ANNUAL REPORT
2021
Horizon Oil Limited
ABN 51 009 799 455
2021 INVESTMENT
HIGHLIGHTS
—
Enhanced shareholder value through
capital management initiatives –
buy-backs and capital return
—
Strong balance sheet with cashflow
generation from Maari and Beibu
helping to drive US$31.2 million increase
in net cash to US$31.7 million
—
Assets highly leveraged to increasing oil
price – 80% increase in oil prices during
FY2021
—
Low cash operating costs maintained
well below US$20/bbl
UNDERLYING PROFIT
AFTER TAX
US$7.8 million
SALES VOLUME
1.265 mmbbls
NET CASH
SALES REVENUE
US$31.7 million
US$63.6 million
TOTAL DISTRIBUTIONS
TO SHAREHOLDERS1
A$49.4 million
(US$36.6 million)
EBITDAX
US$36.4 million
from continuing operations
2021 Highlights
Chairman’s Message
CEO’s Message
Reserves and Resources Statement
Activities Review
Annual Financial Report
Shareholder Information
Glossary
Corporate Directory
1
2
3
5
10
15
110
113
114
1 Includes the A$47.4 million capital return announced during the financial year and paid in August 2021.
Horizon | Annual Report 2021
Looking ahead, encouraged by a strong oil price outlook,
we are focusing our efforts and influence on how to
maximise production and revenue from the producing
fields and especially to the successful commissioning
of the WZ12-8E development in China.
OIL SALES
(mmbbls)
Maari
Beibu
REVENUE
(US$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
1.27
0.80
0.58
0.60
0.48
0.47
1.42
0.30
0.80
0.32
122.4
19.2
60.9
84.0
0.1
46.8
42.3
37.1
63.6
38.1
25.5
100.0
18.0
50.9
31.2
68.5
14.2
38.0
16.4
2
EBITDAX
(US$m)
(Excl. cost recovery)
Cost recovery
93.0
19.2
73.8
51.4
0.1
51.3
68.5
18.0
50.5
45.2
14.2
31.0
UNDERLYING PROFIT
AFTER TAX 2
(US$m)
(Excl. cost recovery)
Cost recovery
24.7
36.
36.
17.9
-2.3
7.8
8.3
8.2
FY17
FY18
FY19
FY20
FY21
FY17
FY18
FY19
FY20
FY21
FY17
FY18
FY19
FY20
FY21
1
Net of hedge settlements
2 FY20 and FY21 excludes profit and loss from discontinued operations
-16.5
AREAS OF
OPERATION
CHINA
Block 22/12
(Production/Exploration)
26.95%/55%
NEW ZEALAND
PMP 38160 (Maari/Manaia)
26%
CHINA
NEW ZEALAND
Horizon | Annual Report 2021 |
1
A MESSAGE FROM OUR CHAIRMAN
From an uncertain beginning, Horizon posted a
strong end to the financial year and as a result,
subsequent to the year end, we had the
confidence to reward shareholders with a return
of surplus capital of some A$47 million.
in the oil price.
Horizon’s strong result was of course primarily due to a
However, a significant
recovery
from Horizon
contribution
management playing its part in maximising oil production
from both Beibu and Maari and by further reducing an
already low cost of production.
result came
the
to
We believe that the price of oil will remain buoyant for the
next few years as the impact of the global pandemic
subsides coupled with lack of investment in new oil
supply. Accordingly, Horizon’s low-cost producing assets
provide excellent value - more so, given Horizon’s difficult
decision earlier in the year to rationalise its asset portfolio
and divest its development and exploration assets in
Papua New Guinea.
Looking ahead to the upcoming year, Horizon will
continue to maximise shareholder returns by identifying
and actively pursuing
infill well drilling, near-field
exploration and a variety of other initiatives to increase
production from its producing assets in both China and
New Zealand and by continued cost control. Whilst
Horizon is open to growth opportunities, we acknowledge
that these opportunities need to be significantly value
accretive to be pursued.
Finally, we acknowledge the part we have to play in an
increasingly low carbon future. We are pleased to present
a Sustainability Report which transparently discloses our
impact and the actions we are taking to be a more
sustainable Company.
Mike Harding
Chairman
2 A MESSAGE FROM OUR CEO
One year ago when writing this introduction for
the 2020 annual report the long term consensus
oil price was less than US$50/bbl.
Back then, recognising the high possibility for a future oil
price spike, we invested in our producing asset in the
Beibu Gulf, China - making a final investment decision on
our WZ12-8E development and encouraging our operator
to drill two successful infill wells. Horizon is now being
rewarded for those earlier decisions as this production
has and will occur into a significantly higher oil price
environment.
These decisions and significant amounts of operational
activity all took place during restrictions forced on us by
the COVID-19 pandemic. It is a credit to our Operators and
our staff that operations were achieved safely, efficiently
and with zero environmental incidents.
During the year, we sold our development and exploration
assets in Papua New Guinea. While these assets were
significant in terms of resource quality and size, they are
geographically very
remote and were effectively
stranded. Development timeframes were increasingly
long-dated and high cost. Changes earmarked for the
legislative and fiscal regimes for resource projects made
not only the economics of development, but also
continuing licence tenure more and more challenging.
Furthermore, Horizon’s bigger and credentialed oil and
gas partners, and other such players in the forelands
region, had already exited. The decision to sell was not
easy, but Horizon exited for value and without continuing
liability. Importantly, the divestment has enabled a
rationalisation of our cost structure with headcount
reduced by almost one half over the past 18 months.
During the year, our assets performed well. At Beibu,
production has once again been held flat as a result of two
successful
infill wells, water handling capacity
improvements and workovers substantially arresting
natural decline. The WZ12-8E development is also
progressing on time and on budget with first oil
anticipated in Q1 CY2022. At Maari, we anticipate the
transition of operatorship to Jadestone, and Horizon as a
is perfectly placed to
founding project participant
facilitate a smooth transition.
Horizon’s strong balance sheet coupled with consistent
cashflow generation has allowed the company to initiate
a number of maiden capital management initiatives. We
commenced with both an on-market share buy-back and
off-market unmarketable parcel buy-back to drive
shareholder value through the purchase of shares at a
price which Horizon considered to be discounted. Then,
following the significant injection of capital by Samuel
Terry on exercise of outstanding options we turned to a
share capital reduction as being the optimal way to return
this, and other residual surplus capital, to shareholders.
Looking to the future, whilst our immediate focus is on
extracting further value from our low cost producing
assets which will continue to generate significant future
cashflow over much of the decade, Horizon has a number
of challenges before it.
Firstly, we must navigate a macro energy environment
that is in transition. This brings ESG pressures and
challenging funding and insurance markets. Whilst we
are presently experiencing high oil prices, and despite our
bullish medium term oil price predictions, we have not
forgotten that we are only a few months off 20-year price
lows.
Secondly,
in striving to deliver shareholder wealth,
Horizon seeks to balance short-term returns with longer-
term growth. Horizon’s existing asset portfolio presently
has an economic life until the late 2020’s and provision
must be made for decommissioning of our Maari asset.
Horizon remains opportunistic about growth possibilities
and is well placed to capitalise on valuable brown-field
opportunities as larger companies increasingly divest
non-core assets.
Naturally however, any growth
initiatives would need to be superior to the alternatives.
In short, our challenge and immediate focus for the
coming year is to maximise the value and longevity of our
existing assets. We are well placed to do this as we have
the people, the expertise and the influence. We plan and
expect to fully capitalise on the high oil price and our low
cost of production to continue to deliver real value to
shareholders.
Chris Hodge
Chief Executive Officer
3 | Horizon | Annual Report 2021
HORIZON OIL LIMITED
2021 RESERVES & RESOURCES STATEMENT
as at 30 June 2021
Highlights
Consistent production performance from conventional oil
assets in China (0.9 MMbbl Net Working Interest) and New
Zealand (0.5 MMbbl Net Working Interest) for a total of 1.3 MMbbl
produced in the year.
Proved plus Probable Reserves (2P) of oil declined to 6.7 MMbbl,
compared with 8.1 MMbbl last year, due to production (1.3 MMbbl)
and revisions (0.1 MMbbl). Proved Reserves increased by
0.4 MMbbl to 3.6 MMbbl as performance materially exceeded
low side estimates.
FID approval of the WZ12-8E (Phase 1) project in October 2020
with construction activities on schedule and on budget leading
to first oil in Q1 CY2022. The WZ12-8E (Phase 1) project is now
sub-classified “Undeveloped – Approved for development”.
Cashflow from continued strong production puts Horizon in a
good position to take advantage of a pipeline of opportunities in
our China and New Zealand assets.
