determine a special retesting date, and the special retesting
date will be the day the statement is lodged with the ASX.
The SARs will vest if the performance criteria are fulfilled in relation to that special retesting date.
29 [2.4] - Associated policies
The Group has adopted several policies to support remuneration framework and governance, including the Securities
www.horizonoil.com.au.
Actual Remuneration of Executives
Disclosing actual pay provides shareholders with additional information to assist in understanding the cash and other
benefits received by Executives in respect of a financial year. This information differs from the remuneration details
prepared in accordance with statutory obligations and accounting standards on pages 36 - 37 of this Report, as those
details include the values of performance rights that have been awarded, but which may or may not vest. The information
provided below is not prescribed by Australian Accounting Standards and represents the actual remuneration payable to
KMP in respect of this financial year. See Statutory and Security-based Reporting (Section 7) of this Report for statutory
remuneration disclosures that have been prepared in accordance with the Australian Accounting Standards. The table
below excludes the accounting expenses of equity grants and other long-term benefits such as annual and long service
leave awards and sets out the actual value of remuneration received by executive KMP in connection with the financial
year.
Actual remuneration received in respect of the financial year
EXECUTIVE
C Hodge3
M Sheridan4
R Beament
K Quinlivan7
K Bramley5
A McArdle6
Total
TOTAL FIXED REMUNERATION
(INCLUDING SUPERANNUATION)
US$
NON-MONETARY
BENEFITS
US$
STI AMOUNTS
US$1
LTI
AWARDS2
TOTAL
2020
156,007
2019
-
2020
349,594
2019
536,138
2020
308,881
2019
321,486
2020
172,159
2019
271,480
2020
316,5705
2019
399,6125
2020
174,991
2019
357,425
2020
1,478,202
2019
1,886,141
11,151
-
40,517
56,829
8,786
7,277
4,837
5,165
82,0445
146,1365
3,279
6,171
150,614
221,578
-
-
-
223,539
12,808
57,405
7,211
48,475
10,816
48,475
-
63,783
30,835
441,677
-
-
-
-
-
-
-
-
-
-
-
-
-
167,158
-
390,111
816,506
330,475
386,168
184,207
325,120
409,430
594,223
178,270
427,379
1,659,651
2,549,396
Includes STIs payable in respect of the current financial period performance.
LTI awards that vested and were exercised during the financial year.
1
2
3 Actual remuneration for C Hodge reflects only the remuneration received from the date of appointment as Chief Executive Officer and Managing Director
on 14 February 2020. Mr Hodge forfeited 100% of his STI opportunity for the financial year.
4 Actual remuneration for M Sheridan reflects only the remuneration to 28 February 2020, when M Sheridan ceased to be a KMP and Director. M Sheridan
was on notice from 28 February 2020 to 9 June 2020 during which period he was paid US$135,907 in accordance with his employment contract. Following
the notice period M Sheridan received a US$558,088 termination payment in accordance with his employment contract. Mr Sheridan is not entitled to any
STI above his termination payment.
5
on-
living abroad in countries such as Papua New Guinea. Mr Bramley returned to Australia during December 2019, upon which his entitlement to expatriate
allowances ceased.
6 A McArdle ceased to be a KMP effective 19 December 2019.
7 K Quinlivan was on unpaid parental leave from
30 Contractual Arrangements for Executives
Remuneration and other terms of employment for the Executives are formalised in employment contracts.
The key terms of the contractual arrangements for the CEO are summarised below:
COMPONENT
CONTRACT TERM
EXPIRY DATE
NOTICE PERIOD
EMPLOYEE
NOTICE PERIOD
GROUP
Chief Executive Officer
Ongoing basis
No expiration date
6 months
6 months
Termination of employment (without cause)
Payment of termination benefit on termination without cause by the Company,
equal to the total of:
▪
▪
for between 1 year and 2 years continuo
remuneration: and
▪
Board has discretion to permit the SARs not yet exercised to lapse or accelerate the
date on which the SARs become exercisable.
Termination of employment (with cause)
STI is not awarded.
Board has discretion to lapse all SARs.
The key terms of the contractual arrangements for the other Executive KMPs are summarised below:
COMPONENT
CONTRACT TERM
EXPIRY DATE
NOTICE PERIOD
EMPLOYEE
NOTICE PERIOD
GROUP
Other Executives
Ongoing basis
No expiration date
3 months
6 months
Termination of employment (without
cause)
Payment of termination benefit on termination without cause by the Company, equal to
6 months remuneration.
50% of the value of any STI paid to the Executive in the preceding 12 months.
50% of the value of any LTI awards granted or paid in the preceding 12 months.
Board has discretion to cause the SARs not yet exercised to lapse or accelerate the
date on which the SARs become exercisable.
Termination of employment (with cause)
STI is not awarded.
Board has discretion to lapse all SARs.
31 Group Performance and Financial Year Remuneration Outcomes
[5.1] - Overview of Horizon performance
The Board aligns remuneration and
dependent on overall company performance and the vesting of LTIs occurs on fulfilment of absolute Horizon Total
Shareholder Return (TSR), and Horizon TSR relative to the S&P/ASX200 Energy Index.
Award of STIs is
Horizon share price performance for the current and previous four financial years is displayed in the chart below:
Horizon share price ("HZN") versus S&P/ASX200 Energy Index and Brent Crude Oil
$0.18
$0.16
$0.14
$0.12
$0.10
$0.08
$0.06
$0.04
$0.02
$0.00
70,000,000
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
-
e
m
u
o
V
l
HZN Trading Volume
HZN Share Price
S&P/ASX 200 Energy Index (Rebased)
Brent Crude Oil (Rebased)
The table below sets out information regarding the Gro
Corporations Act.
FY20
FY19
FY18
(44,235)
48,409
(1,580)
50,600
93,012
68,482
FY17
4,154
45,171
d by the
FY16
(149,726)
53,995
Net cash/(debt)
489
(27,959)
(88,608)
(108,469)
(131,862)
[5.2] - Performance against STI measures for the financial year
approach. The following table sets out the performance conditions for the STI and their rationale for the financial year.
opportunity is calculated with reference to achievement of KPI targets based on a weighted scorecard
32 KEY FOCUS AREAS
OBJECTIVE AND
MEASUREMENT
RATIONALE
STATUS
FINANCIAL
Financial Metrics &
Profitability
Achievement of budgeted
revenue, operating costs and
cashflow across the Block
22/12 and Maari/Manaia fields
Maintain average Group
operating costs below
US$20/bbl and maintain low
corporate general and
administrative expenditure
Maintain and enhance operating
income streams
Maximise profitability and cashflow
Partially
Achieved
Effective cost control
Exceed
Capital Management
Gearing &
Net debt reduction
Appropriate level of gearing and
exposure to manage business risk
Exceed
Production
Optimisation
Achieve budgeted production
Maximise profitability and cashflow
Achieved
OPERATIONAL
Reserves
Reserves replacement
PNG
Commercialisation
Progression of PNG resource
development planning and
commercialisation
Ensure sustainability of business
and cashflow
Maximise shareholder value and
future growth
Partially
Achieved
In
Progress
BUSINESS
DEVELOPMENT
Growth of the
business
Focus on organic & inorganic
growth opportunities
Ensure sustainability of the business
and cashflow whilst creating value
for shareholders
In
Progress
SAFETY
HSSE
Achievement of no lost time
People & Culture
PEOPLE, CULTURE &
SUSTAINABILITY
Sustainability
operated joint ventures
Attracting the right skills and
retaining key staff
Disclosure and reporting in
accordance with TCFD
guidelines and external
benchmarking participation
Provide a safe workplace for
employees and residents
Ensure Company has the necessary
resources to achieve strategic
objectives
Sustainability awareness; make the
right kind of impact
Achieved
Achieved
Achieved
Voluntary forfeiture of STI Opportunity
Based on the KPI scorecard approved by the Board in respect of the financial year, Executives were eligible for a possible
STI award equal to 38% of their total STI opportunity.
Horizon, and the broader economy, has experienced significant adverse financial impacts as a result of the global COVID-
19 pandemic. In particular, the oil and gas sector faced and continues to face ongoing oil price volatility due to lower short
to medium term demand and variable supply.
financially stable position and has not had to seek any forms of supplementary corporate financing.
Having regard to the impact of COVID-19, the Chief Executive Officer voluntarily forfeits 100% of his possible STI opportunity,
and all other Executives voluntarily forfeit 50% of their possible STI Opportunity.
33 The table below shows the STIs awarded during the financial year:
EXECUTIVE
C Hodge1
M Sheridan2
R Beament
K Quinlivan3
K Bramley
A McArdle4
TOTAL OPPORTUNITY
US$5
% OF FIXED
REMUNERATION
%
AWARDED
%
FORFEITED
79,464
262,510
67,413
37,951
56,926
74,903
50%
50%
21.4%
21.4%
21.4%
21.4%
0%
0%
19%
19%
19%
0%
100%
100%
81.0%
81.0%
81.0%
100%
1 Under the terms of Mr
from 14 February 2020. Mr Hodge forfeited 100% of his STI opportunity for the financial year.
2 M Sheridan ceased as a KMP on 28 February 2020. Mr Sheridan is not entitled to any STI above his termination payment.
3 K Quinlivan was on unpaid parental leave from 1 July 2019 to 31 October 2019.
4 A McArdle ceased as a KMP on 19 December 2019. Mr McArdle was not eligible for an STI for FY20.
5
The STI opportunity is calculated by translating the Executives Australian Dollar denominated TFR to United States Dollars at the prevailing spot rate on
30 June 2020.
-rata basis
asis.
[5.3] - Performance against LTI measures for the financial year
5.1 of this Report.
LTI awarded in
respect of FY20
LTI awards for Executives are made at the beginning of the financial year. In 2019, LTIs were awarded to
was approved by shareholders at the AGM on
22 November 2019.
LTI awards take the form of SARs. For 2019, each SAR had a fair value of A$0.057617, calculated by an
LTI quantum for
FY20
The table below shows the financial year LTI grants.
EXECUTIVE
% OF TFR
NUMBER OF SARS
GRANTED DURING
FY20
VALUE OF SARS AT
EFFECTIVE ALLOCATION
DATE1
NUMBER OF SARS
VESTED DURING FY20
NUMBER OF SARS
LAPSED DURING FY20
C Hodge2
50%
-
-
-
-
M Sheridan
50%
6,508,496
$262,275
12,186,198
2,200,649
R Beament
21.4%
1,671,382
$67,352
K Quinlivan
21.4%
1,411,389
$56,875
K Bramley
21.4%
1,411,389
$56,875
A McArdle3
21.4%
1,857,091
$74,836
-
-
-
-
-
-
-
-
1 The value of a SAR at allocation (1 July 2019)
2 Mr Hodge was not a KMP at the time of LTI award at the beginning of the financial year. Under the terms of Mr
-
employment agreement, he will be eligible for an LTI award
Executive Officer.
3
Awards vesting in
FY20
No SARs were exercised by KMP during the financial year.
34 Non-Executive Director Remuneration
NEDs are paid fees for services on the Board and committees and do not receive any performance-related incentives and
no retirement benefits are provided other than superannuation contributions. The Remuneration and Nomination
Committee reviews fees annually and the Board may also seek advice from external advisers when undertaking the review
process.
NED fees are determined within an aggregate D
shareholders. Shareholders approved the current fee pool limit of A$600,000 at the 2009 Annual General Meeting. These
fees have not changed in A$ terms for the last seven years. Note that the remuneration table set out on page 36 shows
tional currency.
The table below shows the levels for NEDs (exclusive of superannuation) for FY20.
FEES
Board Fees
DESCRIPTION
Chair
PER ANNUM
A$163,110
Other Non-executive Directors
A$81,555
There were no additional fees paid to NEDs during the financial year for being members of the Board committees. The
NEDs are reimbursed for expenses reasonably incurred in attending to the affairs of the Company. There are no retirement
allowances in place for NEDs.
35 Statutory and share based reporting
[7.1] - Director remuneration for the financial year
The following table sets out the statutory disclosures required under the Corporations Act 2001 (Cth) and in accordance
with Australian Accounting Standards remuneration for Directors for the years ended 30 June 2020 and 30 June 2019.
FINANCIAL YEAR ENDED
30 JUNE 2020 AND 2019
NON-EXECUTIVE DIRECTORS
M Harding
J Humphrey1
G de Nys
S Birkensleigh
G Bittar2
C Hodge3
Total Director remuneration
Total Director remuneration (A$)
SHORT-TERM BENEFITS
POST-EMPLOYMENT BENEFITS
TOTAL5
CASH SALARY / BOARD FEES
SUPERANNUATION4
US$
109,198
68,260
-
59,188
54,599
58,237
54,599
58,237
54,599
58,237
33,898
12,508
306,893
314,667
457,729
441,234
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
US$
10,374
6,485
-
5,623
5,187
5,532
5,187
5,532
5,187
5,532
3,220
1,188
29,155
29,892
43,484
41,917
US$
119,572
74,745
-
64,811
59,786
63,769
59,786
63,769
59,786
63,769
37,118
13,696
336,048
344,559
501,213
483,151
John Humphrey resigned as a Director and Chairman on 28 November 2018.
1
2 B Lorenzon, as alternate Director to G Bittar, received no fees during the current and prior financial periods.
3 Remuneration for C Hodge reflects remuneration as an Independent Non-executive Director prior to
and Managing Director on 14 February 2020.
appointment as Chief Executive Officer
4 Superannuation includes both compulsory superannuation payments and salary sacrifice payments made on election by Directors.
5 Remuneration is paid in Australian dollars and converted to US dollars at the foreign exchange rate prevailing on the date of the transaction.
36 [7.2] - Statutory details of other key management personnel remuneration for the financial year
The table below outlines the remuneration of other key management personnel for the years ended 30 June 2020 and
30 June 2019.
FINANCIAL YEAR ENDED
30 JUNE 2020 AND 2019
SHORT-TERM BENEFITS
POST-EMPLOY-
MENT BENEFITS
LONG-TERM
BENEFITS
CASH SALARY
AND FEES
STIs
NON-
MONETARY1
SUPERANNUATION2
TOTAL CASH
OR IN-KIND
BENEFIT
LONG SERVICE
LEAVE
ACCRUAL3
SHARE
BASED
PAYMENTS
SARs4
TOTAL6
OTHER KEY MANAGEMENT
PERSONNEL
US$
US$
US$
US$
US$
US$
US$
US$
C Hodge6
Chief Executive
Officer
M Sheridan7
Chief Executive
Officer
R Beament
Chief Financial
Officer
K Quinlivan10
General Counsel
K Bramley8
General Manager
PNG
A McArdle9
Chief Operations
Officer
Total KMP
remuneration
Total KMP
remuneration (A$)
2020
149,765
2019
-
2020
340,570
-
-
-
2019
518,266
223,539
56,829
-
40,517
-
9,024
17,871
11,151
6,242
167,158
-
-
-
-
167,158
-
-
390,111
9,838
175,900
575,849
816,505
30,733
256,706
1,103,944
2020
294,458
12,808
8,786
14,423
330,475
6,850
46,231
383,556
2019
303,615
57,405
7,277
17,871
386,168
25,119
23,675
434,962
2020
163,456
7,211
4,837
8,703
2019
253,608
48,475
5,165
17,871
184,207
325,119
-
-
39,040
223,247
19,992
345,111
2020
302,062
10,816
82,044
14,508
409,430
6,122
39,040
454,592
2019
381,761
48,475
146,136
17,852
594,224
26,689
19,992
640,905
2020
170,185
-
3,279
2019
342,748
63,783
6,171
4,806
14,677
178,270
427,379
-
-
12,495
190,765
-
427,379
2020
1,420,496
30,835
150,614
57,706
1,659,651
22,810
312,706
1,995,167
2019
1,799,998
441,677
221,578
86,142
2,549,395
82,541
320,365
2,952,301
2020
2,113,057
44,929
223,101
85,991
2,467,078
33,625
430,427
2,931,130
2019
2,518,714
629,799
309,964
120,531
3,579,008
115,466
428,768
4,123,242
1 Non-monetary benefits include the value of car parking, insurances
2 Superannuation includes both compulsory superannuation payments and salary sacrifice payments made on election by Directors and KMPs.
3 Reflects the movement in the long service accrual between respective reporting dates.
4 Reflects the theoretical value (calculated as at effective allocation date and converted to US dollars at the foreign exchange rate prevailing at the date
of grant) of previously unvested options/SARs which vested during the financial year.
5 Remuneration is paid in Australian dollars and converted to US dollars at the foreign exchange rate prevailing on the date of the transaction.
6 Remuneration for C Hodge reflects remuneration from the date of
ment as Chief Executive Officer and Managing Director on
14 February 2020. Mr Hodge forfeited 100% of his STI opportunity for the financial year.
7 Actual remuneration for M Sheridan reflects only the remuneration to 28 February 2020, when M Sheridan ceased to be a KMP and Director. M Sheridan
was on notice from 28 February 2020 to 9 June 2020 during which period he was paid US$135,907 in accordance with his employment contract.
Following the notice period M Sheridan received a US$558,088 termination payment in accordance with his employment contract. Mr Sheridan is not
entitled to any STI above his termination payment.
8
and non-monetary benefits are expatriate allowances and insuranc
living abroad in countries such as Papua New Guinea. Mr Bramley returned to Australia on 7 December 2019, upon which his entitlement to expatriate
allowances ceased.