Horizon | Annual Report 2021 |
5 Proved and Proved plus Probable Reserves (Horizon share)
CHINA
Block 22/12
NEW ZEALAND
PMP 38160
Developed: WZ6-12 + WZ12-8
Undeveloped: WZ12-8E (Phase 1)
Total China (arithmetic summation)
Developed: Maari + Manaia
Closing Balance 30 June 2021 (arithmetic summation)
Contingent Resources (Horizon share)
CHINA
Block 22/12
NEW ZEALAND
PMP 38160
WZ6-12 + WZ12-10-1 + WZ12-8E
Maari + Manaia
Closing Balance 30 June 2021 (arithmetic summation)
1P
Total
Liquids
MMbbl
1.7
0.3
2.0
1.6
3.6
2C
Raw
Gas
Bcf
2P
Total
Liquids
MMbbl
2.8
0.6
3.4
3.2
6.7
2C
Sales
Gas
PJ
0
0
2C
Total
Liquids
MMbbl
1.3
4.9
6.2
| Horizon | Annual Report 2021
6 Reconciliation of Proved and Proved plus Probable Reserves
PRODUCTION
Total production of 1.3 MMbbl Net Working
Interest which is 0.2 MMbbl less than last
year (1.5 MMbbl Net Working Interest).
Lower production is primarily driven by the
MR6A well at Maari in New Zealand being
offline during the year pending workover
and cleanup.
CHINA
At a 2P level, production of 0.9 MMbbl
Net Working Interest; at a 1P level, a net
increase of 1.0 MMbbl associated with
continued strong production performance
(+0.7 MMbbl) and WZ12-E (Phase 1) 1P
recovery now economic.
NEW ZEALAND
2P reserves have been reduced by
production and a revised estimate of future
requirements for crude fuel. 1P reserves
have increased due to demonstrated strong
field performance under water flood.
Proved and Proved plus Probable Reserves Reconciliation
Opening Balance 30 June 2020
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 2021
1P
Total
Liquids
MMbbl
3.2
(1.3)
0.1
1.7
(0.1)
-
-
3.6
2P
Total
Liquids
MMbbl
8.1
(1.3)
0.1
(0.2)
0.1
-
-
6.7
Reconciliation of Contingent Resources
CHINA
Increase of 0.2 MMbbl associated with
addition of a possible infill well in the
WZ12-8W field.
NEW ZEALAND
Decreased 0.4 MMbbl due to revised
estimates of possible infill drilling, and
production from the existing development
post December 2027 (end of current
licence term).
PAPUA NEW GUINEA
Fully divested in December 2020.
Contingent Resources Reconciliation
Opening Balance 30 June 2020
Revisions of Previous Estimates
Economic Interest adjustment
Transfers, Discoveries and Extensions
Acquisitions and Divestments
Closing Balance 30 June 2021
2C
Total
Liquids
MMbbl
25.8
(0.4)
-
0.2
(19.4)
6.2
2C
Total
Raw Gas
Bcf
599
2C
Total
Sales Gas
PJ
604
(599)
0
(604)
0
Horizon | Annual Report 2021 |
7 Permits, Licences and Interests Held
PERMIT OR LICENSE
OPERATOR
MATERIAL PROJECTS
CHINA
Block 22/12
CNOOC
WZ6-12 South, Mid & North fields, WZ12-8 West & Mid fields
WZ12-8 East field
NEW ZEALAND
WORKING INTEREST (%)
30-JUN-21
30-JUN-20
26.95%
26.95%1
26.95%
55.00%
PMP 38160
OMV
Maari and Manaia fields
26.00%
26.00%
PAPUA NEW GUINEA
PDL 10
PRL 21
PRL 28
PPL 574
PPL 372
PPL 373
PRL 40
Arran Energy
Stanley field
Horizon Oil
Elevala-Ketu fields
Horizon Oil
Ubuntu field
Horizon Oil
Exploration activities
Horizon Oil
Exploration activities
Horizon Oil
Exploration activities
Arran Energy
Puk Puk, Douglas, Weimang and Langia fields
-2
-2
-2
-2
-2
-2
-2
30.00%
30.15%
30.00%
80.00%
95.00%
100.00%
20.00%
1
2
With FID having been approved in October 2020, China National Offshore Oil Corporation (‘CNOOC’) is now participating at a 51% equity level in the
WZ12-8 East Field.
On 2 December 2020, the Group disposed of 100% of the share capital in Horizon Oil (PNG Holdings) Limited, Horizon Oil (Papua) Limited, Horizon Oil
(Ubuntu) Limited and Horizon Oil (Ketu) Limited. Accordingly, the Group no longer owns an interest in any PNG licence or permit.
| Horizon | Annual Report 2021
8 Notes
1
2
3
4
5
6
7
8
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.
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.
9
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.
10 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.
11
Estimates are reported according to Horizon’s economic
interest, this being Horizon’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.
12 Horizon 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
undertakes semi-regular external reviews to complement its
own internal process.
13 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, General Manager – Production and
Exploration 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 24 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.
14 Some totals in the tables may not add due to rounding.
Horizon | Annual Report 2021 |
9 11 12 13 14 ANNUAL FINANCIAL
REPORT
FOR THE FINANCIAL YEAR ENDED
30 JUNE 2021
This annual financial report covers the consolidated financial statements for the Group, consisting of Horizon Oil Limited (the ‘Company’) and its subsidiaries. The
annual financial report is presented in United States dollars.
Horizon Oil Limited is a public company limited by shares and is listed on the ASX. It is incorporated and domiciled in Australia. Its registered office and principal
place of business is:
Level 6
134 William Street
Woolloomooloo NSW 2011
The annual financial report was authorised for issue by the Board of Directors on 26 August 2021. The Board of Directors has the power to amend and reissue the
annual financial report.
All references to reserves and contingent resources within the financial report are drawn from the Horizon 2021 Reserves and Resources Statement dated
26 August 2021.
DIRECTORS’ REPORT
Your directors present their report on the consolidated entity (referred to hereafter as the ‘Group’) consisting of Horizon Oil
Limited (the ‘Company’) and the subsidiaries it controlled at the end of, or during the financial year ended, 30 June 2021.
Directors
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
B Clement (Appointed 1 September 2020)
N Burgess (Appointed 1 July 2021)
B Clement was appointed as a non-executive director on 1 September 2020.
N Burgess was appointed as a non-executive director on 1 July 2021.
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 17 to 21
of this annual financial report.
16 Group Financial Performance
Consolidated Statement of Profit or Loss and Other Comprehensive Income
2021 Profit Drivers
The Group reported a statutory profit after tax of US$8.0 million for the financial year (2020: loss of US$55.1 million). The profit
result includes non-cash financing expense of US$2.9 million (2020: profit of US$8.0 million) associated with the final
revaluation of the options issued under the subordinated loan facility and US$3.1 million profit from discontinued operations
(2020: loss of US$71.5 million), which once excluded results in an Underlying Profit After Tax of US$7.8 million (2020: US$8.
million).
Non-cash items impacting on the financial year result include US$23.9 million (2020: US$26.4 million) in amortisation of
production phase assets, non-cash financing expense of US$2.9 million associated with the revaluation of the options issued
under the subordinated loan facility (2020: gain of US$8.0 million), US$1.4 million gain on the remeasurement of derivative
financial instruments (2020: US$ nil), US$0.3 million (2020: US$0.6 million) related to the value of share options and share
appreciation rights granted to Horizon employees and US$0.5 million financing expense related to amortised establishment
fees on the senior debt facility.
EBITDAX from continuing operations was US$36.4 million (2020: US$51.4 million), and EBIT from continuing operations was
US$10.1 million (2020: US$23.0 million). EBITDAX and EBIT from continuing operations exclude profit/(loss) from discontinued
operations. Cashflows from operating activities of US$23.2 million (2020: US$36.7 million) and cash reserves enabled the
Group to meet its capital expenditure commitments and also repay a further US$12.7 million in debt during the financial year.
EBITDAX, EBIT and underlying profit after 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 after 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 2021 and 30 June 2020.
Basic earnings per share from continuing operations for the financial year were a profit of 0.37 US cents based on a weighted
average number of fully and partly paid ordinary shares on issue of 1,322,129,812 shares.
Sales and Production
The Group’s producing assets performed well, with net production of 1,334,814 barrels of oil (2020: 1,475,562 barrels).
Production at Block 22/12 was materially in line with the comparative period, whilst production at Maari was impacted by
temporary shut-ins of three production wells with workovers delayed by COVID-19 restrictions in place. Two of these wells
were worked over during the period restoring production levels. Sales volumes were 1,265,725 bbls (2020: 1,427,521bbls) and
approximates the net production during the financial year.
17 Crude oil sales revenue of US$63.6 million (2020: US$84.0 million) was generated during the financial year resulting from a
net realised oil price of US$50.22 per barrel (2020: US$58.86 per barrel), inclusive of hedge settlements. Throughout the year
58% of sales were hedged (2020: 53%) with a hedging settlement of US$6.6 million (2020: gain US$9.1 million) realised on
740,000 barrels hedged at a weighted average fixed price of US$45.31 per barrel (2020: 760,000 barrels at US$64.05 per
barrel). Operating costs for the period were US$47.1 million, 12% lower than the prior comparative period (2020: US$53.4
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 relatively consistent with the prior comparative period at US$3.8 million (2020:
US$3.7 million). This expense comprised net employee benefits expense of US$2.3 million (including non-cash share-based
payment expense of US$0.4 million), corporate office expense of US$1.2 million, and depreciation of US$0.3 million.
Insurance Expense
Insurance expense of US$2.0 million (2020: US$2.0 million) was consistent with the prior financial period.
Exploration and Development Expenses
Exploration and development expenses were US$2.1 million (2020: US$1.8 million) and was focused on infill, appraisal and
exploration opportunities in and around the Group’s low cost producing fields permit in China and the evaluation of inorganic
growth opportunities.
Other Income
Other income of US$0.8 million relates to the full and final settlement for outstanding insurance claims pertaining to the
Maari asset.
Finance Costs
The Group’s borrowing costs of US$2.0 million were US$1.7 million lower during the period following the progressive
repayment of debt and reduced global interest rates. Other non-cash financing expense of US$2.9 million (2020: income
US$8.0 million) associated with the revaluation of the options issued under the subordinated loan facility was recorded during
the financial period.
Income and Royalty Tax
The net income and royalty tax expense of US$0.3 million (2020: US$10.9 million) incurred during the financial year included
a current tax expense of US$1.1 million, a deferred income tax benefit of US$2.1 million and a royalty related tax expense of
US$1.3 million. The net income tax expense was driven by cash taxes of US$1.5 million in China and US$3.4 million in New
Zealand. Royalty tax expense of US$1.3 million reflected cash and deferred royalty tax associated with the Maari/Manaia
field.
Consolidated Statement of Financial Position
At 30 June 2021, total assets were US$186.8 million (2020: US$171.6 million) and total liabilities were US$76.5 million (2020:
US$88.8 million), resulting in an increase in net assets to US$110.3 million (2020: net assets of US$82.9 million).
The increase in assets is primarily due to the consideration received on the exercise of the 300 million general options and
strong cash flow generation. The amortisation charge for the period was largely offset by capitalised costs pertaining to the
WZ12-8E development and Block 22/12 infill well drilling campaign completed during the period. The reduction in total
liabilities primarily reflects the US$12.7 million of debt repayments made during the financial period.
At 30 June 2021, the Group had a working capital surplus of US$36.1 million (2020: US$15.3 million) resulting predominately
from the consideration received on the exercise of the 300 million general options and strong cash flow generation which
were partially offset by the US$12.7 million in debt repayments.
At 30 June 2021, the Group increased the net cash position to US$31.7 million, based on nominal amounts drawn down, which
represented a US$31.2 million increase in net cash over the financial period. Net cash of US$31.7 million comprised of cash
and cash equivalents held of US$44.4 million (2020: US$25.9 million) offset by borrowings of US$12.7 million (2020: US$25.4
18 million). At financial year end, borrowings consisted of US$12.7 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
2021 Cash Drivers
Net cash generated from operating activities was 36% lower for the financial year at US$23.2 million (2020: US$36.7 million)
due to the lower oil prices in the first half of the financial year and reduced sales volumes. Sales volumes at Maari were
impacted by temporary shut-ins of three production wells with workovers delayed by COVID-19 restrictions in place.
Pleasingly, two of these wells were worked over during the period restoring production levels. The restoration of production
coupled with a strengthening oil price resulted in a 32% increase in operational cashflows over the second half of the
financial year.
The free cash available after operating and investing activities, coupled with the proceeds received on exercise of the general
options and PNG disposal, enabled further debt reduction with US$12.7 million of the senior debt facility repaid and allowed
for the commencement of various capital management initiatives including the share buy-backs completed and capital
return paid post period end.
19 Corporate
Group liquidity
At 30 June 2021, the Group’s net cash position had further increased to US$31.7 million (30 June 2020: US$0.5 million), an
increase of US$31.2 million during the financial year, which was aided by the receipt of US$14.1 million on exercise of 300
million general options during the year by Samuel Terry Asset Management. Net cash comprises cash and cash equivalent
assets held of US$44.4 million (30 June 2020: US$25.9 million) offset by the nominal value of borrowings drawn down of
US$12.7 million (30 June 2020: US$25.4 million), on the Syndicated Revolving Cash Advance Facility. Details of the Group’s
debt facilities are set out in Note 19.
Oil Price Hedging
Subsequent to period end, additional hedging was implemented to protect cashflows from commodity price volatility and
covers approximately 50% of forecast production to 31 December 2021. 300,000 bbls are hedged using a mixture of swaps,
collars and options with a weighted average floor price of ~US$69/bbl, with the majority of instruments retaining exposure
to higher oil prices.
Share Buy-backs/Capital Return
During the 2021 financial year, the Group announced capital management initiatives in the form of an on-market buy-back,
unmarketable parcel buy-back, and proposed capital return.
The on-market buy-back commenced on 4 March 2021 and resulted in the purchase and cancellation of 20,300,000 ordinary
shares. The shares were acquired at an average price of AUD 8.7 cents per share, with prices ranging from AUD 8.1 cents to
AUD 10 cents. The total cost of AUD 1,775,621 (US$1,375,061) net of after-tax transaction costs, was deducted from share
capital. The on-market buy-back was cancelled on 28 June 2021 following the announcement of a proposed share capital
return.
The unmarketable parcel buy-back was completed on 7 April 2021 with a total of 2,738,303 Ordinary shares bought back. The
shares were bought back at a fixed price of AUD 8.3 cents per share resulting in a reduction of AUD 227,279 (US$173,050) net
of after-tax transaction costs, being deducted from share capital.
A share capital reduction proposal of AUD 1.4 cents per share was announced on 28 June and subsequently amended to AUD
3 cents per share on 23 July 2021 at a total cost of AUD 47.4 million (~U$35 million). The proposal was approved by
shareholders at an Extraordinary General Meeting held on 10 August 2021.
Group business strategies and prospects for future financial years
The Company’s exploration, development and production activities are focused in Southeast Asia. The robust, long-lived
cash flows from the Company’s interests in Block 22/12, offshore China, and the Maari/Manaia fields, offshore New Zealand
will be applied to fund the Company’s future capital and growth program and retire debt. That program is directed to bring
into production the Company’s substantial inventory of discovered reserves and contingent resources in fields in China and
New Zealand and identify suitable value accretive 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 company’s inventory provide shareholders with exposure to
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 risks. The
speculative nature of petroleum exploration and development will also impact the Company’s ability to achieve 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
control of the Group. For further information in relation to the Company’s risk management framework, refer to the Corporate
Governance Statement.
20 Outlook
It is expected that the 2022 financial year and beyond will be underpinned by continued strong oil production from the Group’s
China and New Zealand operations. Continued water injection at Maari combined with the progressive planned development
of WZ12-8E oil field in China, 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 owing to the higher oil price
environment. The forecast cashflow from the producing oil fields will enable continued material reductions in the Company’s
debt levels and funding for further organic growth in Block 22/12, in particular the WZ12-8E oil field development.
The Group’s short-term focus is on:
– Optimising production performance from the Beibu and Maari/Manaia fields through various well intervention activities;
– Installation of the facilities, and development drilling for the WZ12-8E development with first oil anticipated in Q1 CY2022;
and
– Continued evaluation of nearby prospects in Block 22/12.
Significant changes in the state of affairs
Sale of PNG interests
As announced on 3 December 2020, the Group had completed the sale of Horizon Oil (PNG Holdings) Limited to Arran Energy
Investments Pty Ltd, resulting in the transfer of its entire asset portfolio in Papua New Guinea. Horizon ceases to have any
operations in PNG.
Matters subsequent to the end of the financial year
Subsequent to the period end, on 10 August 2021 the Company held an Extraordinary General Meeting of shareholders to
consider the proposed capital return of AUD 3 cents per share. The resolution was passed at the meeting, with the
subsequent payment and reduction in the Group’s cash balance of AUD 47.4 million (US$35.1 million) occurring during August
2021.
Other than the matters noted above and disclosed in the review of operations, there has not been any matter or circumstance
which has arisen since 30 June 2021 that has significantly affected, or may significantly affect:
[1] -
the Group’s operations in future financial years; or
[2] - the results of those operations in future financial years; or
[3] - the Group’s state of affairs in future financial years.
Environmental regulation
The Group is subject to significant environmental regulation in respect of exploration, development and production activities
in all countries in which it operates – China and New Zealand. Horizon Oil Limited is committed to undertaking all of its
exploration, development and production activities in an environmentally responsible manner.
The Directors believe the Group has adequate systems in place for managing its environmental requirements and is not
aware of any breach of those environmental requirements as they apply to the Group.
Reporting currency
The Company’s and the Group’s functional and reporting currency is United States dollars. All references in this annual
financial report to “$” or “dollars” are references to United States dollars, unless otherwise stated.
21
Information on Directors
The following persons held office as Directors of Horizon Oil Limited at the date of this Directors’ Report:
Chairman, Independent Non-Executive Director Mike Harding
Responsibilities:
Experience:
Directorships:
Mr Harding has been Chairman of Horizon since November 2018. He is Chairman of
Horizon’s Disclosure Committee and Member of Horizon’s Audit and 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:
Non-executive Director
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. He is a Member of Horizon’s Risk
Management and Disclosure Committees.
Mr Hodge has over 40 years’ oil and gas experience; training as a geologist and
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).