9 A McArdle ceased to be a KMP effective 19 December 2019.
10 K Quinlivan was on unpaid parental leave from 1 July 2019 to 31 October 2019.
37
[7.3] - Shareholding of key management personnel
Shareholding
The following tables detail the number of shares held by KMP, either directly or indirectly or beneficially during the
reporting period ended 30 June 2020:
KMP
OPENING BALANCE
30 JUNE 2019
ACQUIRED
DURING FY20
DISPOSED OF
DURING FY20
RECEIVED DURING
FINANCIAL YEAR ON THE
EXERCISE OF OPTIONS
CLOSING BALANCE
30 JUNE 2020
DIRECTORS
M Harding
C Hodge
-
-
M Sheridan
7,968,201
G de Nys
2,203,639
S Birkensleigh
G Bittar
OTHER KMP
-
-
R Beament
38,184
-
-
-
-
-
-
-
K Bramley
36,250
146,040
-
-
-
-
-
-
-
-
A McArdle
50,000
K Quinlivan
-
-
-
(50,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
7,968,201
2,203,639
-
-
38,184
182,290
-
-
Long Term Incentives (Share Appreciation Rights)
The following tables detail the number of SARs held by KMP, either directly or indirectly or beneficially during the reporting
period ended 30 June 2020:
KMP
BALANCE AT
START OF
FINANCIAL
YEAR
GRANTED AS
REMUNERATION
DURING
FINANCIAL YEAR
EXERCISED
DURING
FINANCIAL
YEAR
LAPSED
DURING
FINANCIAL
YEAR
BALANCE AT
END OF
FINANCIAL YEAR
VESTED AND
EXERCISABLE AT
END OF FINANCIAL
YEAR
UNVESTED
C Hodge1
-
-
M Sheridan
43,537,715
6,508,496
R Beament
1,318,690
1,671,382
K Quinlivan
1,113,561
1,411,389
K Bramley
1,113,561
1,411,389
A McArdle2
-
1,857,091
-
-
-
-
-
-
-
-
-
-
2,200,649
47,845,562
19,644,975
28,200,587
-
-
-
-
2,990,072
2,524,950
2,524,950
1,857,091
-
-
-
-
2,990,072
2,524,950
2,524,950
1,857,091
1
Mr Hodge will be eligible for an LTI award following the first anniversary of employment as the
Chief Executive Officer and Managing Director.
2 Subsequent to year end the Board exercised its discre
3 Subsequent to year end and in accordance with contract entitlement, 10,004,499 SARs were issued to key management personnel.
due to the cessation of his employment.
38 Option holdings
No listed or unlisted options in the Company were held during the current or prior financial year by Directors and other KMP,
including their personally related entities.
[7.4] - Securities Trading Policy
sets out the procedures and principles that apply to trading in Horizon Oil Limited securities. A copy of the Securities
Trading Policy is available on the Company website www.horizonoil.com.au.
[7.5] - Other transactions with KMP
Other than as noted above, there are no other transactions between any of the KMP with any of the companies which are
related to or provide services to the Group unless disclosed in this Report.
There were no loans to any of the KMP during the financial year.
[7.6] - Additional statutory information
Terms and conditions of the share-based arrangements
The terms and conditions of each grant of SARs presently on issue affecting remuneration for Executive KMP in the
previous, current or future reporting periods are as follows:
EFFECTIVE
ALLOCATION
DATE
ESTIMATED
EXPIRY DATE
EXERCISE
PRICE3
STRIKE PRICE1
VALUE PER SAR AT
EFFECTIVE
ALLOCATION DATE2
DATE EXERCISABLE
01/07/2015
01/07/2020
01/07/2016
01/07/2021
01/07/2016
01/07/2021
01/07/2017
01/07/2022
01/07/2018
01/07/2023
01/07/2019
01/07/2024
Nil
Nil
Nil
Nil
Nil
Nil
A$0.0865
A$0.0438
100% after 12/08/20184
A$0.0483
A$0.0263
100% after 20/10/20194
A$0.0930
A$0.0193
100% after 20/10/20194
A$0.0453
A$0.0197
100% after 20/10/20204
A$0.1439
A$0.0730
100% after 20/10/20214
A$0.1054
A$0.0576
100% after 20/10/20224
The value per SAR at effective allocation date is determined by an independent expert using a Monte Carlo simulation.
1
2
3 No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a SAR.
4 SARs will become exercisable subject to meeting vesting or performance conditions. See summary in section 2.
5 SARs on issue to Michael Sheridan for the 30 June 2020 financial year, were approved by shareholders for the purposes of the ASX listing rules at the
-day volume weighted average price for Horizon shares at effective allocation date.
2019 Annual General Meeting.
The amounts disclosed for the remuneration of Directors and other KMP include the assessed fair values of SARs granted
during the financial year, at the effective date of allocation. Fair values have been assessed by an independent expert
the current price and expected price volatility of the underlying Horizon shares, the expected dividend yield and the risk-
free interest rate for the term of the SAR (refer below). The value attributable to SARs is allocated to particular periods in
e-
the period from the effective allocation date to the end of the vesting period, unless it is probable that the individual will
cease service at an earlier date and the Board will determine that such persons SARs lapse, in which case the value is to be
spread over the period from effective allocation date to that earlier date.
effective allocation date to be allocated equally over
39 The model inputs for each grant of SARs during the financial year ended 30 June 2020 included:
Effective allocation date
Estimated expiry date
Exercise price
Expected price volatility
Risk free rate
Expected dividend yield
-day VWAP of Horizon shares at effective allocation date
A$0.1054
1 July 2019
1 July 2024
Nil1
65.80% p.a.
1.030% p.a.
0.00% p.a.
1
No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a SAR.
Details of remuneration SARs
For each grant of SARs currently on issue to KMP in the current or prior financial years which results in an amount being
disclosed in the Remuneration Report as a share-based payment to KMP for the financial year, the percentage of the grant
that vested in the financial year and the percentage that was forfeited because the person did not meet the vesting or
performance conditions is set out below. The SARs may vest after three years, subject to the performance conditions
being met. No SARs will vest if the performance conditions are not fulfilled, therefore the minimum value of SARs yet to
vest is US$Nil. The maximum value of the SARs yet to vest has been determined as the amount of the fair value of the SARs
at the effective allocation date that is yet to be expensed.
NAME
FINANCIAL YEAR
GRANTED
VESTED
%
FORFEITED
%
FINANCIAL YEARS IN WHICH
SARs MAY VEST
MAXIMUM TOTAL VALUE OF
GRANT YET TO VEST1
US$
SARs
R Beament
K Bramley
K Quinlivan
FORMER KMP
M Sheridan
A Fernie
B Emmett
2019
2020
2019
2020
2019
2020
2015
2016
2017
2018
2019
2020
2015
2016
2017
2018
2015
2016
2017
2018
-
-
-
-
-
-
100%
100%
-
-
-
-
100%
100%
-
-
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30/06/2022
30/06/2023
30/06/2022
30/06/2023
30/06/2022
30/06/2023
30/06/2018
30/06/2019
30/06/2020
30/06/2021
30/06/2022
30/06/2023
30/06/2018
30/06/2019
30/06/2020
30/06/2021
30/06/2018
30/06/2019
30/06/2020
30/06/2021
23,675
44,861
19,992
37,882
19,992
37,882
-
-
-
-
92,191
174,690
-
-
-
-
-
-
-
-
The above values have been converted to dollars at the exchange rate prevailing on the date of the grant of the SARs.
1
2 Subsequent to year end the Board exercised its discretion to lapse Mr
.
40 Dividends
No dividend has been paid or declared by the Company to the shareholders since the end of the prior financial year.
Insurance of Officers
During the financial year, Horizon Oil Limited paid a premium to insure the Directors and secretaries of the Company and
related bodies corporate. The insured liabilities exclude conduct involving a wilful breach of duty or improper use of
information or position to gain a personal advantage. The contract prohibits the disclosure of the premium paid.
The officers of the Company covered by the insurance policy include the Directors and secretaries, and other officers who
are Directors or secretaries of subsidiaries who are not also Directors or secretaries of Horizon Oil Limited.
The liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings that may
be brought against the officers in their capacity as officers of the Company or a related body corporate.
Non-Audit Services
The Company may decide to employ PricewaterhouseCoopers on assignments additional to its statutory audit duties where
Details of the amounts paid or payable to PricewaterhouseCoopers for audit and non-audit services provided during the
financial year are set out below.
The Board of Directors has considered the position and, in accordance with the written advice received from the Audit
Committee, is satisfied that the provision of non-audit services is compatible with the general standard of independence
for external auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit
services by the external auditor, as set out below, did not compromise the external auditor independence requirements of
the Corporations Act 2001 for the following reasons:
– all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and
objectivity of the external auditor; and
– none of the services undermine the general principles relating to auditor independence as set out in Australian
Professional Ethical Standards 110 Code of Ethics for Professional Accountants, including reviewing or auditing the
-making capacity for the Group, acting as advocate for the
Group or jointly sharing economic risk and rewards.
41 Remuneration of external auditors
During the financial year, the following fees were paid or payable for services
provided by the external auditor of the parent entity and its related practices:
1. PWC AUSTRALIA
Audit and other assurance services
Audit and review of financial reports
Other assurance services
CONSOLIDATED
2020
US$
2019
US$
158,282
168,234
14,267
14,307
Total remuneration for audit and other assurance services
172,549
182,541
Taxation services
Tax compliance1
Total remuneration for taxation services
2. NON-PWC AUDIT FIRMS
Audit and other assurance services
Total remuneration for audit and other assurance services
15,895
15,895
8,085
8,085
16,361
16,361
19,667
19,667
196,529
218,569
1
Remuneration for taxation services has been recorded on a gross basis; some of these fees were for services provided to PNG operated joint
ventures.
42 set out on page 44.
Rounding of Amounts to The Nearest Thousand Dollars
tions Act 2001 is
The amounts contained in this report, and in the financial report, have been rounded under the option available to the
Group under ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191. The Group is an entity of the
accordance with that Class Order to the nearest thousand dollars or, in certain cases, to the nearest dollar.
External Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of the Directors.
M Harding
Chairman
Sydney
27 August 2020
C Hodge
Chief Executive Officer
43 Auditor’s Independence Declaration
As lead auditor for the audit of Horizon Oil Limited for the year ended 30 June 2020, I declare that to
the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Horizon Oil Limited and the entities it controlled during the period.
Sean Rugers
Partner
PricewaterhouseCoopers
Sydney
27 August 2020
44 Independent auditor’s report
To the members of Horizon Oil Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Horizon Oil Limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 June 2020 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated statement of financial position as at 30 June 2020
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
45 individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
Key audit matters
• Amongst other relevant topics,
we communicated the
following key audit matters to
the Audit and Risk Committee:
− Impairment assessment of
exploration, development
and oil & gas assets
•
These are further described in
the Key audit matters section
of our report.
•
For the purpose of our audit we
used overall Group materiality of
$1.01 million, which represents
approximately 2% of the Group’s
EBITDA after adjusting for
exploration and development
expenses and impairment
(adjusted EBITDA).
• We applied this threshold,
together with qualitative
considerations, to determine the
scope of our audit and the nature,
timing and extent of our audit
procedures and to evaluate the
effect of misstatements on the
financial report as a whole.
• We chose adjusted EBITDA
because, in our view, it is the
benchmark against which the
performance of the Group is most
commonly measured and is a
generally accepted benchmark in
the oil and gas industry. We
determined that a 2% threshold
was appropriate based on our
professional judgement, noting it
is within the range of commonly
acceptable thresholds.
• Our audit focused on where
the Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
•
•
Our audit focused on the
joint arrangement oil
producing operations in
New Zealand and China, the
joint arrangement gas
exploration and
development assets in PNG
and the Group’s corporate
head office in Sydney.
The Group uses an internal
expert to perform an
assessment of the Reserves
and Resources on an annual
basis. Our scope included
assessing the work of the
internal expert.
46
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
Key audit matter
How our audit addressed the key audit matter
Impairment assessment of exploration,
development and oil & gas assets
Refer to note 1(k), 1(0), 14, 15 & 28
As indicators of impairment were identified by the
Group with respect to exploration, development and oil
& gas assets, the Group performed an impairment
assessment and calculated the recoverable amount of
the assets which is the higher of the asset’s fair value
less costs to sell and value in use.
This is a key audit matter due to the:
•
•
•
significant judgement exercised by the Group
in estimating the recoverable amount of the
exploration, development and oil and gas
assets in different jurisdictions
volatility of global oil prices which have been
impacted by the recent COVID19 pandemic
financial significance of these assets to the
business
We performed the following procedures, amongst
others:
•
Read the impairment assessment prepared by the
Group. Assisted by PwC valuation experts, we
assessed the key assumptions applied within the
Group’s discounted cash flow model, including:
̵
the assessment of the discount rates used by
the Group in the valuation process of its
exploration, development and oil and gas
assets held in the joint arrangements, New
Zealand and China.
̵ Considering the Group’s forecast oil prices
which were derived from broker forecasts and
analysing the Group’s process for developing
oil price assumptions.
̵ Comparing recent market transactions to the
carrying value of the relevant asset, where
available.
Compared the underlying value drivers (reserves
estimate, production profile, operating and capital
expenditure requirements) in the Group’s impairment
assessment to the underlying value drivers identified by
the Group’s internal expert in their most recent
reserves and resources statement on China and New
Zealand joint arrangements.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2020, but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
47 If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of
our auditor's report.
48
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 26 to 40 of the directors’ report for the
year ended 30 June 2020.
In our opinion, the remuneration report of Horizon Oil Limited for the year ended 30 June 2020
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Sean Rugers
Partner
Sydney
27 August 2020
49 the financial statements and notes are in accordance with the Corporations Act 2001 including:
(i) complying with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements;
(ii)
for the financial year ended on that date; and
on as at 30 June 2020 and of its performance
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
Note 1 confirms that the financial statements also comply with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by
Section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
M Harding
Chairman
Sydney
27 August 2020
C Hodge
Chief Executive Officer
50
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME FOR THE FINANCIAL YEAR ENDED 30 JUNE 2020
CONSOLIDATED
NOTE
2020
2019
REVENUE
Cost of sales
Gross profit
Other income
General and administrative expenses
Insurance expense
Exploration and development expenses
Impairment of non-current assets
Finance costs
interest, transaction costs, other
Finance income
unrealised movement in value of options
Other expenses
(Loss)/profit before income tax
NZ royalty tax expense
Income tax (expense)/benefit
(Loss)/profit for the financial year
OTHER COMPREHENSIVE (LOSS)/INCOME
ITEMS THAT MAY BE RECLASSIFIED TO PROFIT AND LOSS
Changes in the fair value of cash flow hedges
Total comprehensive (loss)/income for the financial year
(Loss)/profit attributable to:
Security holders of Horizon Oil Limited
Non-controlling interests
(Loss)/profit for the financial year
Total comprehensive (loss)/income attributable to:
Security holders of Horizon Oil Limited
Non-controlling interests
Total comprehensive (loss)/income for the financial year
Earnings per share for (loss)/profit attributable to ordinary equity
holders of Horizon Oil Limited:
Basic earnings per ordinary share
Diluted earnings per ordinary share
4
5
4
5
5
5
5, 28
5
5
5
6a
6b
84,025
(53,384)
30,641
28
(4,469)
(2,132)
(5,035)
(67,285)
(3,850)
8,047
(180)
(44,235)
(2,949)
(7,955)
(55,139)
(2,749)
(57,888)
(55,139)
-
(55,139)
(57,888)
-
(57,888)
122,401
(67,354)
55,047
4,427
(3,754)
(1,907)
(4,592)
-
(11,748)
11,157
(221)
48,409
(1,653)
(10,930)
35,826
9,782
45,608
35,826
-
35,826
45,608
-
45,608
US cents
US cents
40a
40b
(4.23)
(4.23)
2.75
2.17
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with
the accompanying notes.
51 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020
CONSOLIDATED
NOTE
2020
2019
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Derivative financial instruments
Other assets
Total current assets
NON-CURRENT ASSETS
Deferred tax assets
Property, plant and equipment
Exploration phase expenditure
Oil and gas assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Payables
Current tax payable
Borrowings
Derivative financial instruments
Total current liabilities
NON-CURRENT LIABILITIES
Payables
Deferred tax liabilities
Other financial liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
7
8
9
10
11
12
13
14
15
16
17
18
10
16
21
19
18
20
22
23a
23b
25,920
7,923
3,510
15
1,387
38,755
7,084
869
8,225
116,702
132,880
171,635
6,887
2,942
12,236
1,344
21,472
8,046
5,519
2,708
1,673
39,418
8,357
528
56,903
157,453
223,241
262,659
11,503
4,189
9,506
307
23,409
25,505
385
15,169
3,791
12,079
33,947
65,371
88,780
82,855
174,801
12,599
(104,545)
82,855
71
16,623
11,838
38,298
29,018
95,848
121,353
141,306
174,801
15,911
(49,406)
141,306
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
52 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED
30 JUNE 2020
CONSOLIDATED
ATTRIBUTABLE TO MEMBERS OF HORIZON OIL LIMITED
CONTRIBUTED
EQUITY
RESERVES
TOTAL EQUITY
RETAINED
PROFITS /
(ACCUMULATED
LOSSES)
Balance as at 1 July 2018
174,801
NOTE
Profit for the financial year
23(b)
Changes in the fair value of
cash flow hedges
23(a)
Total comprehensive income
for the financial year
Transactions with owners in
their capacity as equity
holders:
Employee share-based
payments expense
23(a)
-
-
-
-
-
Balance as at 30 June 2019
Balance as at 1 July 2019
174,801
174,801
Loss for the financial year
23(b)
Changes in the fair value of
cash flow hedges
23(a)
Total comprehensive loss for
the financial year
Transactions with owners in
their capacity as equity
holders:
Employee share-based
payments benefit
23(a)
-
-
-
-
-
5,740
-
9,782
(85,232)
35,826
-
95,309
35,826
9,782
9,782
35,826
45,608
389
389
15,911
15,911
-
-
-
(49,406)
(49,406)
(55,139)
(2,749)
-
389
389
141,306
141,306
(55,139)
(2,749)
(2,749)
(55,139)
(57,888)
(563)
(563)
-
-
(563)
(563)
Balance as at 30 June 2020
174,801
12,599
(104,545)
82,855
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
53
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED
30 JUNE 2020
CONSOLIDATED
NOTE
2020
2019
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Income taxes paid
Net cash inflow from operating activities
39
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration phase expenditure
Payments for oil and gas assets
Payments for plant and equipment
Net cash outflow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Transaction costs incurred on borrowings
Leasing arrangements
Proceeds from borrowings
Repayment of borrowings
Net cash outflow from financing activities
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents held in
foreign currencies
18a
18a
83,871
(32,386)
51,485
28
(3,469)
(11,313)
36,731
(2,274)
(5,755)
(22)
(8,051)
-
(233)
-
(24,000)
(24,233)
4,447
21,472
1
130,383
(37,441)
92,942
32
(6,490)
(13,671)
72,813
(2,684)
(7,465)
(71)
(10,220)
(1,942)
-
94,588
(161,390)
(68,744)
(6,151)
27,625
(2)
Cash and cash equivalents at the end of the financial year
7
25,920
21,472
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
54 Notes to the consolidated Financial Statements
Summary of Significant Accounting Policies
A summary of the significant accounting policies adopted in the preparation of the financial statements are set out below.
These policies have been consistently applied, unless otherwise stated. The financial statements are for the consolidated
statements, the consolidated entity is a for profit entity.
Statement of compliance
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards,
Interpretations and the Corporations Act 2001.
The consolidated financial statements comply with Australian Accounting Standards as issued by the AASB and
Basis of preparation
These financial statements are presented in United States dollars and have been prepared under the historical cost
convention, as modified by the revaluation of financial assets and liabilities (including derivative instruments) at fair value
through profit or loss, or other comprehensive income where hedge accounting is adopted.
The Compan
and accordingly amounts in the financial statements are rounded off to the nearest thousand dollars, unless otherwise
indicated.
The general purpose financial statements for the year ended 30 June 2020 have been prepared on a going concern basis
which contemplates the realisation of assets and settlement of liabilities in the normal course of business as they become
due. At the date of this report, the directors are of the opinion that no asset is likely to be realised for amounts less than
the amount at which it is recorded in the financial report as at 30 June 2020. Accordingly, no adjustments have been made
to the financial report relating to the recoverability and classification of the asset carrying amounts or the amounts and
classification of liabilities that might be necessary should the Group not continue as a going concern.
New and amended standards adopted by the Group
The Group has adopted all of the new and revised Australian Accounting Standards and Interpretations issued by the
ended 30 June 2020. None of the new and revised standards and interpretations were deemed to have a material impact
on the results of the Group.
Leases
Leases
n
d
liabilities for leases with terms of more than 12 months unless the underlying asset is of low value.
The new standard has been applied as at 1 July 2019 using the simplified transition approach. Under this method, the
cumulative effect of initial application is recognised as an adjustment to the opening balance of retained earnings as at
1 July 2019 and comparatives are not restated. The application of AASB 16 has resulted in the recognition of right-of-use
assets of US$140,510 and an equal increase in lease liabilities at 1 July 2019, with no impact on the opening retained
earnings for the year ending 30 June 2020.
55
The adoption of AASB 16 has resulted in a change in the Groups lease recognition policy (refer to Note 1(j)).
There are no other Australian Accounting Standards that are not yet effective and that are expected to have a material
impact on the Group in the current or future financial years.
Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires
ing policies. The areas involving a
higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial
statements are disclosed in Note 2.
Changes in accounting estimates
financial year ended 30 June 2020, except as disclosed in Note 2.
estimates has not affected items recognised in the financial statements for the
Principles of consolidation
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Horizon Oil Limited (the
20 and the results of all subsidiaries for the financial year then ended.
Horizon Oil Limited and its subsidiaries together are referred to in these fina
Subsidiaries are those entities (including special purpose entities) over which the Group has control. Control exists when
the Company is exposed to, or has the rights to, variable returns from its involvement and has the ability to affect those
returns through its power over that entity. There is a general presumption that a majority of voting rights results in control.
The existence and effect of potential voting rights that are currently exercisable or convertible are also considered when
assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated
from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group (refer to Note 1(n)).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.
Investments in subsidiaries are accounted for at cost in the individual financial statements of Horizon Oil Limited. These
investments may have subsequently been written down to their recoverable amount determined by reference to the net
assets of the subsidiaries as at 30 June each financial year where this is less than cost.
Joint operations
A joint operation is a joint arrangement whereby the participants that have joint control of the arrangement (i.e. joint
operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement.
The Group recognises assets, liabilities, revenues and expenses according to its share in the assets, liabilities, revenues
and expenses of a joint operation or similar as determined and specified in contractual arrangements (Joint Operating
Agreements).
liabilities, revenue and expenses are set out in Note 27.
56 Where part of a joint operation interest is farmed out in consideration of the farminee undertaking to incur further
expenditure on behalf of both the farminee and the entity in the joint operation area of interest, exploration expenditure
incurred and carried forward prior to farm-out continues to be carried forward without adjustment, unless the terms of the
farm-out are excessive based on the diluted interest retained. An impairment provision is then made to reduce exploration
expenditure to its estimated recoverable amount. Any cash received in consideration for farming out part of a joint
operation interest is recognised in the profit or loss.
Crude oil and gas inventory and materials in inventory
Crude oil and gas inventories, produced but not sold, are valued at the lower of cost and net realisable value. Cost
comprises a relevant proportion of all fixed and variable production, overhead, restoration and amortisation expenses and
is determined on an average cost basis.
Stocks of materials inventory, consumable stores and spare parts are carried at the lower of cost and net realisable value,
with cost primarily determined on an average cost basis.
Operating segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of Directors.
Foreign currency translation
[i] Functional and presentation currency
Items included in the financia
statements are presented in United States dollars
Horizon Oil Limited has selected United States dollars as its presentation currency for the following reasons:
(a)
(b)
it is widely understood by Australian and international investors and analysts.
d in United States dollars; and
[ii] Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at financial year end exchange rates of monetary assets and liabilities denominated in foreign currencies are
generally recognised in the profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and
qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.
[iii] Group companies
All Group subsidiaries have a functional currency of United States dollars and, as a result, there is no exchange differences
arising from having a different functional currency to the presentation currency of Horizon Oil Limited.
Revenue recognition
Revenue arises from the sale of crude oil. To determine whether to recognise revenue, the Group follows a 5-step process:
Identifying the contract with a customer;
Identifying the performance obligations;
[1] -
[2] -
[3] - Determining the transaction price;
[4] - Allocating the transaction price to the performance obligations; and
[5] - Recognising revenue when/as performance obligation(s) are satisfied.
57
The Group enters into sales transactions involving a single product. The total transaction price for a contract is allocated
amongst the various performance obligations based on their relative stand-alone selling prices. The transaction price for a
contract excludes any amounts collected on behalf of third parties. Revenue is recognised either at a point in time or over
time, when (or as) the Group satisfies performance obligations by transferring the promised goods to its customers.
Revenue from Block 22/12, China, is derived over a period in time as the crude oil produced continuously flows through a
metered pipeline. The metered monthly production is invoiced at the end of each month, in accordance with a monthly
sales contract, and revenue recognised for the month of production. At the end of each month, once billing occurs and
revenue is recognised, there are no unsatisfied performance obligations or variable revenue requiring estimation.
Revenue from the Maari/Manaia fields, New Zealand, is derived at a point in time as the crude oil produced is stored and
sold in individual liftings which are pursuant to individual sales contracts. Each lifting is invoiced in accordance with the
respective contract and revenue recognised based on the bill of lading date associated with the lifting. Once the lifting is
complete there are no unsatisfied performance obligations or variable revenue requiring estimation.
The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and
reports these amounts as other liabilities in the statement of financial position. Similarly, if the Group satisfies a
performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in
its statement of financial position, depending on whether something other than the passage of time is required before the
consideration is due.
Deferred income
A liability is recorded for obligations under petroleum sales contracts where the risks and rewards of ownership have not
passed to the customer and payment has already been received.
Taxation
[i]
Income tax
The income tax expense or
based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the
financial statements, and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantially enacted at the end of the
reportin
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected
to apply when the related deferred income tax asset is realised, or deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax
bases of investments in subsidiaries where the parent entity is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse in the foreseeable future.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.
58 [ii] Government royalties
Government royalties are treated as taxation arrangements when they are imposed under Government authority and when
for the purposes of AASB 112 Income Taxes. Current and deferred tax is then provided on the same basis as described in (i)
above. Royalty arrangements that do not meet the criteria for treatment as a tax are recognised on an accruals basis.
Leases
The Group leases offices in Sydney and PNG, as well as various equipment, with rental contracts typically taken out for
fixed periods of 12 months to 3 years. These contracts do not have a reasonably certain extension option and may contain
both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease
components based on their relative stand-alone prices. Lease terms are negotiated on an individual basis, and do not
impose any covenants other than the security interests in the leased assets that are held by the lessor.
Previously, the above leases were classified as operating leases by the Group, where the Group is the lessee. The company
did not have any leases which are classified as finance leases. On adoption of AASB 16 at 1 July 2019, the leases described
above are recognised as a right-of-use asset (Note 13) and a corresponding liability (Note 16) at the date at which the
leased asset is available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net
present value of the following lease payments:
– fixed payments (including in-substance fixed payments), less any lease incentives receivable; and
– variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the
commencement date
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined,
funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar
terms, security and conditions.
on 1 July 2019 was 5.1%.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the
lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost and are depreciated over the shorter of the asset's useful life and the lease term
on a straight-line basis.
The Group has elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead,
for contracts entered into before the transition date the group relied on its assessment made applying AASB 117 and
Interpretation 4 Determining whether an Arrangement contains a Lease.
Impairment of assets
Assets are reviewed for impairment at each reporting date to determine whether there is any indication of impairment. If
an impairment indicator exists a formal estimate of the recoverable amount is calculated. An impairment loss is
amount is the high
assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely
independent of the cash inflows f
-
an after-tax discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset.
59 Exploration phase expenditure is assessed for impairment in accordance with Note 1(o).
Cash and cash equivalents
For presentation purposes in the statement of cash flows, cash and cash equivalents includes cash at banks and on hand
(including share of joint operation cash balances), deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities in the consolidated statement of financial position.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for
doubtful debts. Trade receivables are generally due for settlement within 30 days from the date of recognition. They are
included in current assets, except for those with maturities greater than one year after the end of the reporting period
which are classified as non-current assets.
The group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. The expected loss rates are based on the payment profiles of sales over a period of 36
months before 30 June 2020 and the corresponding historical credit losses experienced within this period. The historical
rates are adjusted to reflect current and forward-looking information on key factors affecting the ability of the customers
to settle the receivables. Management assesses the collectability of these amounts based on the customer relationships
and historical payment behaviour.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written
off. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of receivables. The amount of the provision is the difference
at the original
effective interest rate. The amount of the provision is recognised in profit or loss.
Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity
instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the
fair values of the assets transferred, the liabilities assumed, equity interests issued by the Group, fair value of any asset or
liability resulting from a contingent consideration arrangement, and fair value of any pre-existing equity interest in the
subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are,
with limited exceptions, measured initially at their fair values at the acquisition date. Acquisition related costs are
expensed as incurred.
For purchase combinations which do not constitute the acquisition of a business, the Group identifies and recognises the
individual identifiable assets acquired and liabilities assumed. The consideration paid is allocated to the individual
identifiable assets and liabilities on the basis of their relative fair values at the date of purchase. Transaction costs
associated with the acquisition are a component of the consideration transferred and are therefore capitalised.
Exploration phase expenditure
Exploration phase expenditure in respect of each area of interest is accounted for using the successful efforts method of
accounting. The successful efforts method requires all exploration phase expenditure to be expensed in the period it is
incurred, except the costs of successful wells, the costs of acquiring interests in new exploration assets and pre-
development costs where there is a high degree of probability that the development will go ahead, which are capitalised.
Costs directly associated with the drilling of exploration wells and any associated geophysical and geological costs are
initially capitalised pending determination of whether potentially economic reserves of hydrocarbons have been
discovered. Areas of interest are recognised at the cash-generating unit level, being the smallest grouping of assets
generating independent cash flows which usually is represented by an individual oil or gas field.
60 When an oil or gas field has been approved for development, the capitalised exploration phase expenditure is reclassified
as oil and gas assets in the statement of financial position. Prior to reclassification, capitalised exploration phase
expenditure is assessed for impairment.
Where an ownership interest in an exploration and evaluation asset is purchased, any cash consideration paid net of
transaction costs is treated as an asset acquisition. Alternatively, where an ownership interest is sold, any cash
consideration received net of transaction costs is treated as a recoupment of costs previously capitalised, with any excess
accounted for as a gain on disposal of non-current assets.
Impairment of capitalised exploration phase expenditure
Exploration phase expenditure is reviewed for impairment semi-annually in accordance with the requirements of AASB 6
Exploration for and Evaluation of Mineral Resources. The carrying value of capitalised exploration phase expenditure is
assessed for impairment at the asset or cash-generating unit level (which usually is represented by an exploration permit
or licence) whenever facts and circumstances (as defined in AASB 6) suggest that the carrying amount of the asset may
exceed its recoverable amount. If
calculated.
An impairment loss exists when the carrying amount of an asset or cash-generating unit exceeds its estimated
recoverable amount. The asset or cash-generating unit is then written-down to its recoverable amount. Impairment losses
are recognised as an expense in profit or loss.
Capitalised exploration phase expenditure that suffered impairment is tested for possible reversal of the impairment loss
whenever facts or changes in circumstances indicate that the impairment may have reversed.
Oil and gas assets
[i] Development expenditure
Development expenditure is stated at cost less any accumulated impairment losses. Development expenditure incurred
by or on behalf of the Group is accumulated separately for fields in which proven and probable hydrocarbon reserves have
been identified to the satisfaction of directors. Such expenditure comprises direct costs and overhead expenditure
incurred which can be directly attributable to the development phase or is acquired through the acquisition of a permit.
Once a development decision has been taken on an oil or gas field, the carrying amount of the relevant exploration and
evaluation expenditure in respect of the relevant area of interest is aggregated with the relevant development expenditure.
field is capable of operating in the manner intended by management (that is, when commercial levels of production are
capable of being achieved).
Development expenditure is tested for impairment in accordance with the accounting policy set out in Note 1(k).
[ii] Production assets
When further development costs are incurred in respect of a production asset after the commencement of production,
such expenditure is carried forward as part of the production asset when it is probable that additional future economic
benefits associated with the expenditure will flow to the Group. Otherwise such expenditure is classified as production
expense in income statements when incurred.
Production assets are stated at cost less accumulated amortisation and any accumulated impairment losses.
Once commercial levels of production commence, amortisation is charged using the unit-of-production method. The unit-
of-production method results in an amortisation expense proportional to the depletion of proven and probable
61
hydrocarbon reserves for the field. Production assets are amortised by area of interest in the proportion of actual
production for the financial period to the proven and probable hydrocarbon reserves of the field.
The cost element of the unit-of-production calculation is the capitalised costs incurred to date for the field together with
the estimated/anticipated future development costs (stated at current financial period-end unescalated prices) of
obtaining access to all the proven and probable hydrocarbon reserves included in the unit-of-production calculation.
Production assets are tested for impairment in accordance with the accounting policy set out in Note 1(k).
[iii] Restoration provision
The estimated costs of decommissioning and removing an asset and restoring the site are included in the cost of the asset
as at the date the obligation first arises and to the extent that it is first recognised as a provision. This restoration asset is
subsequently amortised on a unit-of-production basis.
The corresponding provision, of an amount equivalent to the restoration asset created, is reviewed at the end of each
reporting period. The provision is measured at the best estimate of the present value amount required to settle the
present obligation at the end of the reporting period, based on current legal and other requirements and technology,
discounted where material using market yields at the balance sheet date on US Treasury bonds with terms to maturity and
currencies that match, as closely as possible, to the estimated future cash outflows.
Where there is a change in the expected restoration, rehabilitation or decommissioning costs, an adjustment is recorded
against the carrying value of the provision and any related restoration asset, and the effects are recognised in profit or loss
on a prospective basis over the remaining life of the operation.
The unwinding of the effect of discounting on the restoration provision is included within finance costs in profit or loss.
[iv] Reserves
The estimated reserves include those determined on an annual basis by Mr Gavin Douglas, Subsurface Manager of Horizon
Oil Limited. Mr Douglas is a full-time employee of Horizon Oil Limited and is a member of the American Association of
Heriot Watt University, UK and more than 23 years of relevant experience. The reserve estimates are determined by
Mr Douglas based on assumptions, interpretations, and assessments. These include assumptions regarding commodity
prices, foreign exchange rates, operating costs and capital expenditures, and interpretations of geological and
geophysical models to make assessments of the quantity of hydrocarbons and anticipated recoveries.
Investments and other financial assets
Subsidiaries are accounted for in the consolidated financial statements as set out in Note 1(c).
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of
selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after
the end of the reporting period which are classified as non-current assets. Loans and receivables are included in
receivables in the statement of financial position.
62 Plant and equipment
The cost of improvements to, or on, leasehold property is depreciated over the unexpired period of the lease or the
estimated useful life of the improvement to the Group, whichever is shorter.
Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts, net of
their residual values, over their estimated useful lives, as follows:
– Computer equipment
– Furniture, fittings and equipment
– Leasehold improvement
4 years
10 years
3
3
10 years
than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or
loss.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are
unpaid. Due to their short-term nature they are not discounted. The amounts are unsecured and are usually paid within 30
days of recognition. They are included in current liabilities, except for those with maturities greater than one year after the
end of the reporting period which are classified as non-current liabilities.
Derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on
whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group
designates certain derivatives as either; (1) hedges of the fair value of recognised assets or liabilities or a firm commitment
(fair value hedge); or (2) hedges of the cash flows of recognised assets and liabilities and highly probable forecast
transactions (cash flow hedges). The Group currently does not have any derivatives designated as fair value hedges.
The Group documents at the inception of the hedging transaction the relationship between hedging instruments and
hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The
Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that
are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or
cash flows of hedged items.
The fair values of derivative financial instruments used for hedging purposes are disclosed in Note 10. Movements in the
hedging reserve in equity are shown in Note 23(a).
[i] Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in
profit or loss within other income or other expenses.
Amounts accumulated in equity are recycled to profit or loss in the periods when the hedged item will affect profit or loss
(for instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of
gain or loss
relating to the effective portion of forward foreign exchange contracts and commodity price contracts hedging export
63
recognition of a non-financial asset (for example, inventory) or a non-financial liability, the gains and losses previously
deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the
asset or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the
forecast transaction is ultimately recognised in profit or loss.
When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is
immediately transferred to the profit or loss.
[ii] Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument
that does not qualify for hedge accounting are recognised immediately in profit or loss and are included in other income or
other expenses.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured
at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is
recognised in profit or loss over the period of the borrowings using the effective interest rate method. Fees paid on the
establishment of loan facilities which are not an incremental cost relating to the actual drawdown of the facility, are
recognised as prepayments (netted against the loan balance) and amortised on a straight-line basis over the term of the
facility.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the end of the reporting period.
Borrowing costs
Borrowing costs which includes the costs of arranging and obtaining financing, incurred for the acquisition or construction
of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its
intended use or sale. Other borrowing costs are expensed when incurred.
There were US$Nil borrowing costs (2019: US$Nil) capitalised during the current financial year and the amount of borrowing
costs amortised to the income statement were US$776,816 (2019: US$1,053,169).