Gerrit de Nys
Mr de Nys has been a Director of Horizon since June 2007. He is Chairman of
Horizon’s Risk Management Committee and Member of Horizon’s Remuneration
and Nomination Committees.
Mr de Nys has over 45 years’ experience in civil engineering, construction, oil field
contracting and natural resource investment management.
Mr de Nys is a Director of various IMC Pan Asia Alliance Group subsidiaries,
companies affiliated with Horizon’s substantial shareholder IMC Pan Asia Alliance
Group.
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.
22 Independent Non-Executive Director
Sandra Birkensleigh
Responsibilities:
Experience:
Directorships:
Qualifications:
Ms Birkensleigh has been a Director of Horizon since February 2016. She is Chair of Horizon’s
Audit Committee and a Member of Horizon’s Risk Management, and Remuneration and
Nomination Committees.
Ms Birkensleigh has 24 years’ experience in financial services, risk management, compliance
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 Chairman of Auswide Bank Limited and a director of MLC Limited, 7-11
Holdings and its subsidiaries, National Disability Insurance Agency, the Sunshine Coast
Children’s Therapy Centre and a Council Member of the University of the Sunshine Coast. Ms
Birkensleigh is a Member of Council and 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 Chartered Accountant and holds a Bachelor of Commerce. She is a
Graduate Member of the Australian Institute of Company Directors and Fellow of the
Governance, Risk and Compliance Institute.
Non-executive Director
Greg Bittar
Responsibilities:
Experience:
Directorships:
Qualifications:
Mr Bittar has been a Director of Horizon since March 2017, as nominated by Horizon’s
substantial shareholder IMC Pan Asia Alliance Group. He is Chairman of Horizon’s
Remuneration and Nomination Committee and a Member of Horizon’s Audit Committee.
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 was former Chairman of Trek Metals Limited and 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:
Mr Lorenzon has been an Alternate Director for Greg Bittar since March 2017.
Mr Lorenzon is Head of Finance, IMC Industrial Group and has more than 20 years’ 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 12 years and
previously worked for Vale in Brazil and Rio Tinto in Australia in roles encompassing strategic
planning, mergers and acquisitions and business development.
Qualifications:
Mr Lorenzon is a Chartered Financial Analyst and holds a Master of Business Administration
and Bachelor of Civil Engineering.
Independent Non-Executive Director
Bruce Clement
Responsibilities:
Experience:
Directorship:
Qualifications
Mr Clement was appointed as an independent non-executive director on 1 September 2020.
Mr Clement has over 40 years’ oil and gas experience; beginning his career as a projects
engineer at Esso Australia Limited (now Exxon). He has managed exploration, development
and production operations in Australia and Asia, as well as successfully delivering key projects
in Australia, China, Indonesia, the UK and the USA, including implementation of major
acquisitions and divestments. Bruce has led AWE Limited and Roc Oil Limited as Chief
Executive Officer and held senior managerial roles at Santos Limited, Ampolex Limited and
Esso Australia Limited (Exxon). He is a Member of Risk Management Committee.
Bruce is currently a non-executive Director at Norwest Energy Limited.
Mr Clement holds a Bachelor of Engineering (Civil) Hons and Bachelor of Science (Maths &
Computer Science) from Sydney University and Masters of Business Administration from
Macquarie University.
23 Non-executive Director
Nigel Burgess
Responsibilities:
Experience:
Directorships:
Qualifications:
Mr Burgess is a nominee director of Samuel Terry Asset Management, which manages the
Samuel Terry Absolute Return Fund, a substantial shareholder in Horizon.
Mr Burgess has 30 years of commercial experience in funds management with Samuel Terry,
Hunter Hall, GIO of Australia and Friends Provident in Australia, and a family office in Europe.
He has experience in a variety of commercial transactions and corporate restructurings across
a range of industries and jurisdictions.
Mr Burgess was a former director of Spicers Limited (ASX: SRS, delisted 2019) and Yellow
Holdings Limited (New Zealand).
Mr Burgess has an Economics degree and an Accounting Masters degree, both from University
of NSW.
Company Secretary
Kylie Quinlivan
Responsibilities:
Ms Quinlivan has been General Counsel and Company Secretary of Horizon since July 2018.
Experience:
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 years’ experience as a corporate lawyer
including first tier Corporate M&A practice at Minter Ellison, Sydney.
Qualifications:
Ms Quinlivan holds a Master of Laws and Bachelor of Commerce.
Assistant Company Secretary
Kyle Keen
Responsibilities:
Experience:
Qualifications:
Mr Keen has been the Finance Manager of Horizon since February 2018 and was appointed
Assistant Company Secretary in November 2018.
Mr Keen is a Chartered Accountant with expertise in financial risk management and reporting
across a range of sectors, in particular oil and gas. He has 10 years’ experience including
working in first tier auditing practices such as EY, United Kingdom and KPMG, South Africa.
Mr Keen holds a Bachelor of Accounting (Hons) and is a member of the South African Institute
of Chartered Accountants.
Directors’ Interests in the Company’s Securities
As at the date of this Directors’ Report, the Directors held the following number of fully paid ordinary shares:
DIRECTOR
ORDINARY SHARES
DIRECT
INDIRECT
TOTAL
M Harding
C Hodge
G de Nys
S Birkensleigh
G Bittar
B Clement
N Burgess
B Lorenzon (as alternate)
-
-
-
-
-
-
-
-
-
-
-
-
2,203,639
2,203,639
-
-
-
-
-
-
-
-
-
-
24 Meetings of Directors
The numbers of meetings of the Company’s Board of Directors (the ‘Board’) and of each Board Committee held during the
financial year, and the numbers of meetings attended by each Director were:
BOARD
AUDIT
COMMITTEE
RISK MANAGEMENT
COMMITTEE
REMUNERATION
& NOMINATION
COMMITTEE
DISCLOSURE
COMMITTEE
Number of meetings held:
Number of meetings attended by:
M Harding
C Hodge1
G de Nys
S Birkensleigh
G Bittar
B Clement2
B Lorenzon (as alternate for G Bittar)
2
2
2
2
2
10
10
10
10
9
10
9
5
2
2
2
2
1
2
1
1
1
2
2
2
2
2
2
1
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.
Mr Clement was appointed as a non-executive director effective 1 September 2020 and attended all meetings from that date.
Corporate Governance
The Company and the Board are committed to achieving and demonstrating the highest standards of corporate governance.
The Board continues to review the Company’s governance framework and practices to ensure they meet the interests of
shareholders. The Corporate Governance Statement was approved by the Board on 24 August 2021.
The Company’s Corporate Governance Statement for the year ended 30 June 2021 may be accessed from the Company’s
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
comply with the ASX Corporate Governance Council’s revised Corporate Governance Principles and Recommendations 3rd
edition, released in March 2014.
Sustainability Reporting
This year Horizon has further enhanced its focus on sustainability and prepared a 3 year Environmental Social and
Governance (ESG) Action Plan to refine our goals, targets and activities in our ESG priority areas. Sustainability continues to
be an important focus for Horizon with sustainability performance again forming part of executive KPIs.
Horizon continues to report against the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD)
and has further enhanced disclosures surrounding emissions. We continued to participate in the Carbon Disclosure Project
(CDP) in 2021. 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.
The Company’s Sustainability Report for the year ended 30 June 2021 may be accessed from the Company’s website at
www.horizonoil.com.au.
25 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 2021. This Report forms part of the Directors’ Report and has been 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
The table below outlines the KMP movements during the financial year:
TITLE
PERIOD AS KMP
Sandra Birkensleigh
Director (non-executive)
Chairman (non-executive)
Director (executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
NAME
DIRECTORS
Mike Harding
Chris Hodge
Gerrit de Nys
Greg Bittar
Bruce Clement1
Bruno Lorenzon
OTHER KMP (EXECUTIVES)
Kylie Quinlivan3
Kelvin Bramley2
Alternate Director (non-executive)
Full financial year
Richard Beament
Chief Financial Officer
General Counsel/Company Secretary
General Manager, Commercial & Business Development
Until 19 May 2021
Full financial year
Full financial year
1
2
Mr Clement was appointed as a non-executive director effective 1 September 2020.
Mr Bramley was issued notice of redundancy on 19 May 2021 when he ceased to be a KMP. Mr Bramley is currently working out his notice period.
3 Subsequent to period end MS Quinlivan tendered her resignation and will cease to be a KMP and Company Secretary effective 30 September 2021.
Full financial year
Full financial year
Full financial year
Full financial year
Full financial year
Since 1 September 2020
26 Executive Remuneration Framework
[2.1] - How does Horizon determine remuneration outcomes?
The objective of the Group’s remuneration framework is to provide reward for performance that is competitive and
appropriate for the results delivered. The Board, through its Remuneration and Nomination Committee, continues to review
KMP remuneration arrangements to ensure they align with the Group’s strategic objectives. The remuneration framework
for executives is based on the following principles for guiding the Group’s decisions regarding executive remuneration.
– Good reward governance principles:
– competitiveness and reasonableness;
– acceptability to shareholders;
– performance linkage / alignment of executive compensation;
– transparency; and
– capital management.
– Alignment to shareholders’ interests:
– focuses on sustained growth in shareholder value; and
– attracts and retains high calibre executives capable of managing the Group’s diverse international operations.
– Alignment to program participants’ 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.
[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
(“at risk”) remuneration consisting of STIs and LTIs. The graph below sets out the proportion 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.
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.
27 [2.3] - Elements of remuneration
FIXED REMUNERATION (FR)
What is Fixed
Remuneration?
Fixed Remuneration comprises ‘Total 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 Committee
considering market data, scope of the Executive’s role, expected skill, experience and qualification and
individual performance.
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 Company’s performance 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 the Company’s Board approved KPIs for the relevant year. 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
Up to 50% of the CEO’s TFR and up to 21.4% of the Other Executives TFR.
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).
What are the
performance
measures applied to
the LTI?
SARs vest over a three to five year period on fulfilment of two performance criteria: (1) Horizon’s Total
Shareholder Return (TSR) must exceed 10%; and (2) Horizon’s TSR must equal or exceed the S&P ASX 200
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 Board’s absolute discretion.
The Board considers that the absolute and relative TSR performance hurdles effectively align the interests of
Executives with Horizon’s 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:
(1) Horizon’s Total Shareholder Return (TSR) must exceed 10%; and
(2) Horizon’s TSR must equal or exceed the S&P ASX 200 Energy Index, whereby the proportion of SARs that
vest is calculated as follows:
– if Horizon’s TSR is equal to the Index, 50% vest;
– if the Company’s TSR is 14% or more above the Index, 100% vest; and
– if Horizon’s TSR is between the Index and 14% above the Index, a percentage vest based on a linear pro-
rata calculation.
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).
28 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
21.4% of TFR. The LTI opportunity is prescribed by the Executives’ employment contracts.
Treatment of
incentives on
cessation of
employment
When do SARs lapse?
The number of SARs issued to an Executive in a relevant year is calculated by dividing the monetary value of
the Executive’s LTI opportunity by the fair value of a SAR at allocation. The fair value of a SAR is determined
by an independent expert each year using the Black-Sholes model.
On cessation of an Executive’s employment, the Board may exercise its discretion to: (1) lapse all or some of
the Executive’s SARs; or (2) determine that some or all of the Executive’s SARs which have not become
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 vesting of Executives’ 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.
[2.4] - Associated policies
The Group has adopted several policies to support remuneration framework and governance, including the Securities Trading
Policy, Disclosure Policy and the Code of Conduct.
These policies are available on the Group’s website
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 35 – 36 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 share 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.
29 Actual remuneration received in respect of the financial year
EXECUTIVE
C Hodge3
R Beament
K Quinlivan4
K Bramley5
M Sheridan6
A McArdle7
Total
TOTAL FIXED REMUNERATION
(INCL. SUPERANNUATION)
US$
NON-MONETARY
BENEFITS
US$
2021
463,934
2020
156,007
2021
330,790
2020
308,881
2021
318,267
2020
172,159
2021
254,622
2020
316,5705
2021
-
2020
349,594
2021
-
2020
174,991
2021
1,367,613
2020
1,478,202
32,135
11,151
15,313
8,786
5,985
4,837
12,306
82,0445
-
40,517
-
3,279
65,739
150,614
STI AMOUNTS
LTI AWARDS2
TOTAL
US$1
186,897
-
59,077
12,808
54,876
7,211
44,109
10,816
-
-
-
-
344,959
30,835
-
-
-
-
-
-
-
-
-
-
-
-
-
-
682,966
167,158
405,180
330,475
379,128
184,207
311,037
409,430
-
390,111
-
178,270
1,778,311
1,659,651
1 Includes STIs payable in respect of the current financial period performance.
2 LTI awards that vested and were exercised during the financial year.
3 Actual remuneration for C Hodge during the 2020 financial period reflects only the remuneration received from the date of appointment as Chief Executive
Officer and Managing Director on 14 February 2020.
4 K Quinlivan was on unpaid parental leave from 1 July 2019 to 31 October 2019.
5 K Bramley was issued notice of redundancy on 19 May 2021 where he ceased to be a KMP. Mr Bramley’s STI amount has been reduced on a pro rata basis and
Mr Bramley is currently working out his notice period. Included in Mr Bramley’s fixed remuneration and non-monetary benefits for the 2020 financial period
are expatriate allowances and insurances commensurate with expatriates’ living abroad in countries such as Papua New Guinea.
6 M Sheridan ceased to be a KMP and Director effective 28 February 2020.
7 A McArdle ceased to be a KMP effective 19 December 2019.
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 1 year or less continuous service, 3 months’ total fixed remuneration:
for between 1 year and 2 years continuous service, 6 months’ total fixed
remuneration: and
for more than 2 years continuous service, 12 months’ total fixed remuneration.
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 performance by using ‘at risk’ remuneration, including STI’s and LTI’s. Award of STIs is
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.
Horizon share price performance for the current and previous four financial years is displayed in the chart below:
$0.18
$0.16
$0.14
$0.12
$0.10
$0.08
$0.06
$0.04
$0.02
$0.00
Horizon Oil Limited share price ("HZN") versus S&P/ASX200 Energy Index and Brent
Crude Oil
70,000,000
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
e
m
u
o
V
l
6
1
-
l
u
J
6
1
-
t
c
O
7
1
-
n
a
J
7
1
-
r
p
A
7
1
-
l
u
J
7
1
-
t
c
O
8
1
-
n
a
J
8
1
-
r
p
A
8
1
-
l
u
J
8
1
-
t
c
O
9
1
-
n
a
J
9
1
-
r
p
A
9
1
-
l
u
J
9
1
-
t
c
O
0
2
-
n
a
J
0
2
-
r
p
A
0
2
-
l
u
J
0
2
-
t
c
O
1
2
-
n
a
J
1
2
-
r
p
A
-
1
2
-
l
u
J
HZN Trading Volume (RHS)
HZN Share Price
S&P/ASX 200 Energy Index (Rebased)
Brent Crude Oil (Rebased)
The table below sets out information regarding the Group’s performance over the last five years as required by the
Corporations Act.
Profit/(loss) before tax (US$’000)
EBITDAX (US$’000)
Net cash/(debt) (US$’000)
FY211
5,178
36,391
31,696
FY201
27,300
51,392
489
FY19
FY18
48,409
93,012
(1,580)
68,482
FY17
4,154
45,171
(27,959)
(88,608)
(108,469)
1 The profit/(loss) before tax and EBITDAX information for the 2020 and 2021 financial years excludes profit and loss from discontinued operations as reported
in the consolidated statement of profit and loss.
32
[5.2] - Performance against STI measures for the financial year
The Executive’s STI opportunity is calculated with reference to achievement of KPI targets based on a weighted scorecard
approach. The following table sets out the performance conditions for the STI and their rationale for the financial year.
KEY FOCUS AREAS
OBJECTIVE AND
MEASUREMENT
RATIONALE
Financial Metrics &
Profitability
Achievement of budgeted
revenue, operating costs and
cashflow across the Block
22/12 and Maari/Manaia fields
FINANCIAL
Maintain average Group
operating costs below
US$20/bbl and maintain low
corporate general and
administrative expenditure
STATUS
Exceed
Maintain and enhance operating
income streams
Maximise profitability and cashflow
Exceed
Effective cost control
Exceed
Capital Management
Gearing / Net cash increase
Drive shareholder value
through distributions
Appropriate level of gearing and
exposure to manage business risk
Exceed
Provide returns for shareholders
Exceed
Production
Optimisation
Achieve budgeted production
Maximise profitability and cashflow
Exceed
OPERATIONAL
Reserves
Reserves replacement
Ensure sustainability of business
and cashflow
PNG
Manage PNG risks with no
incremental liabilities
Maximise shareholder value and
manage risks
Partially
Achieved
Achieved
BUSINESS
DEVELOPMENT
Growth of the
business
Focus on organic & inorganic
growth opportunities
SAFETY
HSSE
People & Culture
PEOPLE, CULTURE &
SUSTAINABILITY
Sustainability
Achievement of TRIFR below
NOPSEMA industry average
across Horizon’s assets
Attracting the right skills and
retaining key staff
Deliver sustainability roadmap
with enhanced reporting in
accordance with TCFD
guidelines
Ensure sustainability of the business
and cashflow whilst creating value
for shareholders
In
Progress
Promote safe operations with a safe
workplace for employees
Achieved
Ensure Company has the necessary
resources to achieve strategic
objectives
Achieved
Sustainability awareness; make the
right kind of impact
Achieved
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 80% of their total STI opportunity.
33 The table below shows the STIs awarded during the financial year:
EXECUTIVE
C Hodge
R Beament
K Quinlivan
K Bramley2
TOTAL OPPORTUNITY
US$1
% OF FIXED REMUNERATION
%
AWARDED
%
FORFEITED
233,622
73,846
68,595
55,084
50%
21.4%
21.4%
21.4%
80%
80%
80%
80%
20%
20%
20%
20%
1 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
2021.
2 K Bramley was issued notice of redundancy on 19 May 2021 where he ceased to be a KMP. Mr Bramley’s STI amount has been reduced on a pro rata basis.