Employee benefits
[i] Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and related on-costs expected to be
settled within 12 months of the end of the reporting period are recognised in other payables in respect of employees'
services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are
settled. The liabilities are recognised in other payables.
[ii] Long service leave
The liability for long service leave is recognised as a provision for employee benefits and measured as the present value of
expected future payments to be made in respect of services provided by employees up to the end of the reporting period
using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of
employee departures and periods of service. Expected future payments are discounted using market yields at the end of
64 the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible,
the estimated future cash outflows.
[iii] Share-based payments
Share-based payment compensation benefits are provided to employees and consultants via the Horizon Oil Limited Long
Term Incentive Plan, the Horizon Oil Limited Employee Option Scheme, and the General Option Plan. Information relating to
these schemes is set out in Note 32.
The fair
Plan and Horizon Oil Limited Employee Option Scheme are recognised as an employee share-based payments expense
with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of
the options and SARs granted, which includes any market performance conditions but excludes the impact of any service
and non-market performance vesting conditions and the impact of any non-vesting conditions. Non-market performance
vesting conditions are included in assumptions about the number of options and SARs that are expected to vest.
Oil Limited Long Term Incentive
The fair value is measured at effective allocation date. The total expense is recognised over the vesting period, which is
the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the
Group revises its estimates of the number of options and SARs that are expected to vest based on the non-market
performance vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with
a corresponding adjustment to equity.
The fair value at effective allocation date is independently determined using either a Black-Scholes or Monte Carlo
simulation option pricing model that takes into account the exercise price, the term of the option or SAR, the impact of
dilution, the share price at effective allocation date and expected price volatility of the underlying share, the expected
dividend yield and the risk free interest rate for the term of the option or SAR.
The Company has elected to retain any amounts originally recognised in the share-based payments reserve, regardless of
whether the associated options are exercised, cancelled or lapse unexercised.
Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new ordinary shares or options over unissued ordinary shares are
shown in share capital as a deduction, net of related income tax, from the proceeds. Incremental costs directly
attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the
acquisition as part of the purchase consideration but are expensed.
Earnings per share
[i] Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
[ii] Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares. Potential ordinary shares are considered dilutive only when their conversion to ordinary shares would
decrease earnings per share, or increase loss per share, from continuing operations.
65 Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as
part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the taxation authority, are presented as operating cash flow.
Parent entity financial information
The financial information for the parent entity, Horizon Oil Limited, disclosed in Note 41, has been prepared on the same
basis as the consolidated financial statements, except as set out below.
[i]
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of
Horizon Oil Limited. Dividends received from associates are reco
being deducted from the carrying amount of these investments.
[ii] Financial guarantees
Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no
compensation, the fair values of these guarantees are accounted for as contributions and recognised as part of the cost of
the investment.
Critical accounting estimates and judgements
This section considers estimates and judgements which are continually evaluated and are based on historical experience
and other factors, including expectations of future events that may have a financial impact on the Group and that are
believed to be reasonable under the circumstances.
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The most significant estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amount of assets and liabilities relate to:
[i] Exploration and evaluation assets
requires management to make certain estimates and assumptions as to future events and circumstances. These
estimates and assumptions include whether commercially viable reserves have been found and whether the capitalised
exploration and evaluation expenditure will be recovered through future exploitation or sale. The carrying amount of
exploration and evaluation assets has been disclosed in Note 14.
[ii] Reserve estimates
The estimated quantities of proven and probable hydrocarbons reported by the Group are integral to the calculation of
amortisation expense (depletion), assessments of impairment of assets, provision for restoration and the recognition of
deferred tax assets due to changes in expected future cash flows. Reserve estimates require interpretation of complex
and judgemental geological and geophysical models in order to make an assessment of the size, shape, depth and quality
66
of reservoir, and their anticipated recoveries. The economic, geological and technical factors used to estimate reserves
may change from period to period. Reserve estimates are prepared in accordance with guidelines prepared by the Society
of Petroleum Engineers.
[iii] Provisions for restoration
The Group estimates the future removal and restoration costs of petroleum production facilities, wells, pipelines and
related assets at the time of installation of the assets and reviews these assessments periodically. In most instances the
removal of these assets will occur well into the future. The estimate of future removal costs therefore requires
management to make judgements around the timing of the required restoration, rehabilitation and decommissioning, as
well as, the discount rate. The carrying amount of the provision for restoration is disclosed in Note 20.
During the period the Group revised the future cost estimates from which the provisions for restoration of the PNG licences
are derived. Following the significant reductions in yields and inflation rates caused by the COVID-19 pandemic, the Group
revised the discount and inflation rate used in quantifying the restoration provisions. The resultant effect is an increase in
the restoration provision of US$1.7 million pertaining to PNG licences and a US$2.3 million increase in the restoration
provision for the New Zealand licence.
[iv] Impairment of oil and gas assets
The Group assesses whether its oil and gas assets are impaired on a semi-annual basis. This requires an estimation of the
recoverable amount of the cash generating unit to which each asset belongs. The recoverable amount of an asset is the
higher of its fair value less cost to sell and value in use. The fair value less cost to sell is assessed on the basis of the
estimated net cash
estimated future cash flows are based on estimates of hydrocarbon reserves, future production profiles, commodity
prices, operating costs and future development costs necessary to access the reserves. The estimated future cash flows
-tax discount rate of between 10% and
11% to take into account risks which have not already been adjusted for in the cash flows.
The Group s current oil price forecast assumes a recovery in oil prices over the next 4 years to US$60/bbl real. Should
longer term oil prices be sustained at current levels this may lead to further impairment of the Groups assets.
During the period the Group recorded a US$67.3 million non-
exploration and development assets in Papua New Guinea. The impairment assessment conducted in respect of the
period considered challenges faced by the company in PNG, including unresolved licence tenure issues, the lack of
progress in commercialisation of the discovered resources in the Western Province of PNG, and the recent shift by the PNG
Government in requiring improved fiscal returns from resource projects. Reference was also made to comparable market
transactions. In light of these matters and uncertainties, the Group has impaired its PNG exploration and development
assets during the financial period, to a carrying amount of US$5.8 million. The impairment of the PNG assets is disclosed in
Note 28.
[v] Share-based payments and General options
Share-based payment transactions with directors and employees are measured by reference to the fair value of the share
performance rights and employee options at the date they were granted. The fair value of the derivative liability
associated with the general options is valued as at financial year end. The fair value is ascertained using an appropriate
pricing model, being either the Black-Scholes or Monte Carlo simulation, depending on the terms and conditions upon
which the share performance rights, employee options and general options were granted. The Group also applies
assumptions around the likelihood of the share performance rights or options vesting which will have an impact on the
expense and equity recorded in the financial year. The number of share performance rights, employee options and general
options outstanding are disclosed in Note 32.
67 [vi] Recoverability of deferred tax assets
The recoverability of deferred tax assets is based on the probability that future taxable amounts will be available to utilise
those temporary differences and losses. The Group has not recognised deferred tax assets in respect of some tax losses
and temporary tax differences as the future utilisation of these losses and temporary tax differences is not considered
probable at this point in time. Assessing the future utilisation of tax losses and temporary tax differences requires the
Group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income
are based on forecast cash flows from operations and the application of existing tax laws. To the extent that future
utilisation of these tax losses and temporary tax differences becomes probable, this could result in significant changes to
deferred tax assets recognised, which would in turn impact future financial results. During the current year, the deferred
that it is no longer expected that the
those losses recorded.
operations would generate sufficient taxable profits to fully utilise
on the basis
No critical judgements considered to have a significant risk of causing a material adjustment to the carrying amounts of
the assets and liabilities within the next financial year were made during the preparation of this report.
Segment information
Description of segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker has been identified as the Board of Directors.
arranged by developmental phase. Discrete pre-tax financial information (including pre-tax operating profit and capital
expenditure on exploration and evaluation assets and oil and gas assets) for each oil and gas permit is prepared and
provided to the chief operating decision maker on a regular basis. In certain circumstances, individual oil and gas permits
are aggregated into a single operating segment where the economic characteristics and long-term planning and
operational considerations of the individual oil and gas permits are such that they are considered interdependent. The
Group has identified four operating segments:
s working interest in each individual oil and gas permit,
– New Zealand exploration and development
the Group is currently involved in developing and producing crude oil from
the Maari/Manaia oil field development, and the exploration and evaluation of hydrocarbons within the permit;
– China exploration and development
the Group is currently involved in developing and producing crude oil from the
Block 22/12
Block 22/12;
WZ 6-12 and WZ 12-8W oil field development and in the exploration and evaluation of hydrocarbons within
– PNG exploration and development - the Group is currently involved in the Stanley condensate/gas development, and the
exploration and evaluation of hydrocarbons in six onshore permit areas
PPL 373; and
PRL 21, PRL 28, PRL 40, PPL 574, PPL 372 and
–
68 Segment information provided to the chief operating decision maker
CHINA
EXPLORATION &
DEVELOPMENT
NEW ZEALAND
EXPLORATION &
DEVELOPMENT
PAPUA NEW
GUINEA
EXPLORATION &
DEVELOPMENT
ALL OTHER
SEGMENTS
TOTAL
2020
SEGMENT REVENUE:
Revenue from external customers
Profit/(loss) before tax
46,958
15,346
Depreciation and amortisation
(15,554)
37,067
5,670
(10,800)
-
(71,536)
(95)
-
6,285
(263)
Total segment assets as at
30 June 2020
Additions to non-current assets other than financial assets and deferred tax during the financial year ended:
-
Exploration phase expenditure:
77,307
70,156
18,678
5,494
2,431
1,107
817
Development and production
phase expenditure:
Plant and equipment:
Total segment liabilities as at
30 June 2020
55
-
321
-
470
73
35,237
41,059
6,069
-
796
6,415
84,025
(44,235)
(26,712)
171,635
4,355
846
869
88,780
CHINA EXPLORATION &
DEVELOPMENT
NEW ZEALAND
EXPLORATION &
DEVELOPMENT
PAPUA NEW GUINEA
EXPLORATION &
DEVELOPMENT
ALL OTHER
SEGMENTS
TOTAL
2019
SEGMENT REVENUE:
Revenue from external customers
Profit/(loss) before tax
Depreciation and amortisation
80,112
36,126
(21,234)
42,289
6,810
(18,050)
-
(4,298)
(20)
-
9,771
(116)
Total segment assets as at
30 June 2019
Additions to non-current assets other than financial assets and deferred tax during the financial year ended:
Exploration phase expenditure:
80,480
96,340
75,407
1,440
1,070
171
66
10,432
122,401
48,409
(39,420)
262,659
2,747
4,258
71
-
66
13,438
121,353
Development and production phase
expenditure:
Plant and equipment:
Total segment liabilities as at
30 June 2019
3,495
-
62,732
3
-
40,573
760
5
4,610
Other segment information
[i] Segment revenue
customers, including through sales agreements with the respective joint venture operators.
Reportable segment revenues are equal to consolidated revenue.
[ii] Segment profit before tax
The chief operating decision maker assesses the performance of operating segments based on a measure of profit before
tax.
69
Segment profit before tax is equal to consolidated profit before tax.
[iii] Segment assets
The amounts provided to the chief operating decision maker with respect to total assets are measured in a manner
consistent with that of the financial statements.
Reportable segment assets are equal to consolidated total assets.
[iv] Segment liabilities
The amounts provided to the chief operating decision maker with respect to total liabilities are measured in a manner
consistent with that of the financial statements.
Reportable segment liabilities are equal to consolidated total liabilities.
Revenue
FROM CONTINUING OPERATIONS
Crude oil sales
Net realised gain/(loss) on oil hedging derivatives
OTHER INCOME
Insurance claim income1
Interest received from unrelated entities
CONSOLIDATED
2020
2019
74,942
9,083
84,025
-
28
28
126,742
(4,341)
122,401
4,395
32
4,427
1 During the prior financial period the Group finalised the recovery of US$4.4 million of outstanding insurance claims associated with historical Maari repair
works.
Revenue for the financial year ended 30 June 2020 relates to contracts executed for the sale of crude oil and all
performance obligations have been met within the period. There is no variable consideration requiring estimation for the
year ended 30 June 2020.
The Group did not have contracts that were executed in a prior period, whereby the performance obligations were partially
met at the beginning of the period. There are no existing contracts that are unsatisfied or partially unsatisfied as at
30 June 2020.
revenue recognition is as follows:
Segment information.
CONSOLIDATED
2020
2019
37,067
46,958
84,025
42,289
80,112
122,401
CRUDE OIL SALES
Goods transferred at a point in time
Goods transferred over a period of time
70 Expenses
COST OF SALES
Direct production costs
Inventory adjustments1
Amortisation expense
Royalties and other levies
1 Adjustment for the cost of inventory produced which is on hand as at the end of the financial period.
GENERAL AND ADMINISTRATIVE EXPENSES
Employee benefits expense (net)
Employee share options expense
Corporate office expense
Depreciation expense
Rental expense relating to operating leases
INSURANCE EXPENSE
Insurance expense (including Loss of Production Income insurance)
EXPLORATION AND DEVELOPMENT EXPENSES
Exploration and development expenditure expensed
IMPAIRMENT OF NON-CURRENT ASSETS
Impairment of non-current assets2
2 Refer to Note 28 for a
non-current assets.
FINANCING COSTS
Interest and finance charges
Discount unwinding on provision for restoration
Unrealised movement in fair value of derivative financial instrument3
Amortisation of prepaid financing costs
CONSOLIDATED
2020
2019
24,538
2,243
26,354
249
53,384
1,655
611
1,756
358
89
4,469
2,132
2,132
5,035
5,035
67,285
67,285
2,454
885
(8,047)
511
(4,197)
27,414
(1,750)
39,284
2,406
67,354
1,317
680
1,189
136
432
3,754
1,907
1,907
4,592
4,592
-
-
6,379
833
(11,157)
4,536
591
3 The amount shown reflects an unrealised gain of $8,047,000 (2019: gain of $11,157,000) relating to the mark to market revaluation of the derivative
financial liability arising from the share options issued in respect of the subordinated secured facility. Refer to Note 19 for further details of the
component parts recognised in relation to this financing transaction.
OTHER EXPENSES
Net foreign exchange losses/(gain)
Other expenses
104
76
180
104
117
221
71
Income tax expense
(a)
Royalty tax expense (benefit)
Royalty paid/payable in New Zealand
current tax expense
Tax benefit related to movements in deferred tax balances
Income tax expense
Total royalty tax expense
(b)
Current tax expense
Tax expense related to movements in deferred tax balances
Adjustments for current tax of prior periods
Total income tax expense
Deferred income tax expense/(benefit) included in income tax expense comprises:
Decrease in deferred tax assets
Decrease in deferred tax liabilities
Total deferred income tax expense
(c)
Numerical reconciliation between profit before tax and tax expense/(benefit)
(Loss)/profit from continuing operations before income tax
Less: Royalty paid/payable
Tax at the Australian tax rate of 30% (2019: 30%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Expenditure not allowed for income tax purposes
Other deductible items
Non-assessable income
Other assessable income
Effect of overseas tax rates
Deferred tax asset not brought to account
Previously unrecognised deferred tax now recognised
Previously recognised tax losses now not recognised
Tax losses utilised to reduce current tax expense
Tax paid on non-resident insurance premiums
Previously unrecognised tax losses now recognised to reduce current tax expense
Adjustments for current tax of prior periods
Income tax expense
Royalty tax expense
Total tax expense/(benefit) recognised in statement of profit or loss
CONSOLIDATED
2020
2019
4,220
(1,271)
2,949
4,775
2,071
1,109
7,955
3,398
(1,327)
2,071
4,069
(2,416)
1,653
10,798
126
6
10,930
875
(749)
126
CONSOLIDATED
2019
2020
(44,235)
(4,220)
(48,455)
(14,537)
27,336
(48)
(9,740)
786
18,334
(888)
1,161
-
2,985
(212)
3
-
1,109
7,955
2,949
10,904
48,409
(4,069)
44,340
13,302
6,497
(268)
(7,844)
214
(1,401)
(2,017)
1,320
1,163
-
-
6
(1,449)
6
10,930
1,653
12,583
72 CONSOLIDATED
2020
2019
Amounts recognised in other comprehensive income
(d)
Aggregate deferred tax arising in the reporting period and not recognised in net profit or
loss but directly debited to other comprehensive income.
Deferred tax: Changes in fair value of cash flow hedges
Total tax expense/(benefit) recognised in other comprehensive income
(990)
(990)
3,387
3,387
(e)
Tax losses
Unused tax losses (and applicable tax rate) for which no deferred tax asset has been
recognised:
Horizon Oil Limited
30% (2019: 30%)
Potential tax benefit at applicable tax rates
3,038
3,038
-
-
The Company has no Australian subsidiaries and therefore it is not subject to the Australian tax consolidation regime.
Cash and cash equivalents
Cash at bank and on hand
Restricted cash1
CONSOLIDATED
2020
2019
23,007
2,913
25,920
10,050
11,422
21,472
1
Advance Facility (refer to Note 18(b)), certain cash balances are available to the Group after certain
conditions of the relevant facility agreement are satisfied. No restricted cash was held on deposit during the year (2019: US$Nil).
Receivables
Trade and other receivables1
CONSOLIDATED
2020
2019
7,923
7,923
8,046
8,046
1 Of this balance US$Nil (2019: US$Nil) related to amounts receivable from related parties. Refer to Note 31 for further details.
Note 24(b).
exposure to credit and market risks, and collectability of overdue amounts, is included in
73
Inventories
Crude oil, at cost
Drilling and workover spares inventory
Derivative financial instruments
CURRENT:
Derivative (liability)/asset - Oil price swaps
Derivative asset
Derivative (liability)
Derivative (liability)
Foreign exchange contracts
Interest rate swaps
Foreign exchange contracts
cash flow hedges
cash flow hedges
cash flow hedges
cash flow hedges
CONSOLIDATED
2020
1,483
2,027
3,510
2019
3,726
1,793
5,519
CONSOLIDATED
2020
2019
(1,197)
15
(147)
-
(1,329)
2,605
103
-
(307)
2,401
The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to oil
price, interest rate and foreign exchange
(refer to Note 24(a)).
Oil price swap contracts (cash flow hedges)
During the financial year, oil price hedging was undertaken as a risk mitigation measure to ensure the
position remains sound and that the Group is able to meet its financial obligations in the event of low oil prices. At 30 June
2020, the Group had 220,000 barrels of crude oil hedged through Brent oil price swaps (30 June 2019: 480,000) at a
weighted average price of US$35.75.