[5.3] - Performance against LTI measures for the financial year
Horizon’s share price performance for the current and previous four financial years is displayed in the chart under section
5.1 of this Report.
LTI awarded in
respect of FY21
LTI awards for Executives are made at the beginning of the financial year. In 2020, LTIs were awarded to
Executives in respect of FY21.
LTI awards take the form of SARs. For 2020, each SAR had a fair value of A$0.0264, calculated by an independent
expert using the Black-Sholes model. The Horizon share price at allocation (known as ‘strike price’) was A$0.063.
LTI quantum for
FY21
The table below shows the financial year LTI grants.
EXECUTIVE % OF TFR
NUMBER OF
SARS GRANTED
DURING FY21
VALUE OF SARS AT
EFFECTIVE
ALLOCATION DATE1
NUMBER OF SARS
VESTED DURING FY21
NUMBER OF SARS
LAPSED DURING
FY21
C Hodge2
50%
-
R Beament
21.4%
3,720,681
K Quinlivan
21.4%
3,141,909
K Bramley
21.4%
3,141,909
-
$67,727
$57,192
$57,192
-
-
-
-
-
-
-
-
The value of a SAR at allocation (1 July 2020) is calculated in accordance with AASB 2 ‘Share-based Payment’ of SARs.
1
2 Under the terms of C Hodge’s employment agreement, Mr Hodge will be eligible for an LTI award following the first anniversary
of employment as the Group’s Chief Executive Officer.
Awards vesting
in FY21
No SARs were exercised by KMP during the financial year.
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 Directors’ fee pool limit, which is periodically recommended for approval by
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 35 shows
remuneration in US$ in line with the Group’s functional currency.
34 The table below shows the levels for NEDs (exclusive of superannuation) for FY21.
FEES
Board Fees
DESCRIPTION
Chair
Other Non-executive Directors
PER ANNUM
A$163,110
A$81,555
There were no additional fees paid to NEDs during the financial year for being members of the Board committees. The NEDs
are reimbursed for expenses reasonably incurred in attending to the affairs of the Company. There are no retirement
allowances in place for NEDs.
Statutory and share based reporting
[7.1] - Director remuneration for the financial year
The following table sets out the statutory disclosures required under the Corporations Act 2001 (Cth) and in accordance with
Australian Accounting Standards remuneration for Directors for the years ended 30 June 2021 and 30 June 2020.
SHORT-TERM BENEFITS
POST-EMPLOYMENT BENEFITS
TOTAL5
CASH SALARY / BOARD FEES
US$
SUPERANNUATION4
US$
FINANCIAL YEAR ENDED
30 JUNE 2021 AND 2020
NON-EXECUTIVE DIRECTOR
M Harding
G de Nys
S Birkensleigh
G Bittar1
B Clement2
C Hodge3
2021
121,945
2020
109,198
2021
60,973
2020
54,599
2021
60,973
2020
54,599
2021
60,973
2020
54,599
2021
51,294
2020
2021
-
-
2020
33,898
Total Director remuneration
2021
356,158
2020
306,893
Total Director remuneration(A$)
2021
475,739
2020
457,729
11,585
10,374
5,792
5,187
5,792
5,187
5,792
5,187
4,873
-
-
3,220
33,834
29,155
45,195
43,484
US$
133,530
119,572
66,765
59,786
66,765
59,786
66,765
59,786
56,167
-
-
37,118
389,992
336,048
520,934
501,213
1 B Lorenzon, as alternate Director to G Bittar, received no fees during the current and prior financial periods.
2 B Clement was appointed as a non-executive director effective 1 September 2020.
3 Remuneration for C Hodge during the 2020 financial period reflects remuneration as an Independent Non-executive Director prior to Mr Hodge’s appointment
as Chief Executive Officer and Managing Director on 14 February 2020. Refer to note 7.2 for Mr Hodge’s remuneration 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.
35
[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 2021 and
30 June 2020.
FINANCIAL YEAR ENDED
30 JUNE 2021 AND 2020
SHORT-TERM BENEFITS
POST-
EMPLOYMENT
BENEFITS
TOTAL CASH
OR IN-KIND
BENEFIT
LONG-
TERM
BENEFITS
SHARE
BASED
PAYMENTS
TOTAL
OTHER KEY MANAGEMENT
PERSONNEL
CASH SALARY &
FEES
STIs
NON-
MONETARY1
SUPERANNUA
TION2
SARs4
LONG
SERVICE
LEAVE
ACCRUAL3
C Hodge6
Chief Executive
Officer
R Beament
Chief Financial
Officer
K Quinlivan7
General Counsel
K Bramley8
GM, Commercial &
Business Dev
M Sheridan9
Chief Executive
Officer
A McArdle10
Chief Operations
Officer
Total KMP
remuneration
Total KMP
remuneration (A$)
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
447,740
186,897
32,135
16,194
682,966
149,765
-
11,151
6,242
167,158
-
-
-
-
682,966
167,158
312,128
59,077
15,313
18,662
405,180
6,311
68,680
480,171
294,458
12,808
8.786
14,423
330,475
6,850
46,231
383,556
299,605
54,876
5,985
18,662
379,128
163,456
7,211
4,837
8,703
184,207
-
-
57,997
437,125
39,040
223,247
238,199
44,109
12,306
16,423
311,037
4,612
51,231
366,880
302,062
10,816
82,044
14,508
409,430
6,122
39,040
454,592
-
340,570
-
170,185
-
-
-
-
-
40,517
-
3,279
-
-
-
-
-
9,024
390,111
9,838
175,900
575,849
-
-
4,806
178,270
-
-
-
-
12,495
190,765
1,297,672
344,959
65,739
69,941
1,778,311
10,923
177,908
1,967,142
1,420,496
30,835
150,614
57,706
1,659,651
22,810
312,706
1,995,167
1,739,601
458,845
88,067
93,777
2,380,290
14,632
250,964
2,645,886
2,113,057
44,929
223,101
85,991
2,467,078
33,625
430,427
2,931,130
1 Non-monetary benefits include the value of car parking, insurances and other expenses inclusive of Fringe Benefits Tax (“FBT”).
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 value at effective allocation date (converted to US dollars at the foreign exchange rate prevailing at that date) 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 in the 2020 financial period reflects remuneration from the date of Mr Hodge’s appointment as Chief Executive Officer and Managing
Director on 14 February 2020.
7 K Quinlivan was on unpaid parental leave from 1 July 2019 to 31 October 2019.
8 K Bramley was issued notice of redundancy on 19 May 2021 where he ceased to be a KMP. Mr Bramley’s STI amount has been reduced on a pro rata basis and
Mr Bramley is currently working out his notice period. Included in Mr Bramley’s fixed remuneration and non-monetary benefits for the 2020 financial period
are expatriate allowances and insurances commensurate with expatriates’ living abroad in countries such as Papua New Guinea.
9 M Sheridan ceased to be a KMP and Director effective 28 February 2020.
10 A McArdle ceased to be a KMP effective 19 December 2019.
36 [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 2021:
KMP
Opening Balance
30 June 2020
Acquired
during FY21
Disposed of
during FY21
Received during financial
year on the exercise of
options
Closing Balance
30 June 2021
DIRECTORS
M Harding
C Hodge
G de Nys
-
-
2,203,639
S Birkensleigh
G Bittar
B Clement
OTHER KMP
-
-
-
R Beament
38,184
K Bramley
182,290
K Quinlivan
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 2021:
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
C Hodge1
-
-
R Beament
2,990,072
3,720,681
K Quinlivan
2,524,950
3,141,909
K Bramley
2,524,950
3,141,909
-
-
-
-
-
-
-
-
-
6,710,753
5,666,859
5,666,859
-
-
-
-
UNVESTED
-
6,710,753
5,666,859
5,666,859
1
2
3
Under the terms of C Hodge’s employment agreement, Mr Hodge will be eligible for an LTI award following the first anniversary of employment as the Group’s
Chief Executive Officer and Managing Director.
Under the terms of G Douglas’s employment agreement, Mr Douglas will be eligible for an LTI award following the first anniversary as a KMP.
Subsequent to year end and in accordance with contract entitlement, 7,644,411 SARs were issued to key management personnel. 5,808,411 SARs issued
to C Hodge remain subject to shareholder approval at the 2021 Annual General Meeting.
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
The Group’s Securities Trading Policy applies to all Directors, other Executives, employees and their related parties and 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/governance.
37 [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
01/07/2016
01/07/2016
01/07/2017
01/07/2018
01/07/2019
01/07/2021
01/07/2021
01/07/2022
01/07/2023
01/07/2024
01/07/2020
01/07/2025
Nil
Nil
Nil
Nil
Nil
Nil
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$0.1054
A$0.063
A$0.0730
A$0.0576
A$0.0264
100% after 20/10/20214
100% after 20/10/20224
100% after 20/10/20234
1
2
3
4
The ‘strike price’ for SARs is the 10-day volume weighted average price for Horizon shares at effective allocation date.
The value per SAR at effective allocation date is determined by an independent expert.
No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a SAR.
SARs will become exercisable subject to meeting vesting or performance conditions. See summary in section 2.