Interest rate swap contracts (cash flow hedges)
During the financial year, interest rate hedging was in place
position remains sound and that the Group is able to meet its financial obligations in the event of a high LIBOR rate. As at
30 June 2020, the Group had no outstanding LIBOR swaps.
Foreign exchange contracts (cash flow hedges)
During the financial year, foreign currency hedging was undertaken as
financial position remains sound and that the Group is able to meet its financial obligations in the event of a weakening
had RMB 48 million hedged through currency swaps, hedging a portion of the China operating and capital costs over the
next 12 months. In addition, the Group had hedged NZD 6 million, through forward exchange contracts, hedging a portion
of the New Zealand operating costs over the next 6 months. The Group had also hedged AUD 1.5 million, through forward
exchange contracts, hedging a portion of its corporate costs over the next 6 months.
, AUD and RMB. As at 30 June 2020, the Group
The gain or loss arising from re-measurement of the hedging instruments at fair value is deferred in equity in the hedging
reserve, to the extent that the hedge is effective, and re-classified into profit or loss when the hedged transaction is
recognised. The ineffective portion is recognised in profit or loss immediately. During the financial year, a profit of US$
$8,795,267.56 (2019: loss of US$4,379,815) was transferred to profit or loss.
74 Other assets
Prepayments
Financial asset at fair value
New Zealand carbon credits1
CONSOLIDATED
2020
585
802
1,387
2019
877
796
1,673
1
The Group acquires New Zealand Units ((NZUs) also referred to as carbon credits) to surrender to the New Zealand Government through the
Environmental Protection Authority, for its proportionate share of the Maari/Manaia fields direct greenhouse gas emissions for the calendar year.
NZUs are tradable instruments with transactions taking place on the New Zealand Emissions Trading Register, which is operated by the
Environmental Protection Authority. The NZUs are recorded at fair value through profit and loss.
Deferred tax assets
Recognised deferred tax assets are attributable to:
Tax losses
Development and production expenditure
Cash flow hedges
Provisions and other
Total deferred tax assets
Set off of deferred tax liabilities pursuant to set off provisions
Net deferred tax assets
CONSOLIDATED
2020
2019
-
6,824
352
128
7,304
(220)
7,084
2,804
6,681
78
865
10,428
(2,071)
8,357
2020
TAX LOSSES
DEVELOPMENT &
PRODUCTION
EXPENDITURE
CASH FLOW
HEDGES
PROVISIONS
AND OTHER
TOTAL
MOVEMENTS
AT 1 JULY 2019
(Charged)/credited
– to profit or loss
– to other comprehensive
income
At 30 June 2020
2,804
6,681
(2,804)
-
-
143
-
6,824
78
-
274
352
865
(737)
-
128
10,428
(3,398)
274
7,304
2019
TAX LOSSES
DEVELOPMENT &
PRODUCTION
EXPENDITURE
CASH FLOW
HEDGES
PROVISIONS
AND OTHER
TOTAL
MOVEMENTS
AT 1 JULY 2018
(Charged)/credited
– to profit or loss
– to other comprehensive
income
At 30 June 2019
4,421
(1,617)
-
2,804
6,149
532
-
6,681
568
-
(490)
78
411
454
-
865
11,549
(631)
(490)
10,428
75
Property, plant and equipment
LAND(2)
BUILDING(2)
OTHER PLANT AND
EQUIPMENT(2)
LEASEHOLD
IMPROVEMENTS
TOTAL
As at 1 July 2018
Cost
Accumulated depreciation
Net book amount
FINANCIAL YEAR ENDED 30 JUNE 2019
Opening net book amount
Additions
Disposals
Depreciation expense
Closing net book amount
As at 30 June 2019
Cost
Accumulated depreciation
Net book amount
As at 1 July 2019
Cost
Adjustment on transition to AASB 16
Accumulated depreciation
Net book amount
FINANCIAL YEAR ENDED 30 JUNE 2020
Opening net book amount
Additions
Disposals
Depreciation expense(1)
Closing net book amount
As at 30 June 2020
Cost
Accumulated depreciation
-
-
-
-
-
-
-
-
-
-
-
-
16
-
16
16
-
(8)
(8)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
103
-
103
103
547
(17)
(203)
430
603
(173)
Net book amount
430
(1) Depreciation expense in relation to the right of use assets is US$223,283.
-
2,179
(2,110)
69
69
71
(1)
(55)
84
2,247
(2,163)
84
2,247
21
(2,163)
105
105
37
-
(53)
89
2,305
(2,216)
89
1,263
(738)
525
525
-
-
(81)
444
1,263
(819)
444
1,263
-
(819)
444
444
-
-
(94)
350
1,263
(913)
350
3,442
(2,848)
594
594
71
(1)
(136)
528
3,510
(2,982)
528
3,510
140
(2,982)
668
668
584
(25)
(358)
869
4,171
(3,302)
869
76 (2) Included in the net book amount of land and building, and other plant and equipment are right-of-use assets as follows:
Land
Office premises
Photocopier and IT equipment
Total
Exploration phase expenditure
30 JUN 2020
1 JUL 2019
-
430
24
454
16
103
21
140
CONSOLIDATED
2020
2019
EXPLORATION PHASE EXPENDITURE
Deferred geological, geophysical, drilling and other exploration and evaluation
expenditure
8,225
56,903
The reconciliation of exploration phase expenditure carried forward above is as
follows:
Balance at beginning of financial year
Acquisition of exploration asset
Disposal of exploration asset
Reassessment of rehabilitation asset
Transfer of costs to production phase
Exploration expenditure incurred during financial year
Exploration expenditure expensed during financial year
Impairment expenditure
Balance at end of financial year
Oil and gas assets
56,903
-
-
1,695
(1,372)
3,538
(3,811)
(48,728)
8,225
57,453
202
(202)
-
-
2,747
(3,297)
-
56,903
CONSOLIDATED
2020
2019
DEVELOPMENT AND PRODUCTION PHASE EXPENDITURE
Producing oil and gas property acquisition, deferred geological, seismic and drilling,
production and distribution facilities and other development expenditure
506,855
505,932
Development costs expensed during financial year
Increase in restoration asset during financial year
Carried forward accumulated impairment losses
Impairment expenditure recognised during the period
Less accumulated amortisation
(407)
2,349
(98,041)
(18,557)
(275,497)
116,702
(1,295)
-
(98,041)
-
(249,143)
157,453
77
The reconciliation of development and production phase expenditure carried forward above is as follows:
CONSOLIDATED
DEVELOPMENT
PHASE
EXPENDITURE
PRODUCTION
PHASE
EXPENDITURE
BALANCE AT 1 JULY 2018
Amortisation incurred
Development and production costs incurred during
financial year
Development and production costs expensed during
financial year
Balance at 30 June 2019
Amortisation incurred
Increase in restoration asset
Transfer from exploration phase
Impairment expenditure
Development and production costs incurred during
financial year
Development and production costs expensed during
financial year
Balance at 30 June 2020
20,960
-
760
(760)
20,960
-
-
-
(18,557)
469
(464)
2,408
Payables
CURRENT LIABILITIES
Trade creditors
Share of joint operation creditors and accruals
Financial liability at fair value
ETS obligation1
Lease liabilities2
Other creditors
NON-CURRENT LIABILITIES
Lease liabilities2
Other creditors
TOTAL
193,774
(39,284)
4,258
(1,295)
157,453
(26,354)
2,349
1,372
(18,557)
846
(407)
172,814
(39,284)
3,498
(535)
136,493
(26,354)
2,349
1,372
-
377
57
114,294
116,702
CONSOLIDATED
2020
2019
784
3,996
361
223
1,523
6,887
262
123
385
707
7,546
488
-
2,762
11,503
-
71
71
1
The ETS financial liability represents Horizon Oil International Limited obligation to the New Zealand Government for the companies proportionate
share of the Maari/Manaia fields greenhouse gas emissions. Refer to Note 11 for the disclosure of the carbon credits acquired (NZUs) which will be
surrendered to the New Zealand Government for settlement of this obligation. The ETS obligation is recorded at fair value through profit and loss.
78 2 The Group has leases for offices in Sydney and PNG, and various equipment. The lease liabilities are secured by the
related underlying assets. Future minimum lease payments at 30 June 2020 were as follows:
MINIMUM LEASE PAYMENTS DUE
Within one year One to five years
After five years
Total
244
(21)
223
271
(9)
262
-
-
-
515
(30)
485
30 June 2020
Lease payments
Finance charges
Net present values
Current tax payable
Current tax payable
Current tax payable
Current royalty tax payable
China
New Zealand
New Zealand
Borrowings
CURRENT:
Bank loans (b)
NON-CURRENT:
Bank loans (b)
Total Borrowings
Net debt reconciliation
CONSOLIDATED
2019
2,503
-
1,686
4,189
2020
134
1,638
1,170
2,942
CONSOLIDATED
2020
2019
12,236
12,236
12,079
12,079
24,315
9,506
9,506
38,298
38,298
47,804
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.
Cash and cash equivalents
Borrowings1
Borrowings1
repayable within one year (including overdraft)
repayable after one year
Net cash/(debt)
Cash and liquid investments
Gross debt
Gross debt1
fixed interest rates
variable interest rates
Net cash/(debt)
2020
2019
25,920
(12,758)
(12,673)
489
25,920
-
(25,431)
489
21,472
(10,030)
(39,401)
(27,959)
21,472
-
(49,431)
(27,959)
Borrowings exclude associated transaction costs and accrued interest and accordingly represents the nominal value of the borrowings as at 30
June 2020 and 30 June 2019.
79
CASHFLOWS
NON-CASH CHANGES
OPENING
1 JULY 2019
DRAWDOWN1
REPAYMENTS AMORTISATION
OF
TRANSACTION
COSTS
CHANGES IN
FAIR VALUE
CLOSING
30 JUNE 2020
Syndicated Revolving Cash
Advance Facility
Total liabilities from
financing activities
47,804
47,804
-
-
(24,000)
(24,000)
511
511
-
-
24,315
24,315
1
Funds drawn down are shown net of associated transaction costs incurred during the period.
Bank loans
Syndicated Revolving Cash Advance Facility
On 15 November 2018, the Group finalised and executed a US$95 million Syndicated Revolving Cash Advance Facility with
Australia and New Zealand Banking Group (ANZ), Westpac Banking Corporation (Westpac) and Industrial and Commercial
Bank of China (ICBC). The proceeds on this facility were applied to repay the outstanding subordinated and senior debt
facilities. The facility retained some key elements of the previous Reserves Based Debt Facility, with key changes
including additional tenure to July 2022, reduced interest rate at LIBOR plus 2.75% and the removal of lender security over
Under the facility, the facility limit and thus future repayments are determined by applying a
minimum loan life coverage ratio to the net present value of estimated future cash flows from all projects included in the
facility. Estimated future cash flows are dependent on, amongst other things, the lenders views on forecast oil prices,
reserve estimates, operating and capital cost estimates and forecast interest and exchange rates.
At 30 June 2020, total debt drawn under the facility was US$25.43 million with undrawn debt capacity of US$1.6 million.
Floating interest in respect of the facility was at LIBOR plus a weighted average margin of 2.75%.
The facility was secured by a floating charge over the shares and assets of the borrowers (Horizon Oil International Limited
and Horizon Oil (Beibu) Limited which are wholly owned subsidiaries of Horizon Oil Limited) and other Horizon Oil Limited
subsidiaries, in favour of ANZ Fiduciary Services Pty Limited as security trustee. Horizon Oil Limited has guaranteed the
performance of Horizon Oil International Limited and Horizon Oil (Beibu) Limited (which have also given guarantees) in
relation to the loan facility from ANZ, Westpac and ICBC. In addition, the shares of the following Horizon Oil Limited
subsidiaries have been mortgaged to ANZ Fiduciary Services Pty Limited: Horizon Oil International Limited and Horizon Oil
(Beibu) Limited. The Group is subject to covenants which are common for a facility of this nature.
Other financial liabilities
NON-CURRENT
Fair value of share options
Total other financial liabilities
CONSOLIDATED
2019
US
11,838
11,838
2020
US
3,791
3,791
The amount shown for other financial liabilities is the fair value of the derivative financial liability arising from the 300
million share options issued as part of a subordinated debt facility executed in 2016 and repaid in full during 2018. The
options are exercisable at A$0.061 per share and as the functional currency of the Group is United States dollars, which will
result in a variable amount of cash being received on exercise of the options, the share options are accounted for as a
derivative financial liability at fair value on a recurring basis and are marked to market at each balance date, with any
gains/losses arising recognised through profit or loss. Refer to Note 24(d) for details of the valuation techniques used to
derive this fair value.
80 The following is a reconciliation of the fair value of the share options:
Balance at beginning of financial year
Unrealised gain on revaluation during the period
Balance at end of financial year
CONSOLIDATED
2020
US
11,838
(8,047)
3,791
2019
US
22,995
(11,157)
11,838
1
The weighted average fair value of the options at measurement date was A$0.0184 (2019: A$0.0563). Refer to Note 24(d) for details of the valuation
techniques used to derive this fair value.
Provisions
Restoration (current)
Restoration (non-current)
The reconciliation of the movement in the total of the restoration provisions is as follows:
Balance at beginning of financial year
Additional provision during financial year
Unwinding of discount
Effect of change in inflation/discount rate
Balance at end of financial year
Non-current liabilities
Deferred tax liabilities
CONSOLIDATED
2020
US
-
33,947
33,947
29,018
1,695
885
2,349
33,947
2019
US
-
29,018
29,018
28,185
-
833
-
29,018
CONSOLIDATED
RECOGNISED DEFERRED TAX LIABILITIES ARE ATTRIBUTABLE TO:
Development and production expenditure
Accounting profits royalty
Cash flow hedges
Other
Total deferred tax liabilities
Set off of deferred tax assets pursuant to set off provisions
Net deferred tax liabilities
2020
US
-
11,919
2,227
4
1,239
15,389
(220)
15,169
2019
US
-
11,345
3,498
711
3,140
18,694
(2,071)
16,623
81 2020
MOVEMENTS
AT 1 JULY 2019
(Charged)/credited
– to profit or loss
– to other comprehensive
income
At 30 June 2020
2019
MOVEMENTS
AT 1 JULY 2018
(Charged)/credited
– to profit or loss
– to other comprehensive
income
At 30 June 2019
DEVELOPMENT
AND PRODUCTION
EXPENDITURE
ACCOUNTING
PROFITS
ROYALTY
CASH FLOW
HEDGES
US$,000
OTHER
TOTAL
11,345
574
-
11,919
3,498
(1,271)
-
2,227
711
-
(707)
4
DEVELOPMENT
AND PRODUCTION
EXPENDITURE
ACCOUNTING
PROFITS
ROYALTY
CASH FLOW
HEDGES
US$,000
3,140
(1,901)
-
1,239
18,694
(2,598)
(707)
15,389
OTHER
TOTAL
12,579
(1,234)
-
11,345
5,962
(2,464)
-
3,498
-
-
711
711
1,764
1,376
-
20,305
(2,322)
711
3,140
18,694
Contributed equity
Issued share capital
Ordinary shares
Fully paid
Partly paid to A$0.01
Movements in ordinary share capital
[i] Ordinary shares (fully paid)
CONSOLIDATED
NUMBER OF SHARES
2020
2019
CONSOLIDATED
2020
US
2019
US
1,301,981
1,301,981
174,342
174,342
1,500
1,500
459
459
1,303,481
1,303,481
174,801
174,801
DATE
30/06/2019
30/06/2020
DETAILS
NUMBER OF SHARES
Balance as at 30 June 2019
Balance as at 30 June 2020
1,301,981,265
1,301,981,265
US$'000
174,342
174,342
82
[ii] Ordinary shares (partly paid to A$0.01):
DATE
30/06/2019
30/06/2020
Ordinary shares
DETAILS
NUMBER OF SHARES
US$'000
Balance as at 30 June 2019
Balance as at 30 June 2020
1,500,000
1,500,000
459
459
Fully paid
Fully paid ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of shares held. Voting rights are governed by the
show of hands every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote and upon a
poll each fully paid ordinary share is entitled to one vote.
Partly paid
Partly paid ordinary shares are issued on exercise of employee options. The partly paid shares currently on issue are held
by the Company following forfeiture by their original holder. The outstanding obligation in relation to the partly paid
ordinary shares is payable either when called or by the date not exceeding 5 years from the grant date of the option which
gave rise to the partly paid ordinary share. Partly paid ordinary shares entitle the holder to participate in dividends and the
proceeds on winding up of the Company in proportion to the number of shares held. Voting rights are governed by the
in person or by proxy is entitled to one vote and upon a poll, is entitled to one vote to the proportion of the total issue price
then paid up.
Unlisted options over unissued ordinary shares
Information related to general options and the Employee Option Scheme, including details of options issued, exercised and
lapsed during the financial year and options outstanding at the end of the financial year is set out in Note 32.
Reserves and retained profits
Reserves
SHARE-BASED PAYMENTS RESERVE
Movements:
Balance at beginning of financial year
Employee share-based payments expense
Balance at end of financial year
HEDGE RESERVE
Movements:
Balance at beginning of financial year
Movement in net market value of hedge contracts
Deferred tax
Balance at end of financial year
Total reserves
CONSOLIDATED
2020
US
2019
US
14,144
(563)
13,581
1,767
(3,730)
981
(982)
12,599
13,755
389
14,144
(8,015)
13,169
(3,387)
1,767
15,911
83 Accumulated (losses)/retained profits
Accumulated losses at beginning of financial year
Net (loss)/profit for financial year
Accumulated losses at end of financial year
Nature and purpose of reserves
CONSOLIDATED
2020
US
(49,406)
(55,139)
(104,545)
2019
US
(85,232)
35,826
(49,406)
Share-based payment reserve:
The fair value of options and share appreciation rights granted to employees results in an increase in equity upon
recognition of the corresponding employee benefits expense, as described in the accounting policy set out in Note 1(w)(iii).
The fair value of general options granted also results in an increase in equity unless accounting standards require the
options to be treated otherwise.
The Company has elected to retain any amounts originally recognised in the share-based payments reserve, regardless of
whether the associated options or share appreciation rights are exercised, cancelled or lapse unexercised.
Hedge reserve:
Changes in the market value of the effective portion of derivatives is reflected directly in equity until such time as the
hedge is ineffective or expires, as described in the accounting policy set out in Note 1(t).
Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and
commodity price risk); credit risk; liquidity risk; capital risk; and climate related and other emerging risks. The Group's
overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as oil
price swaps, interest rate swaps and foreign exchange forward contracts, to hedge certain risk exposures. Derivatives are
exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The Group uses different
methods to measure the different types of risk to which it is exposed. These methods include sensitivity analysis in the
case of interest rate, foreign exchange and commodity price risks, and aging analysis for credit risk.
Risk management is carried out by the finance function under policies approved by the Board of Directors. The finance
function identifies, evaluates and if necessary hedges financial risks in close co-operation with Group management. The
board provides written principles for overall risk management, as well as written policies covering specific areas, such as
mitigating foreign exchange, interest rate and credit risks, use of derivative financial instruments and investment of
excess liquidity.
The Group has no off-balance sheet financial assets or liabilities as at the end of the reporting period.
84
The Group held the following financial instruments at 30 June 2020 and 30 June 2019:
FINANCIAL ASSETS
Cash and cash equivalents
Receivables
Derivative financial instruments
Financial asset
New Zealand carbon credits
FINANCIAL LIABILITIES
Payables (current)
Current tax payable
Payables (non-current)
Borrowings (net of borrowing costs capitalised)
Derivative financial instruments
Other financial liabilities
Market risk
[i] Foreign exchange risk
CONSOLIDATED
30 JUNE 2020
US
30 JUNE 2019
US
25,920
7,923
15
802
34,660
6,887
2,942
385
24,315
1,344
3,791
39,664
21,472
8,046
2,708
796
33,022
11,503
4,189
71
47,804
307
11,838
75,712
Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates.
Foreign exchange risk arises when future commercial transactions and recognised financial assets and financial liabilities
The Group operates internationally and is exposed to foreign exchange risk arising predominately from Australian and New
Zealand dollars, Chinese Renminbi and Papua New Guinea Kina.
The Group manages foreign exchange risk by monitoring forecast cash flows in currencies other than US dollars and
ensuring that adequate Australian dollar, New Zealand dollar, Chinese Renminbi and Papua New Guinea Kina cash
balances are maintained.
periods of unfavourable exchange rates. Regular sensitivity analysis is conducted to evaluate the potential impact of
the most appropriate risk mitigation tool to be used. The Group will hedge when it is deemed the most appropriate risk
mitigation tool to be used.
As at 30 June 2020, the Group had a derivative asset of US$15,000 (30 June 2019: US$103,000 derivative asset) and a
derivative liability of US$147,000 (30 June 2019: $Nil) with NZD 6 million hedged through forward exchange contracts at an
average USD rate of 0.6501, RMB 48 million hedged through currency swaps at an average USD rate of 7.0580, and AUD 1.5
million hedged through forward exchange contracts at an average USD rate of 0.6755. All hedges are designed to cover a
portion of the G
and China, and corporate costs in Australia.
85 Effects of hedge accounting
The effects of the foreign currency related hedging instruments on the G
follows:
FOREIGN CURRENCY SWAPS (USD/RMB)
Carrying amount
Notional amount
(liability)/asset
Maturity date
Hedge ratio1
Change in discounted spot value of outstanding hedging instruments since
30 June 2019
Change in value of hedged item used to determine hedge ineffectiveness
Weighted average hedged rate for the year
FOREIGN CURRENCY FORWARDS (USD/NZD)
(liability)/asset
Carrying amount
Notional amount
Maturity date
Hedge ratio1
Change in discounted spot value of outstanding hedging instruments since 30
June 2019
Change in value of hedged item used to determine hedge ineffectiveness
Weighted average hedged rate for the year
FOREIGN CURRENCY FORWARDS (USD/AUD)
Carrying amount
asset
Notional amount
Maturity date
Hedge ratio1
Change in discounted spot value of outstanding hedging instruments since 30
June 2019
Change in value of hedged item used to determine hedge ineffectiveness
Weighted average hedged rate for the year
CONSOLIDATED
30 JUNE 2020
30 JUNE 2019
(75)
6,801
1 July 2020
June 2021
1:1
30
8
1,739
1 July 2019
31
December 2019
1:1
(75)
8
-
US$1: RMB7.0580
(8)
US$1: RMB6.9013
(72)
3,900
15 July 2020
16
December 2020
1:1
95
3,953
15 July 2019
16
December 2019
1:1
(72)
95
-
US$1: NZD0.6501
(95)
US$1: NZD0.6588
15
1,013
10
10 July 2020
December 2020
1:1
15
-
US$1: AUD0.6755
-
-
-
-
-
-
-
1
The foreign currency swaps and foreign currency forward contracts are denominated in the same currencies as the highly probable future operating
and corporate overhead expenditures (RMB and NZD operating and AUD corporate expenditures), therefore the hedge ratio is 1:1.
86 Exposure to foreign exchange risk
each reporting period was as follows:
GROUP
30 JUNE 2020
30 JUNE 2019
AUD
NZD
PGK
RMB
AUD
NZD
PGK
RMB
Cash and cash
equivalents
Receivables
Financial asset
Zealand carbon
credits
New
Current tax payable
937
111
-
-
Current payables
2,073
Non-current payables
96
804
178
66
2,808
391
-
72
12
-
-
65
-
9
-
-
134
19
-
702
128
-
-
1,760
71
279
111
796
1,686
542
-
90
8
-
-
120
-
9
-
-
2,503
256
-
For the financial year ended and as at 30 June 2020, if the currencies set out in the table below had strengthened or
weakened against the US dollar by the percentage shown, with all other variables held constant, the net result for the
financial year would increase/(decrease) and net assets would increase/(decrease) by:
GROUP
NET RESULT
NET ASSETS
NET RESULT
NET ASSETS
Change in currency1
Australian dollar impact
New Zealand dollar
impact
Papua New Guinea kina
impact
Chinese Renminbi impact
2020
+10%
(553)
(422)
(56)
-
2019
+10%
(519)
(979)
(84)
(87)
2020
+10%
(78)
(102)
2
(11)
2019
+10%
(70)
(75)
(2)
(206)
2020
-10%
553
422
56
-
2019
-10%
519
979
84
87
2020
-10%
78
102
(2)
11
2019
-10%
70
75
2
206
1
This has been based on the change in the exchange rate against the US dollar in the financial years ended 30 June 2020 and 30 June 2019. The
sensitivity analysis has been based on the sensitivity rates when reporting foreign exchange risk internally to key management personnel and
sensitivity analysis is not fully representative of the inherent foreign exchange risk as the end of the reporting period exposure does not necessarily
reflect the exposure during the course of the financial year.
[ii] Commodity price risk
Commodity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
change in market commodity prices for crude oil.
periods of unfavourable prices. Regular sensitivity analysis is conducted to evaluate the potential impact of unfavourable
risk mitigation tool to be used. The Group will hedge when it is deemed the most appropriate risk mitigation tool to be used
or where required by its financing arrangements. During the current financial year, oil price hedging was undertaken as a
the Group is able to meet its
financial obligations in the event of low oil prices.
As at 30 June 2020, the Group had a derivative liability of US$1,197,000 (30 June 2019: US$2,605,000 derivative asset) as
there were 220,000 bbls hedged at this date (30 June 2019: 480,000 bbls) at a weighted average price of US$35.75/bbl.
87
Effects of hedge accounting
OIL PRICE SWAPS
Carrying amount
Notional amount
Maturity date
(liability)/asset
Hedge ratio1
Change in fair value of outstanding hedging instruments since 30 June 2019
Change in value of hedged item used to determine hedge ineffectiveness
Weighted average hedged rate for the year
CONSOLIDATED
30 JUNE 2020
US
30 JUNE 2019
US
(1,197)
7,865
1 July 2020
31
December 2020
1:1
(1,197)
-
US$35.75/bbl
31
2,605
33,326
1 July 2019
March 2020
1:1
13,373
(13,373)
US$69.43/bbl
1
The oil price swaps were executed in the same oil price benchmark as the highly probable future oil sales, therefore the hedge ratio is 1:1.
For the financial year ended and as at 30 June 2020, if the crude oil price rose or fell by the percentage shown, with all
other variables held constant, the result for the financial year would increase/(decrease) and net assets would
increase/(decrease) by:
GROUP
NET RESULT
NET ASSETS
NET RESULT
NET ASSETS
2020
+10%
965
2019
+10%
2,661
2020
+10%
965
2019
+10%
2,661
2020
2019
2020
2019
-10%
(1,587)
-10%
(3,360)
-10%
(1,587)
-10%
(3,360)
Change in crude oil price
Impact
[iii] Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of
changes in market interest rates.
The Group has no interest-
flows to changes in market interest rates.
As at 30 June 2020 and 30 June 2019
rates, exposing the Group to cash flow interest rate risk. Group policy is to manage material interest rate exposure.
Regular sensitivity analysis is conducted to evaluate the potential impact of unfavourable interest rate movements on the
tool to be used.
The Group manages its cash flow interest rate risk by using floating to fixed interest rate swaps. Such interest rate swaps
have the economic effect of converting borrowings from floating to fixed rates. Under the interest rate swaps, the Group
agrees with other parties to exchange, at specific intervals, the difference between fixed contract rates and floating-rate
interest amounts calculated by reference to the agreed notional principal amounts.
As at 30 June 2020, the Group had no outstanding LIBOR swaps (30 June 2019: US$307,000 of derivative liability).
88 Effects of hedge accounting
CONSOLIDATED
30 JUNE 2020
30 JUNE 2019
liability
INTEREST RATE SWAPS
Carrying amount
Notional amount
Maturity date
Hedge ratio1
Change in fair value of outstanding hedging instruments since 30 June 2019
Change in value of hedged item used to determine hedge effectiveness
Weighted average hedged rate for the year
-
-
-
-
-
-
-
307
36,600
30 June 2020
1:1
(307)
307
2.867%
1
The interest rate swaps were executed with the same reference rate as the interest rate applied against the senior debt facility, therefore the hedge
ratio is 1:1.
FLOATING
INTEREST
RATE
FIXED INTEREST RATE MATURING IN:
NON-
INTEREST
BEARING
CARRYING
AMOUNT
1 YEAR OR
LESS
OVER 1 TOP 2
YEARS
OVER 2 TO 5
YEARS
AS AT 30 JUNE 2020
FINANCIAL ASSETS
Cash and cash equivalents
Receivables
Financial asset
Zealand carbon credits
Derivative financial
instruments
New
Weighted average interest
rate p.a.
FINANCIAL LIABILITIES
Trade and other payables
Current tax payable
Non-current payables
Derivative financial
instruments
Borrowings
Weighted average interest
rate p.a.
Net financial
assets/(liabilities)
4,233
-
-
-
4,233
0.15%
-
-
-
-
25,431
25,431
4.92%
(21,198)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,687
7,923
25,920
7,923
802
15
802
15
30,427
34,660
6,887
2,942
385
1,344
-
11,558
6,887
2,942
385
1,344
25,431
36,989
18,869
(2,329)
89
FLOATING
INTEREST
RATE
FIXED INTEREST RATE MATURING IN:
NON-
INTEREST
BEARING
CARRYING
AMOUNT
1 YEAR OR
LESS
OVER 1 TOP 2
YEARS
OVER 2 TO 5
YEARS
AS AT 30 JUNE 2019
FINANCIAL ASSETS
Cash and cash equivalents
Receivables
Financial asset
Zealand carbon credits
Derivative financial
instruments
New
Weighted average interest
rate p.a.
FINANCIAL LIABILITIES
Trade and other payables
Current tax payable
Non-current payables
Derivative financial
instruments
Borrowings
Weighted average interest
rate p.a.
Net financial
assets/(liabilities)
6,687
-
-
-
6,687
0.15%
-
-
-
-
49,431
49,431
5.90%
(42,744)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,785
8,046
21,472
8,046
796
796
2,708
26,335
2,708
33,022
11,503
4,189
71
307
-
16,070
11,503
4,189
71
307
49,431
65,501
10,265
(32,479)
As at 30 June 2020 and 30 June 2019, the Group had the following variable rate borrowings outstanding:
30 JUNE 2020
30 JUNE 2019
WEIGHTED AVERAGE
INTEREST RATE
BALANCE
WEIGHTED AVERAGE
INTEREST RATE
BALANCE
% P.A.
4.92%
% P.A.
5.90%
25,431
25,431
49,431
12,831
External loans
Net exposure to cash flow interest
rate risk
At 30 June 2020, if the interest rates had been 1.0% p.a. higher or lower and all other variables held constant, the net result
for the financial year would increase/(decrease) and net assets as at 30 June 2020 would increase/(decrease) by:
GROUP
NET RESULT
NET ASSETS
NET RESULT
NET ASSETS
2020
2019
2020
2019
2020
2019
2020
2019
CHANGE IN INTEREST
RATE p.a.
Impact of Assets
Impact of Liabilities
Impact of Net Assets
+1%
38
51
(13)
+1%
43
521
(478)
+1%
38
51
(13)
+1%
43
521
(478)
-1%
(6)
(51)
46
-1%
(6)
(521)
515
-1%
(6)
(51)
46
-1%
(6)
(521)
515
90 Credit risk
Credit risk is managed on a Group basis. Credit risk refers to the risk that a counterparty will default on its contractual
obligations resulting in financial loss to the Group. Credit risk arises from cash and cash equivalents, derivative financial
instruments, as well as credit exposures to customers, including outstanding receivables.
Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit
history, and that the Group has the ability to sell crude to other parties if desired.
es of crude oil are currently concentrated with two counterparties. However, the
Derivative counterparties and cash transactions are limited to high credit quality financial institutions. Where
commercially practical the Group seeks to limit the amount of credit exposure to any one financial institution.
The maximum exposure to credit risk at the end of each reporting period is the carrying amount of the financial assets as
summarised in this note.
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit
ratings (if available) or to historical information about counterparty default rates.
CONSOLIDATED
CASH AND CASH EQUIVALENTS
Counterparties with external credit rating (Standard & Poors)
AA-
A+
B
Counterparties without external credit rating
Share of joint operations cash balances
Overseas financial institutions
Total cash and cash equivalents
RECEIVABLES
Counterparties with external credit rating (Standard & Poors/Fitch)
AAA
AA+
AA-
A+
A-
B
Counterparties without external credit rating
Share of joint operation receivables balances
Joint operations partners
Other
Total receivables
2020
US
24,819
9
7
24,835
1,019
66
1,085
25,920
111
178
2,795
2,434
2,073
12
7,603
273
47
-
320
7,923
2019
US
19,794
9
-
19,803
1,579
90
1,669
21,472
125
111
1,492
5,656
-
5
7,389
412
117
128
657
8,046
91
The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. The expected loss rates are based on the payment profiles of sales over a period of 36
months before 30 June 2020 and the corresponding historical credit losses experienced within this period. The historical
rates are adjusted to reflect current and forward-looking information on key factors affecting the ability of the customers
to settle the receivables. Management has assessed the collectability of these amounts based on the customer
relationships and historical payment behaviour and believe that the amounts are still collectable in full.
On that basis, the loss allowance as at 30 June 2020 was determined as follows for trade receivables:
AS AT 30 JUNE 2020
CURRENT
Expected loss rate
Gross carrying amount
Loss Allowance
0%
7,923
-
MORE THAN 30
DAYS DUE PAST
MORE THAN 60
DAYS DUE PAST
0%
-
-
0%
-
-
TOTAL
7,923
-
As at 30 June 2020, there were no financial assets that are past due (30 June 2019: US$Nil). At the date of this report, the
full balance of the receivables has been received in cash.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities.
The Group has policies in place to manage liquidity risk by maintaining adequate reserves and by continuously monitoring
forecast and actual cash flows and matching profiles of financial assets and liabilities.
Financing arrangements
The Group had access to the following undrawn borrowing facilities as at the end of each reporting period:
FLOATING RATE:
Expiring within one year
Expiring beyond one year
Maturities of financial liabilities
CONSOLIDATED
30 JUNE 2020
30 JUNE 2019
1,599
-
9,300
-
NON-INTEREST BEARING
VARIABLE RATE1
FIXED RATE
AS AT 30 JUNE 2020
12 months
Less than 6 months
6
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
Total contractual cash flows
9,829
1,354
375
-
-
11,558
5,556
13,230
7,662
-
-
26,448
-
-
-
-
-
-
92 NON-INTEREST BEARING
VARIABLE RATE1
FIXED RATE
AS AT 30 JUNE 2019
12 months
Less than 6 months
6
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
Total contractual cash flows
15,692
307
71
-
-
16,070
1
Includes principal repayments and future interest payments.
Fair value estimation
1,350
11,315
25,216
16,338
-
54,219
-
-
-
-
-
-
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
value measurement hierarchy:
requires disclosure of fair value measurements by level of the following fair
(a)
(b)
(c)
quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as
prices) or indirectly (derived from prices) (level 2); and
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
[i] Fair value measurements
and 30 June 2019:
AS AT 30 JUNE 2020
ASSETS
Derivatives used for hedging
New Zealand carbon credits
Total Assets
LIABILITIES
Derivatives used for hedging
New Zealand ETS obligation
Financial liabilities at fair value through profit or loss:
Options over unissued shares
Total liabilities
20
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
-
802
802
-
361
-
361
15
-
15
1,344
-
-
1,344
-
-
-
-
-
3,791
3,791
15
802
817
1,344
361
3,791
5,496
93
AS AT 30 JUNE 2019
ASSETS
Derivatives used for hedging
New Zealand carbon credits
Total Assets
LIABILITIES
Derivatives used for hedging
New Zealand ETS obligation
Financial liabilities at fair value through profit or loss:
Options over unissued shares
Total liabilities
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
2,708
796
3,504
307
488
-
795
-
-
-
-
-
-
-
-
-
-
-
-
11,838
11,838
2,708
796
3,504
307
488
11,838
12,633
There were transfers between levels 1 and 2 for recurring fair value measurements during the year. The Group transferred
its hedging derivatives from level 1 to level 2. There were no other transfers between levels 1,2 or 3 for recurring fair value
measurements during the year.
cy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the
reporting period.
The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at 30 June
2020.