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 using
a Monte Carlo simulation. Factors taken into account by this model include the ‘strike price’, the term of the SAR, 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 accordance with
AASB 2 ‘Share-based Payment’ and also with the guidelines issued by the Australian Securities and Investments Commission
(‘ASIC’) which require the value of a SAR at effective allocation date to be allocated equally over 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.
The model inputs for each grant of SARs during the financial year ended 30 June 2021 included:
Effective allocation date
Estimated expiry date
Exercise price
‘Strike price’, being the 10-day VWAP of Horizon shares at effective allocation date
Expected price volatility
Risk free rate
Expected dividend yield
1
No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a SAR.
1 July 2020
1 July 2025
Nil1
A$0.063
55% p.a.
0.4% p.a.
0.00% p.a.
38 Details of remuneration –SARs
For each grant of SARs currently on issue to KMP in the current or prior financial years which results in an amount being
disclosed in the Remuneration Report as a share-based payment to KMP for the financial year, the percentage of the grant
that vested in the financial year and the percentage that was forfeited because the person did not meet the vesting or
performance conditions is set out below. The SARs may vest after three years, subject to the performance conditions being
met. No SARs will vest if the performance conditions are not fulfilled, therefore the minimum value of SARs yet to vest is
US$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 YEAR 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
2021
2019
2020
2021
2019
2020
2021
2017
2018
2019
2020
2018
2017
2018
-
-
-
-
-
-
-
-
-
100%
100%
-
-
100%
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30/06/2022
30/06/2023
30/06/2024
30/06/2022
30/06/2023
30/06/2024
30/06/2022
30/06/2023
30/06/2024
Fully vested
Fully vested
30/06/2022
30/06/2023
Fully vested
Fully vested
Fully vested
-
22,430
45,151
-
18,941
38,128
-
18,941
38,128
-
-
-
87,345
-
-
-
1
The above values have been converted to dollars at the exchange rate prevailing on the date of the grant of the SARs.
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.
39 Non-Audit Services
The Company may decide to employ PricewaterhouseCoopers on assignments additional to its statutory audit duties where
the external auditor’s expertise and experience with the Company and/or the Group are important.
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
auditor’s own work, acting in a management or a decision-making capacity for the Group, acting as advocate for the Group
or jointly sharing economic risk and rewards.
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:
CONSOLIDATED
2021
US$
2020
US$
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
159,509
158,282
11,822
14,267
171,331
172,549
9,819
9,819
10,567
10,567
15,895
15,895
8,085
8,085
Total auditors’ remuneration
191,717
196,529
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.
40 External Auditor’s Independence Declaration
A copy of the external auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set
out on page 42.
Rounding of Amounts to The Nearest Thousand Dollars
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 kind to
which the Class Order applies, and accordingly amounts in the Directors’ Report have been rounded off in 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
26 August 2021
C Hodge
Chief Executive Officer
41 Auditor’s Independence Declaration
As lead auditor for the audit of Horizon Oil Limited for the year ended 30 June 2021, 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
26 August 2021
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
42
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 2021 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 2021
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 significant accounting policies
and other explanatory information
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 & 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.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
43
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
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
● For the purpose of our audit we used
● Our audit focused on
● Amongst other relevant
topics, we communicated
the following key audit
matter to the Audit and
Risk Committee:
− Impairment assessment
of oil & gas assets
● This is further described in
the Key audit matters
section of our report.
overall Group materiality of
$750,000, 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.
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
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.
44
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 matter was 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 this matter. 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 oil & gas assets
Refer to note 1(K), 1(Q), & 16
We performed the following procedures, amongst
others:
As indicators of impairment were identified by the
Group with respect to the oil & gas assets during the
year, 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 oil & gas assets in different
jurisdictions
volatility of global oil prices during the year
which have been impacted by the recent
COVID19 pandemic
financial significance of these assets to the
business.
● Read the impairment assessment prepared by the
Group. Assisted by PwC valuation experts, we
assessed the significant assumptions applied
within the Group’s discounted cash flow model,
including:
̵ Assessing the discount rates used by the
Group in the valuation process of its oil &
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 significant assumptions
(including reserves estimate, production profile,
operating and capital expenditure requirements)
in the Group’s impairment assessment to the
underlying assumptions identified by the Group’s
internal expert in their most recent reserves and
resources statement on China and New Zealand
joint arrangements.
● Assessed the reasonableness of the relevant
disclosures against the requirements of the
Australian Accounting Standards.
45
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 2021, 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.
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.
46
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 26 to 39 of the directors’ report for the
year ended 30 June 2021.
In our opinion, the remuneration report of Horizon Oil Limited for the year ended 30 June 2021
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
26 August 2021
47
DIRECTORS’ DECLARATION
In the directors’ opinion:
(A) 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) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2021 and of its performance
for the financial year ended on that date; and
(B) 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
26 August 2021
C Hodge
Chief Executive Officer
48 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
CONSOLIDATED
2021
US$’000
63,571
(47,126)
2020
US$’000
84,025
(53,384)
16,445
30,641
REVENUE
Cost of sales
Gross profit
Other income
General and administrative expenses
Insurance expense
Exploration and development expenses
Gain on remeasurement of derivative financial instruments
Finance costs – interest, transaction costs, other
Finance (costs)/income – unrealised movement in value of options
Restructuring expense
Other expenses
Profit before income tax
NZ royalty tax expense
Income tax benefit/(expense)
Profit from continuing operations
Profit/(loss) from discontinued operations
Profit/(loss) for the financial year
NOTE
4
5
4
5
5
5
5
5
5
5
5
6a
6b
29b
OTHER COMPREHENSIVE INCOME/(LOSS) - ITEMS THAT MAY BE RECLASSIFIED TO PROFIT AND LOSS
Changes in the fair value of cash flow hedges
Total comprehensive income/(loss) for the financial year
Profit/(loss) attributable to:
Security holders of Horizon
Profit/(loss) for the financial year
Total comprehensive income/(loss) attributable to:
Security holders of Horizon
Total comprehensive (loss)/income for the financial year
817
(3,836)
(1,950)
(2,073)
1,413
(2,038)
(2,930)
(378)
(292)
5,178
(1,274)
958
4,862
3,147
8,009
982
8,991
8,009
8,009
8,991
8,991
Earnings per share for (loss)/profit attributable to ordinary equity holders of Horizon:
US cents
Basic earnings per ordinary share
Diluted earnings per ordinary share
Basic earnings per ordinary share from continuing operations
Diluted earnings per ordinary share from continuing operations
41a
41b
41c
41d
0.61
0.49
0.37
0.30
12
(3,695)
(2,003)
(1,821)
-
(3,701)
8,047
-
(180)
27,300
(2,949)
(7,955)
16,396
(71,535)
(55,139)
(2,749)
(57,888)
(55,139)
(55,139)
(57,888)
(57,888)
US cents
(4.23)
(4.23)
1.26
1.01
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
49 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021
CONSOLIDATED
NOTE
2021
US$’000
2020
US$’000
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Current tax receivable
Derivative financial instruments
Other assets
Intangible assets
Total current assets
NON-CURRENT ASSETS
Deferred tax assets
Plant and equipment
Exploration phase expenditure
Oil and gas assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Payables
Current tax payable
Borrowings
Derivative financial instruments
Total current liabilities
NON-CURRENT LIABILITIES
Payables
Deferred tax liabilities
Other financial liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
7
8
9
11
10
11
12
13
14
15
16
17
18
19
10
17
22
20
19
21
23
24a
24b
44,436
13,982
2,555
1,005
1,413
564
1,296
25,920
7,923
3,510
-
15
585
802
65,251
38,755
8,700
501
-
112,338
121,539
186,790
16,405
1,774
10,939
-
29,118
181
14,808
-
1,196
31,212
47,397
76,515
110,275
194,114
12,697
(96,536)
110,275
7,084
869
8,225
116,702
132,880
171,635
6,887
2,942
12,236
1,344
23,409
385
15,169
3,791
12,079
33,947
65,371
88,780
82,855
174,801
12,599
(104,545)
82,855
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
50
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED
30 JUNE 2021
CONSOLIDATED
ATTRIBUTABLE TO MEMBERS OF HORIZON
CONTRIBUTED
EQUITY
RESERVES RETAINED PROFITS /
(ACCUMULATED LOSSES)
NOTE
US$’000
US$’000
US$’000
BALANCE AS AT 1 JULY 2019
174,801
15,911
(49,406)
Loss for the financial year
24(b)
Changes in the fair value of cash flow hedges
24(a)
Total comprehensive loss for the financial
year
Transactions with owners in their capacity
as equity holders:
Employee share-based payments benefit
24(a)
-
-
-
-
-
-
(55,139)
(2,749)
-
(2,749)
(55,139)
(57,888)
(563)
(563)
-
-
Balance as at 30 June 2020
Balance as at 1 July 2020
174,801
174,801
12,599
(104,545)
12,599
(104,545)
Profit for the financial year
24(b)
Changes in the fair value of cash flow hedges
24(a)
Total comprehensive income for the
financial year
Transactions with owners in their capacity
as equity holders:
Employee share-based payments expense
Acquisition of treasury shares
Issue of treasury shares
24(a)
24(a)
24(a)
-
-
-
-
-
-
Shares bought back and cancelled
23(e)
(1,548)
Exercise of general options and ordinary
shares issued
23(f)
20,861
-
982
982
28
(998)
86
-
-
19,313
(884)
8,009
-
8,009
-
-
-
-
-
-
Balance as at 30 June 2021
194,114
12,697
(96,536)
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
TOTAL
EQUITY
US$’000
141,306
(55,139)
(2,749)
(563)
(563)
82,855
82,855
8,009
982
8,991
28
(998)
86
(1,548)
20,861
18,429
110,275
51 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED
30 JUNE 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Income taxes paid
Net cash inflow from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of PNG portfolio
Payments for exploration phase expenditure
Payments for oil and gas assets
Payments for plant and equipment
Net cash outflow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Leasing arrangements
Payments for shares bought back
Payments for shares acquired by the Employee Share Trust
Proceeds from exercise of general options
Repayment of borrowings
Net cash outflow from financing activities
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents held in foreign currencies
CONSOLIDATED
NOTE
2021
US$’000
2020
US$’000
57,411
83,871
(28,106)
(32,386)
29,305
51,485
-
(1,226)
(4,918)
28
(3,469)
(11,313)
40
23,161
36,731
3,764
(670)
(6,434)
(16)
-
(2,274)
(5,755)
(22)
(3,356)
(8,051)
(233)
-
-
(191)
(1,548)
(998)
14,140
19a
(12,691)
(24,000)
(1,288)
(24,233)
18,517
25,920
(1)
4,447
21,472
1
Cash and cash equivalents at the end of the financial year
7
44,436
25,920
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
52 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
entity consisting of Horizon Oil Limited and its subsidiaries (the ‘Group’). For the purposes of preparing the financial
statements, the consolidated entity is a for profit entity.