[ii] Valuation techniques used to derive fair values
The fair value of financial instruments traded in active markets (such as publicly traded derivatives) was based on quoted
market prices at the end of each reporting period. The quoted market price used for hedging derivatives held by the Group
was the current bid price. These instruments are included in level 1.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined using valuation techniques. These valuation techniques maximise the use of observable market data where it
is available and rely as little as possible on entity specific estimate. If all significant inputs required to fair value an
instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
Specific valuation techniques used to value financial instruments include:
– the fair value of oil price swaps is calculated as the present value of the estimated future cash flows based on forward
prices at balance sheet date;
– the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on
observable yield curves;
– the fair value of foreign currency contracts and swaps calculated as the present value of the estimated future cash flows
based on observable yield curves; and
– other techniques, such as discounted cash flow analysis and Monte Carlo simulations, are used to determine fair value
for the remaining financial instruments.
All of the resulting fair value estimates are included in level 2 unless otherwise stated.
94 For the financial liabilities, the best evidence of fair value is current prices in an active market for similar financial
liabilities. Where such information is not available the directors consider information from a variety of sources including:
– discounted cash flow projections based on reliable estimates of future cash flows; and
– Monte Carlo simulations.
All resulting fair value estimates for properties are included in level 3.
[iii] Fair value measurements using significant unobservable inputs (level 3)
The following table presents the changes in level 3 items for the year ended 30 June 2020 for recurring fair value
measurements:
Opening balance at 1 July 2019
Additions during the period
Profit recognised in profit or loss
Closing balance at 30 June 2020
OPTIONS OVER UNISSUED SHARES
11,838
-
(8,047)
3,791
Valuation inputs and relationships to fair value
The following table summarises the quantitative information about the significant unobservable inputs used in level 3 fair
value measurements.
DESCRIPTION
FAIR VALUE AT
30 JUNE 2020
UNOBSERVABLE
INPUTS
RANGE OF INPUTS
(PROBABILITY-
WEIGHTED AVERAGE)
RELATIONSHIP OF
UNOBSERVABLE INPUTS TO
FAIR VALUE
Options over
unissued shares
3,791
Share price volatility
62.50%
All other inputs being equal, an
increase/decrease in share
volatility results in an
increase/decrease in the fair
value of the liability
Valuation processes
The Group engages external, independent and qualified valuers to determine the fair value of the share options for
financial reporting purposes on a half yearly basis. The fair value of the share options is determined based on a risk-
neutral framework using the Black-Scholes Model. The Black-Scholes Model used to calculate the theoretical value of the
options uses current stock prices, expected dividend yield, the option's strike price, expected interest rates, time to
expiration and expected volatility.
A calculated share price volatility of 62.5% was applied in the valuation. All other parameters were based on the specific
terms of the options issued or observable market data.
[iv] Other fair value measurements
The carrying value of receivables and payables are assumed to approximate their fair values due to their short-term
nature.
The fair value of other financial liabilities (being financial guarantees), after factoring in the likelihood that the parent entity
would be required to perform under the guarantees, was not considered material.
95
The fair value of borrowings for disclosure purposes is not materially different to their carrying value given the likely
anticipated repayment profile. Refer to Note 18 for further details.
The fair value of other classes of financial instruments not yet covered above was determined to approximate their
carrying value.
Capital risk
The consolidated entity manages its capital to ensure that entities in the consolidated group will be able to continue as a
going concern while maximising the return to stakeholders through the optimisation of the debt and equity balances.
Climate-related and other emerging risks
Climate-related and other emerging risks encompass the impact of climate change, any associated climate change
regulations, funding restrictions and any other emerging factors (e.g. technological disruption to the oil and gas industry)
that could have a material impact on the Group. The Group will continue to monitor the impact of these risks.
At the date of this report, the Group is impacted by emissions trading regulations in New Zealand. Currently there are no
equivalent emissions trading regulations in the other jurisdictions in which the Group operates.
The Group manages the impact of the emissions trading regulations in New Zealand by acquiring New Zealand carbon
credits (NZUs) throughout the financial period to offset its annual obligation, such that it is not wholly exposed to the NZU
price at the date of settlement.
At 30 June 2020, if the New Zealand carbon credit price had been 10% p.a. higher or lower and all other variables held
constant, the net result for the financial year would increase/(decrease) and net assets as at 30 June 2020 would
increase/(decrease) by:
GROUP
NET RESULT
NET ASSETS
NET RESULT
NET ASSETS
2020
2019
2020
2019
2020
2019
2020
2019
Change in NZU price
Impact
+10%
(42)
+10%
(74)
+10%
44
+10%
31
-10%
42
-10%
74
-10%
(44)
-10%
(31)
New Zealand Imputation Credits
Imputation credits available for subsequent financial years1
CONSOLIDATED
2019
US
2,983
2020
US
2,961
1
The franking credits available for subsequent financial years are only available to New Zealand resident shareholders under the Trans-Tasman
imputation legislation.
96 Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy set out in Note 1(c):
NAME OF SUBSIDIARY
COUNTRY OF
INCORPORATION
PERCENTAGE OF EQUITY HOLDING
AND VOTING INTEREST (ALL SHARES
ISSUED ARE ORDINARY SHARES)
BUSINESS
ACTIVITIES
CARRIED ON IN
Horizon Oil International Limited
Horizon Oil (New Zealand) Limited
Horizon Oil International Holdings Limited
Horizon Oil (Beibu) Limited
Horizon Oil (China Holdings) Limited
Horizon Oil (PNG Holdings) Limited
Horizon Oil (Papua) Limited
Horizon Oil (Ketu) Limited
Horizon Oil (Ubuntu) Limited
New Zealand
New Zealand
BVI
BVI
BVI
BVI
Bermuda
BVI
BVI
2020
%
100
100
100
100
100
100
100
100
100
2019
%
100
100
100
100
100
100
100
100
100
New Zealand
New Zealand
BVI
China
BVI
BVI
PNG
PNG
PNG
The Group has deregistered the Horizon Oil USA Inc. subsidiary and accordingly the subsidiary is not consolidated into the
financial statements for the 30 June 2020 financial period.
97
Interest in joint operations
Companies in the Group were participants in a number of joint operations. The Group has an interest in the assets and
ed in
the consolidated statement of financial position in accordance with the accounting policy described in Note 1(c), and the
with the accounting policies set out in Note 1(o) & (p), under the following classifications:
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Total current assets
NON-CURRENT ASSETS
Plant and equipment
Exploration phase expenditure
Oil and gas assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Payables
Total current liabilities
NON-CURRENT LIABILITIES
Payables
Total non-current liabilities
Total liabilities
Share of net assets employed in joint operations
CONSOLIDATED
2019
US$
1,579
412
5,519
7,510
-
56,903
157,453
214,356
221,866
7,441
7,441
-
-
7,441
214,425
2020
US
1,019
273
3,510
4,802
-
8,225
116,702
124,927
129,729
3,996
3,996
-
-
3,996
125,733
Contingent liabilities in respect of joint operations are detailed in Note 35.
Exploration and development expenditure commitments in respect of joint operations are detailed in Note 38.
98 The Group had an interest in the following joint operations:
PERMIT OR LICENCE
PRINCIPAL ACTIVITIES
INTEREST (%)
30 JUNE 2020
INTEREST (%)
30 JUNE 2019
NEW ZEALAND
PMP 38160
(Maari/Manaia)
CHINA
Block 22/12
PNG
PDL 10
PRL 21
PRL 28
Oil and gas production, exploration and development
26.00%
26.00%
Oil and gas production, exploration and development
26.95% / 55%1
26.95% / 55%1
Oil and gas development
30.00%2
30.00%2
Oil and gas exploration and development
30.15%2,3
30.15%2
Oil and gas exploration and development
30.00%2
30.00%2
PPL 259/574
Oil and gas exploration
PPL 430
PPL 372
PPL 373
PRL 40
Oil and gas exploration
Oil and gas exploration
Oil and gas exploration
Oil and gas exploration
80.00%2
80.00%2
0%4
100.00%2,4
95.00%2,5
95.00%2
100.00%2,5
100.00%2
20.00%2
20.00%2
1
2
3
4
5
22/12. During 2011 CNOOC exercised its right to participate in the development of WZ 6-12 and WZ 12-8W within Block 22/12 at 51%.
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.
The PRL 21 licensees have applied for a development licence. Tenure remains current, subject to PNG ministerial approval.
During the financial period the PPL 430 licence term expired. The licence had a $nil carrying value at 30 June 2019 and the date of expiration.
The PPL 372 and 373 licensees have applied for an extension and variation of the licenses. Tenure remains current, subject to PNG ministerial
approval.
equity level in any commercial development within Block
Impairment of non-current assets
During the financial period, the Group reassessed the carrying amounts of its exploration and development assets for
hierarchy), using a discounted cash flow method, and are most sensitive to the following key assumptions:
-in-use or fair value less costs to sell (level 3 value
For oil and gas assets, the estimated future cash flows for the value-in-use calculation are based on estimates, the most
significant of which are 2P hydrocarbon reserves, future production profiles, commodity prices, operating costs and any
future development costs necessary to produce the reserves. Under a fair value less costs to sell calculation, future cash
flows are based on estimates of 2P hydrocarbon reserves in addition to other relevant factors such as value attributable to
additional resource and exploration opportunities beyond 2P reserves based on production plans.
external market
reviewed at least annually.
Forecasts of the foreign exchange rate for foreign currencies, where relevant, are estimated with reference to observable
external market data and forward values, including analysis of broker and consensus estimates.
capital, adjusted for risks where appropriate, including the risk profile of the countries in which the asset operates.
-tax weighted average cost of
99
For capitalised exploration phase expenditure, in conjunction with consideration of the key assumptions detailed above, a
further assessment is performed at each balance date, to determine whether any of the following indicators of impairment
exists:
(i)
(ii)
tenure over the licence area has expired during the period or will expire in the near future, and is not expected to be
renewed; or
substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is not
budgeted or planned; or
(iii) exploration for and evaluation of resources in the specific area have not led to the discovery of commercially viable
quantities of resources, and the Group has decided to discontinue activities in the specific area; or
(iv) sufficient data exists to indicate that although a development is likely to proceed, the carrying amount of the
exploration and evaluation asset is unlikely to be recovered in full from successful development or from sale.
greater than its estimated recoverable amount. This assessment considers, amongst other things, whether the asset is
still in use and the value that would likely be recovered from sale.
Recoverable amounts and resulting impairment write-downs recognised during the year ended 30 June 2020 are
presented in the table below:
AREA OF INTEREST/CGU
SEGMENT
IMPAIRMENT
WRITE DOWN
RECOVERABLE
AMOUNT1
Exploration Phase Expenditure
Block 22/12
PRL 21
PRL 28
PRL 40
PRL 259/574
PPL 372
PPL 373
China Exploration
Papua New Guinea Exploration and Development
Papua New Guinea Exploration and Development
Papua New Guinea Exploration and Development
Papua New Guinea Exploration and Development
Papua New Guinea Exploration and Development
Papua New Guinea Exploration and Development
Impairment of exploration phase expenditure
Oil & Gas Assets
PMP 38160 (Maari/Manaia)
Block 22/12
PDL 10 (Stanley)
Impairment of oil and gas assets
Property, Plant & Equipment
Building
Building
Other plant and equipment
Leasehold improvements
Leasehold improvements
Impairment of property, plant & equipment
Total
New Zealand Development and Production
China Development and Production
Papua New Guinea Exploration and Development
All other segments
Papua New Guinea Exploration and Development
All other segments
All other segments
Papua New Guinea Exploration and Development
-
(48,498)
(230)
-
-
-
-
(48,728)
-
-
(18,557)
(18,557)
-
-
-
-
-
-
4,872
3,353
-
-
-
-
-
8,225
52,295
61,999
2,408
116,702
410
21
91
295
52
869
(67,285)
125,796
1 Recoverable amount represent the carrying value of the asset before deducting the carrying value of the restoration liability (US$33,947,000) and
deferred royalty tax balance (US$2,226,000].
100 The post-tax discount rates that have been applied to the above non-current assets range between 10% and 11% (2019:
between 10% and 11%). The impairment assessment conducted in respect of the period considered recent challenges
faced by the company in PNG, including unresolved licence tenure issues, the lack of progress in commercialisation of the
discovered resources in the Western Province of PNG, and the recent shift by the PNG Government in requiring improved
fiscal returns from resource projects. Reference was also made to comparable market transactions. In light of these
matters and uncertainties, the Group has impaired its PNG exploration and development assets, to a carrying amount of
US$5.8 million.
Remuneration of external auditors
During the financial year, the following fees were paid or payable for services
provided by the external auditor of the parent entity and its related practices:
1. PwC Australia
Audit and other assurance services
Audit and review of financial reports
Other assurance services
Total remuneration for audit and other assurance services
Taxation services
Tax compliance1
Total remuneration for taxation services
2. Non-PwC audit firms
Audit and other assurance services
Total remuneration for audit and other assurance services
CONSOLIDATED
2020
US$
2019
US$
158,282
14,267
172,549
15,895
15,895
8,085
8,085
196,529
168,234
14,307
182,541
16,361
16,361
19,667
19,667
218,569
1
Remuneration for taxation services has been recorded on a gross basis; some of these fees were for services provided to PNG operated joint ventures.
where Pri
competitive tenders for all major consulting projects.
Remuneration of key management personnel
See the Remuneration Report within the
detailed remuneration.
KEY MANAGEMENT PERSONNEL COMPENSATION
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments (non-cash)
2020
US$
2019
US$
2,485,483
2,777,949
86,860
22,810
312,706
116,036
82,541
320,365
Total key management personnel remuneration
2,907,859
3,296,891
Detailed remuneration disclosures are provided in sections 1-7 of the audited Remuneration Report.
101
Loans to key management personnel
There were no loans to directors or other key management personnel during the current or prior financial year.
Other transactions with key management personnel
There were no other transactions with key management personnel during the current or prior financial year, other than as
disclosed in sections 1-7 of the remuneration report.
Related parties
Transactions between related parties are on normal commercial terms and conditions no more favourable than those
available to other parties, unless otherwise stated.
Directors and other key management personnel
There were no related party transactions with directors and other key management personnel during the current or prior
year other than as disclosed in sections 1-7 of the Remuneration report and Note 32.
Subsidiaries
Interests in subsidiaries are set out in Note 26. Details in respect of guarantees provided to subsidiaries are set out in Note
41 (ii).
Transactions with related parties
Transactions between Horizon Oil Limited and related parties in the wholly-owned Group during the financial years ended
30 June 2020 and 30 June 2019 consisted of:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Contributions to share capital by Horizon Oil Limited;
Loans advanced by Horizon Oil Limited;
Loans repaid to Horizon Oil Limited;
Payments to Horizon Oil Limited under financial guarantee contract arrangements;
Interest payments to Horizon Oil Limited on loans advanced to subsidiaries;
Dividends paid to Horizon Oil Limited; and
Reimbursement of expenses to Horizon Oil Limited.
The reimbursement of expenses to Horizon Oil Limited by subsidiaries is based on costs recharged on a relevant time
allocation of consultants and employees and associated office charges.
The following transactions occurred with related parties:
2020
US$
2019
US$
SUPERANNUATION CONTRIBUTIONS
Superannuation contributions to superannuation funds on behalf of employees
OTHER TRANSACTIONS
284,020
296,757
Payments to Horizon Oil Limited under financial guarantee contract
arrangements from wholly owned subsidiary
Dividends from Horizon Oil International Limited to Horizon Oil Limited
Dividends from Horizon Oil (Beibu) Limited to Horizon Oil Limited
1,158,521
9,500,000
4,000,000
2,067,258
-
5,000,000
102 LOANS TO/FROM RELATED PARTIES
Balance at beginning of the financial year
Loans advanced
Loan repayments received
Interest charged
Balance at end of financial year
2020
US$
170,251,852
36,090,468
(22,456,323)
1,719,196
185,605,193
2019
US$
163,361,550
58,923,695
(53,403,781)
1,370,388
170,251,852
Terms and conditions
Transactions relating to dividends, calls on partly paid shares and subscriptions for new ordinary shares were on the same
terms and conditions that applied to other shareholders.
All other transactions were made on normal commercial terms and conditions and at market rates, except that there are
no fixed terms for the repayment of loans between the parties. Certain loans to/from subsidiaries are subject to interest,
however, the interest is typically suspended until commercial production commences or a change in the ownership
interest of the entity occurs. The average interest rate on loans attracting interest during the financial year was LIBOR plus
5.14% (2019: LIBOR plus 5.64%). Outstanding balances are unsecured and repayable in cash.
Share-based payments
Set out below is a summary of unlisted options and share appreciation rights on issue:
EFFECTIVE
ALLOCATION
DATE
ESTIMATED
EXPIRY
DATE
EXERCISE
PRICE
BALANCE
START OF
FINANCIAL
YEAR
GRANTED
DURING
FINANCIAL
YEAR
EXERCISED
DURING
FINANCIAL
YEAR
NUMBER
NUMBER
NUMBER
LAPSED/CAN
CELLED
DURING
FINANCIAL
YEAR
NUMBER
BALANCE
END OF
FINANCIAL
YEAR
NUMBER
VESTED AND
EXERCISABLE
AT END OF
FINANCIAL
YEAR
NUMBER
CONSOLIDATED ENTITY 2020
SHARE APPRECIATION RIGHTS ISSUED
01/07/2014
01/07/2015
01/07/2016
01/07/2016
01/07/2017
01/07/2018
01/07/2019
Total
01/07/2019
01/07/2020
01/07/2021
01/07/2021
01/07/2022
01/07/2023
01/07/2024
A$0.372
A$0.092
A$0.092
A$0.052
A$0.052
A$0.072
A$0.112
7,402,177
17,629,840
16,617,522
24,372,395
55,691,714
8,680,899
-
-
-
-
-
-
-
12,859,747
-
10,171,063
-
12,186,198
-
-
-
7,402,177
-
-
-
-
-
-
-
7,458,777
16,617,522
12,186,197
55,691,714
8,680,899
12,859,747
-
7,458,777
16,617,522
12,186,197
-
-
-
130,394,547
12,859,747
22,357,261
7,402,177
113,494,856
36,262,496
Weighted average exercise price
A$0.08
A$0.011
A$0.07
A$0.37
A$0.07
A$0.08
OPTIONS ISSUED
02/11/2015
15/09/2016
Total
02/11/2020
15/09/2021
A$0.201
A$0.063
Weighted average exercise price
1,000,000
300,000,000
301,000,000
A$0.06
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
-
300,000,000
300,000,000
301,000,000
300,000,000
A$0.06
-
1
Relates to options issued under the Employee Option Scheme.
2 No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a SAR.
3 Relates to general options issued in connection with the subordinated secured debt facility. Refer to Note 19 for further details.
103
EFFECTIVE
ALLOCATION
DATE
ESTIMATED
EXPIRY
DATE
EXERCISE
PRICE
BALANCE
START OF
FINANCIAL
YEAR
GRANTED
DURING
FINANCIAL
YEAR
EXERCISED
DURING
FINANCIAL
YEAR
NUMBER
NUMBER
NUMBER
LAPSED/CAN
CELLED
DURING
FINANCIAL
YEAR
NUMBER
BALANCE
END OF
FINANCIAL
YEAR
NUMBER
VESTED AND
EXERCISABLE
AT END OF
FINANCIAL
YEAR
NUMBER
CONSOLIDATED ENTITY 2019
SHARE APPRECIATION RIGHTS ISSUED
01/07/2014
01/07/2015
01/07/2016
01/07/2016
01/07/2017
01/07/2018
Total
01/07/2019
A$0.372
7,402,177
01/07/2020
01/07/2021
01/07/2021
01/07/2022
A$0.092
A$0.092,
A$0.052
A$0.052
25,088,617
16,617,522
24,372,395
55,691,714
-
-
-
-
-
01/07/2023
A$0.072
-
8,680,899
-
7,458,777
-
-
-
-
129,172,425
8,680,899
7,458,777
Weighted average exercise price
A$0.08
A$0.07
A$0.09
OPTIONS ISSUED
02/11/2015
15/09/2016
Total
02/11/2020
15/09/2021
A$0.201
A$0.063
Weighted average exercise price
1,000,000
300,000,000
301,000,000
A$0.06
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,402,177
-
17,629,840
16,617,522
24,372,395
55,691,714
8,680,899
17,629,840
-
-
-
-
130,394,547
17,629,840
A$0.08
A$0.09
1,000,000
-
300,000,000
300,000,000
301,000,000
300,000,000
A$0.06
-
1
Relates to options issued under the Employee Option Scheme.
2 No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a SAR.
3 Relates to general options issued in connection with the subordinated secured debt facility. Refer to Note 19 for further details.
The weighted average remaining contractual life of share options outstanding at the end of the period was 1.89 years (2019
3.32 years).
Long Term Incentive Plan
The LTI arrangements approved at the 2010 annual general meeting apply to senior executives and involve the grant of
share appreciation rights which may vest subject (amongst other things) to the level of total share
achieved in the vesting period, relative to an appropriate index.
TSR
Under the LTI Plan, the board has the discretion, subject to the ASX Listing Rule requirements, to grant share appreciation
SARs
-term
remuneration would be long-term incentives in the form of SARs, with the number of SARs granted based on the value of a
SAR.
A SAR is a right to receive either or both a cash payment or shares in the Company, as determined by the board, subject to
the Company satisfying certain conditions, including performance conditions.
The LTI Plan provides that the amount of the cash payment or the number of shares in the Company that the participant
receives on exercise of the SAR is based on the value of the SAR at the time it is exercised (
). The SAR Value is
riod
VWAP
up to the date before the date the SAR is exercised over the VWAP of shares in the Company for the ten business day period
date of the SARs or any other day determined by the board, at the time of the grant. The Effective Allocation Date would
If the board determines that the SARs are to be satisfied in cash, the amount of cash that the participant receives on the
exercise of the SARs is the SAR Value multiplied by the number of SARs exercised (less any deduction for taxes that the
Company is required to make from the payment). If the board determines that the SARs are to be satisfied in shares, the
number of shares that the participant receives on the exercise of the SARs is the SAR Value divided by the volume weighted
average price of shares in the Company for the ten business day period up to the day before the day the SARs are
104 exercised. Where the number of shares calculated is not a whole number, it will be rounded down to the nearest whole
number.
No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a SAR.
Employee Option Scheme
The issue of securities under the Employee Option Scheme was approved by shareholders for the purposes of the ASX
Listing Rules at the 2014 Annual General Meeting. The scheme is open to permanent full time or part time employees of
the Compa
The maximum number of ordinary shares in respect of which options may be issued pursuant to the Employee Option
Scheme, together with the number of partly paid ordinary shares on issue pursuant to any other employee share scheme
of the Company, must not exceed 5% of the number of ordinary shares in the Company on issue from time to time.
Each option entitles the employee to subscribe for one share in the Company and each option expires 5 years from the
date of issue. Options granted are progressively exercisable in three equal tranches from dates which are 12, 24 and 36
months after grant date. Upon exercise of the option, only one cent of the exercise price will be payable, with the balance
being paid at the expiration of the period which is 5 years from the date of the issue of the options.
The exercise price will be the greater of:
(a)
the price determined by directors but will not be less than the weighted average sale price per share of all sale
prices at which fully paid ordinary shares are sold on the ASX during the period of 5 business days ending on the
(b)
20 cents per option.
The option exercise prices are subject to adjustment in certain circumstances in line with the ASX Listing Rule 6.22.2.
General options issued
On 15 September 2016 the Group issued 300 million general options over unissued shares in Horizon Oil Limited in
connection with the drawdown of a subordinated secured non-amortising loan during the period. The carrying value of the
associated derivative liability at 30 June 2020 was $3,790,926 (2019: $11,838,224). Refer to Note 19 for further details,
including details of unrealised gains/losses resulting from revaluations through profit or loss recorded during the year.
This liability is measured at fair value on a recurring basis and the options are not subject to any vesting conditions.
The general terms associated with the options included:
– Each option entitles the option holder to subscribe for one share in Horizon Oil Limited;
– The options expire 5 years from date of grant;
– Options are settled by the issue of shares in Horizon Oil Limited; and
– Options are unlisted.
The options were issued in connection with the subordinated secured debt facility drawn down during the 2017 financial
year. The options are standalone instruments and accordingly were not cancelled and/or lapsed upon early settlement of
the subordinated secured debt facility in November 2018.
The Group engages external, independent and qualified valuers to determine the fair value of the share options for
financial reporting purposes on a half yearly basis. The fair value of the share options is determined based on a risk-
neutral framework using the Black-Scholes Model. The Black-Scholes Model used to calculate the theoretical value of the
105 options uses current stock prices, expected dividend yield, the option's strike price, expected interest rates, time to
expiration and expected volatility.
A calculated share price volatility of 62.5% was applied in the valuation. All other parameters were based on the specific
terms of the options issued or observable market data.
Refer to Note 24(d) for further details of the valuation techniques and option pricing models associated with these
instruments.
The model inputs for the measurement of the fair value of the general options on grant date during the financial year
ended 30 June 2020 included:
Grant date
Expiry date
Exercise price
Horizon share price at grant date
Expected price volatility
Risk free rate
Expected dividend yield
Share appreciation rights issued
15 September 2016
15 September 2021
A$0.061
A$0.064
62.50% p.a.
0.26% p.a.
0.00% p.a.
12,859,747 share appreciation rights were issued under the Long-Term Incentive Plan. The weighted average exercise price
of these SARs is A$0.1054 with performance hurdles to be achieved prior to exercise. The independently assessed
weighted average fair value at effective allocation date of these share appreciation rights was A$0.057617 per SAR.
The fair value at effective allocation date is independently determined using a Monte Carlo Simulation method that takes
into account the exercise price, the term of the option/SAR, the impact of dilution, the share price at effective allocation
date and expected volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term
of the option/SAR.
The model inputs for the grant of share appreciation rights during the financial year ended 30 June 2020 included:
Effective allocation date
Estimated expiry date
Exercise price
10 Day VWAP of Horizon shares at effective allocation date
Expected price volatility
Risk free rate
Expected dividend yield
1 July 2019
1 July 2024
N/A
A$0.1054
65.80% p.a.
1.030% p.a.
0.00% p.a.
No options were issued under the Employee Option Scheme during the year.
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the financial year as part of employee
benefits expense in profit or loss were as follows:
106 SHARE APPRECIATION RIGHTS ISSUED UNDER:
Long Term Incentive Plan
OPTIONS ISSUED UNDER:
Employee Option Scheme
Total employee share-based payments expense
CONSOLIDATED
2020
2019
611
-
611
678
2
680
Options/SARs in respect of which expiry dates were modified during the financial year
No options/SARs were modified during the financial year.
Options/SARs exercised during the financial year
During the financial year 22,357,261 SARs were exercised and settled with cash payments of US$1,174,315.
Options/SARs lapsing or cancelled during the financial year
During the financial year 7,458,777 SARs lapsed.
Options/SARs exercised and options/SARs issued subsequent to 30 June 2020
Subsequent to year end and in accordance with contract entitlement, 10,004,499 SARs were issued to key management
personnel.
No options or SARs have been exercised subsequent to financial year end.
Options/SARs lapsed subsequent to 30 June 2020
No options or SARs have lapsed subsequent to financial year end.
Employee entitlements
EMPLOYEE ENTITLEMENT LIABILITIES ARE INCLUDED WITHIN:
other creditors
Current
Non-current - other creditors (Note 16)
CONSOLIDATED
2020
US
396
123
NUMBER
2020
2019
US
453
71
NUMBER
2019
EMPLOYEE NUMBERS
Average number of employees during financial year
23
30
107
Contingent asset
[i] On 23 May 2013, the Group advised ASX that it had entered into an Agreement to sell 40% of its Papua New Guinea
completion that was received, a further $130 million in cash is due upon a project development decision which gives
rise to Osaka Gas achieving equity LNG from its acquired gas volumes, plus potential production payments where
threshold condensate production is exceeded. Due to the conditions required for the deferred consideration of $130
million, and the potential production payments, all remaining consideration under the Agreement is disclosed as a
contingent asset as at 30 June 2020. In the event that Osaka Gas does not participate in a project, under the terms of
the Agreement, they are obliged to return their licence interests to Horizon. If Osaka Gas decide to transfer their PNG
decide to sell the
[ii] The Maari joint venture carried out an upgrade of the FPSO Raroa
flow line, production and test riser, and Maari wellhead platform during the 2016 and 2017 financial years. The works
the date of this report the Group had recovered $5.0 million as settlement for the claims relating to the repairs to the
water injection flow line, production and test riser, and Maari wellhead platform. Investigation and discussions with
the relevant insurers continues in relation to the claim for the upgrade of the FPSO Raroa
was approximately $6.5 million. At
Contingent liabilities
The Group had contingent liabilities as at 30 June 2020 and 30 June 2019 that may become payable in respect of:
In accordance with normal oil and gas industry practice, the Group has entered into joint operations and farm-out
agreements with other parties for the purpose of exploring and developing its petroleum interests. If a participant to a joint
operation defaults and fails to contribute its share of joint operation obligations, then the remaining joint operation
participants are jointly and severally liable to meet the obligations of the defaulting participant. In this event, the interest
in the permit or licence held by the defaulting participant may be redistributed to the remaining participants. In the event
of a default, a contingent liability exists in respect of expenditure commitments due to be met by the Group in respect of
defaulting joint operation participants.
The Group occasionally receives claims arising from its operations in the normal course of business. In the opinion of the
directors, all such matters are either covered by insurance or, if not covered, are without merit or are of such a nature the
amounts involved would not have a material impact on the results.
No material losses are anticipated in respect of any of the above contingent liabilities.
Events after balance sheet date
Other than the matters disclosed in this report, there has not been any matter or circumstance which has arisen since
30 June 2020 that has significantly affected, or may significantly affect:
–
– the results of those operations in future financial years; or
–
The financial statements were authorised for issue by the Board of Directors on 27 August 2020. The Board of Directors has
the power to amend and reissue the financial statements.
108 Commitments for expenditure
Non-cancellable operating leases
On 1 July 2019, the Group adopted
Leases
, the new standard for lease accounting
statements of financial position assets and liabilities. Accordingly, commitments for minimum leases payments in
relation to non-cancellable operating leases are not disclosed below at 30 June 2020 as the financial obligations are
recognised on the balance sheet at that date.
Commitments for minimum lease payments in relation to non-cancellable
operating leases, not recognised in the financial statements, are payable as
follows:
Within one financial year
Later than one financial year but not later than five financial years
CONSOLIDATED
2020
2019
-
-
-
329
543
872
Exploration and development commitments
The Group has entered into joint operations for the purpose of exploring, developing and producing from certain petroleum
interests. To maintain existing interests or rights to earn interests in those joint operations the Group will be expected to
make contributions to ongoing exploration and development programs. Since such programs are subject to continual
review by operating committees, upon which the Group is represented, the extent of future contributions in accordance
with these arrangements is subject to continual renegotiation.
Subject to the above-mentioned limitations, the directors have prepared the following disclosure of exploration and
development expenditure commitments not recognised in the consolidated financial statements. These are payable as
follows, based on current status and knowledge of estimated quantum and timing of such commitments by segment.
2020
NEW ZEALAND
DEVELOPMENT
CHINA
EXPLORATION &
DEVELOPMENT
PAPUA NEW
GUINEA
EXPLORATION &
DEVELOPMENT
TOTAL
Within one financial year
Later than one financial year but not later
than 5 financial years
After 5 financial years
Total
2,810
-
-
2,810
8,319
12,537
-
20,856
1,098
-
-
1,098
12,227
12,537
-
24,764
109
2019
NEW ZEALAND
DEVELOPMENT
CHINA
EXPLORATION &
DEVELOPMENT
TOTAL
PAPUA NEW
GUINEA
EXPLORATION &
DEVELOPMENT
Within one financial year
Later than one financial year but not later
than 5 financial years
After 5 financial years
2,767
2,058
3,300
8,125
-
-
-
-
-
-
-
-
Total
2,767
2,058
3,300
8,125
The above commitments may be deferred or modified with the agreement of the host government, by variations to the
terms of individual petroleum interests, or extensions to the terms thereof. Another factor likely to delay timing of these
commitments is the potential lack of availability of suitable drilling rigs in the area of interest.
The commitments may also be reduced by the Group entering into farm-out agreements or working interest trades, both of
which are typical of the normal operating activities of the Group.
In addition to the above commitments, the Group has invested funds in other petroleum exploration interests, but is not
exposed to a contingent liability in respect of these, as it may choose to exit such interests at any time at no cost penalty
other than the loss of the interests.
Reconciliation of profit after income tax to net cash flows from operating activities
CONSOLIDATED
(LOSS)/PROFIT FOR FINANCIAL YEAR
Impairment expense
Exploration and development expenditure written off/expensed
Depreciation expense
Profit on sale of fixed assets
Movement in employee entitlement liabilities
Non-cash employee share-based payments expense
Amortisation expense
Amortisation of prepaid financing costs
Provision for restoration
Unrealised fair value movements associated with subordinated debt
Unrealised movement in in fair value of other financial liabilities
CHANGE IN OPERATING ASSETS AND LIABILITIES:
(Increase)/Decrease in trade debtors
Decrease/(Increase) in other debtors and prepayments
Decrease/(Increase) in inventory
Decrease in net deferred tax liabilities
(Decrease)/Increase in tax payable
Increase/(Decrease) in trade creditors
Decrease in other creditors
Net cash inflow from operating activities
2020
(55,139)
67,285
4,218
358
(24)
51
611
26,354
511
885
-
(8,047)
(154)
426
2,243
(181)
(1,247)
77
(1,496)
36,731
2019
35,826
4,592
136
(24)
9
680
39,284
1,406
833
3,133
(11,157)
6,806
(3)
(2,372)
(1,049)
1,243
(5,825)
(705)
72,813
110 Earnings per share
(a) Basic earnings per share attributable to the ordinary equity holders of the
Company
(b) Diluted earnings per share attributable to the ordinary equity holders of the
Company
WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE DENOMINATOR
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
Weighted average number of ordinary shares and potential ordinary shares used as
the denominator in calculating diluted earnings per share
CONSOLIDATED
2020
US CENTS
2019
US CENTS
(4.23)
(4.23)
2020
NUMBER
2.75
2.17
2019
NUMBER
1,303,481,265
1,303,481,265
1,303,481,265
1,653,557,138
2020
2019
RECONCILIATION OF EARNINGS USED IN CALCULATING EARNINGS PER SHARE
(Loss)/profit attributable to the ordinary equity holders of the company used in
calculating basic and diluted earnings per share
(55,139)
35,826
Information concerning the classification of securities
Partly paid ordinary shares
Partly paid ordinary shares carry the rights of fully paid ordinary shares and to that extent they have been recognised as
ordinary share equivalents in the determination of basic earnings per share. All partly paid shares on issue are held by the
Company.
Details regarding the partly paid ordinary shares are set out in Note 22.
Options and share appreciation rights granted as compensation
Options and share appreciation rights (SARs) granted to employees under the Long Term Incentive Plan or Employee Option
Scheme and general options issued (including the 300 million options issued in connection with the drawdown of the
subordinated secured non-amortising loan facility in a prior period), are included in the calculation of diluted earnings per
share to the extent to which they are dilutive. The SARs are considered to be contingently issuable shares and are treated
as outstanding and included in the calculation of diluted earnings per share if the relevant performance hurdles have been
met. Options and SARs have not been included in the determination of basic earnings per share.
Details regarding the options and share appreciation rights are set out in Note 32.
111
Parent Entity financial information
[i] Summary financial information
The individual financial statements for the Parent Entity show the following aggregate amounts:
STATEMENT OF FINANCIAL POSITION
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Contributed equity
Share-based payments reserve
Retained earnings
Total equity
(Loss)/profit for the financial year
Total comprehensive (loss)/profit for the financial year
[ii] Guarantees entered into by the parent entity
PARENT ENTITY
2020
2019
4,697
120,518
125,215
2,524
3,891
6,415
118,800
174,801
13,592
(69,593)
118,800
(28,753)
(28,753)
6,988
154,556
161,544
1,530
11,909
13,439
148,105
174,801
14,144
(40,840)
148,105
17,645
17,645
The parent entity has provided guarantees in respect of bank loans and hedge derivatives of its subsidiaries amounting to
US$26,775,165 (2019: US$50,405,616) and has also provided customary joint venture guarantees.
No liability has been recognised for guarantees provided. After factoring in the likelihood that the parent entity would be
required to perform under the guarantees the fair value of the liability was not considered material.
[iii] Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2020 or 30 June 2019. For information about
guarantees given by the parent entity, see above.
[iv] Contractual commitment for the acquisition of property, plant or equipment
As at 30 June 2020, the parent entity had no contractual commitments for the acquisition of property, plant or equipment
(30 June 2019
US$Nil).
112 114 115 116 117