The nature of the operations and principal activities for the Group are described in the Directors’ Report.
Statement of compliance
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, other
authoritative pronouncements of the Australian Accounting Standards Board (‘AASB’), Urgent Issues Group Interpretations
and the Corporations Act 2001.
The consolidated financial statements comply with Australian Accounting Standards as issued by the AASB and International
Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board (‘IASB’).
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 Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 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 2021 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 2021. 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
There were no new and revised Australian Accounting Standards and Interpretations issued by the Australian Accounting
Standards Board (‘AASB’) that were relevant to its operations and effective for the financial year ended 30 June 2021.
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
management to exercise its judgement in the process of applying the Group’s accounting 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
A review of the Group’s accounting estimates has not affected items recognised in the financial statements for the financial
year ended 30 June 2021, except as disclosed in Note 2.
53 Principles of consolidation
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Horizon Oil Limited (the
'Company’ or 'Parent Entity') as at 30 June 2021 and the results of all subsidiaries for the financial year then ended. Horizon
Oil Limited and its subsidiaries together are referred to in these financial statements as ‘the Group’.
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). Details of major joint operation interests and the sum of the Group’s interests in joint operation assets,
liabilities, revenue and expenses are set out in Note 28.
Where part of a joint operation interest is farmed out in consideration of the farmee undertaking to incur further expenditure
on behalf of both the farmee 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 a weighted 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.
54
Foreign currency translation
[i] Functional and presentation currency
Items included in the financial statements of each of the Group’s subsidiaries are measured using the currency of the primary
economic environment in which the subsidiary operates (the ‘functional currency’). The consolidated financial statements
are presented in United States dollars, which is Horizon’s functional and presentation currency. Horizon has selected United
States dollars as its presentation currency for the following reasons:
(a) a significant portion of Horizon’s activity is denominated in United States dollars; and
(b) it is widely understood by Australian and international investors and analysts.
[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.
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.
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.
55
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 revenue for the reporting period is the tax payable on the current period’s taxable income 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
reporting period in the countries where the Company’s subsidiaries operate and generate taxable income. It establishes
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.
[ii] Government royalties
Government royalties are treated as taxation arrangements when they are imposed under Government authority and when
the calculation of the amount payable is derived from a measure of profit that falls within the definition of ‘taxable profit’ 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 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.
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,
the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar
56 terms, security and conditions. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities is
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.
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. Intangible assets with an indefinite
useful life are assessed for impairment regardless of whether there are any indicators of impairment. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the
cash inflows from other assets or groups of assets (‘cash-generating units’).
In assessing the recoverable amount, an asset’s estimated future cash flows are discounted to their present value using an
after-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset.
Exploration phase expenditure is assessed for impairment in accordance with Note 1(P).
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 2021 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.
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
57 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.
Non-current assets held for sale and discontinued operations
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to
dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The
results of discontinued operations are presented separately in the statement of comprehensive income.
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.
Business development costs such as the review of farm in opportunities and bid rounds are expensed in the period in which
they are incurred. 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.
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 any indication of impairment exists, an estimate of the asset’s recoverable amount is 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.
58 Development expenditure is reclassified as ‘production assets’ at the end of the commissioning phase, when the oil or gas
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 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, General Manager, Production &
Exploration of Horizon. Mr Douglas is a full-time employee of Horizon and is a member of the American Association of
Petroleum Geologists. Mr Douglas’ qualifications include a Master of Reservoir Evaluation and Management from the Heriot
Watt University, UK and more than 24 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).
59
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.
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
3 – 4 years
3 – 10 years
Lease tenure
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of the reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
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.
Intangible assets
[i] New Zealand carbon credits
New Zealand carbon credits, also referred to as New Zealand Units (NZUs) are acquired through the Environmental Protection
Authority and surrendered to the New Zealand Government for the Group’s proportionate share of the Maari/Manaia fields
direct greenhouse gas emissions for the calendar year. The NZUs are valued at cost and have an indefinite useful life.
NZUs are not amortised but are tested for impairment in accordance with the accounting policy set out in Note 1(K).
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 24(A).
60
[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 interest
rate swaps hedging variable rate borrowings is recognised in profit or loss within “finance costs”. The gain or loss relating
to the effective portion of forward foreign exchange contracts and commodity price contracts hedging export sales is
recognised in profit or loss within ‘sales’. However, when the forecast transaction that is hedged results in the 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 (2020: US$Nil) capitalised during the current financial year and the amount of borrowing
costs amortised to the income statement were US$705,396 (2020 US$776,816).
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
61 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
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 Long-Term
Incentive Plan, the Horizon Employee Option Scheme, and the General Option Plan. Information relating to these schemes
is set out in Note 33.
The fair value of options and share appreciation rights (‘SARs’) granted under the Horizon Long-Term Incentive Plan and
Horizon 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.
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 cancelled or lapse unexercised.
During the financial year, the Group established the Horizon Oil Employee Incentive Trust to administer the Long-Term
Incentive Plan and Horizon Employee Option Scheme. The Horizon Oil Employee Incentive Trust is consolidated in
accordance with the principles in Note 1(C).
Where the Horizon Oil Employee Incentive Trust purchases the company’s equity instruments, the consideration paid,
including any directly attributable incremental costs (net of income taxes) is deducted from equity reserves. When an
employee exercises options pursuant to the Long-Term Incentive Plan or Employee Option Scheme, and the Board resolves
to settle in shares, the Horizon Employee Oil Incentive Trust transfers the appropriate amount of shares to the employee.
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.
Where the Group purchases the company’s equity instruments, for example as the result of a share buy-back, the
consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity
attributable to the owners of Horizon as treasury shares until the shares are cancelled or reissued. Where such ordinary
shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs
and the related income tax effects, is included in equity attributable to the owners of Horizon.
62 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.
Goods and Services Tax (‘GST’)
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 42, 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 recognised in the parent entity’s profit or loss, rather than 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.
63 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
The Group’s policy for exploration and evaluation expenditure is discussed in Note 1(P). The application of this policy 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 15.
[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 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 21.
Following the significant volatility 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 a US$2.8 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 when an indicator of impairment is
present. 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 flows that will be received from the asset’s continued employment
and subsequent disposal. The 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.
Current climate change legislation is also factored into the estimated future cashflows and future uncertainty around
climate change risks continue to be monitored. In most cases, the present value of future cashflows is most sensitive to
estimates of future oil price and discount rates. The estimated future cash flows are discounted back to today’s dollars to
obtain the fair value amount using an after-tax discount rate of between 10% and 11%.
The Group’s current oil price forecast assumes an oil price of US$65/bbl over the next 4 years. Should longer term oil prices
be materially less than US$65/bbl it may lead to impairment of the Groups assets.
64
[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 33.
[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. The deferred tax asset associated with historical
losses recorded in the Group’s Australian parent entity continue to not be recognised on the basis that it is not expected that
the Group’s Australian operations would generate sufficient taxable profits to fully utilise those losses recorded.
Critical judgements in applying the Group’s accounting policies
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.
The operating segments identified are broadly based on the Group’s working interest in each individual oil and gas permit,
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 three operating segments:
– 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 – WZ6-12 and WZ12-8W oil field development and in the exploration and evaluation of hydrocarbons within Block
22/12; and
– ‘All other segments’ include amounts of a corporate nature not specifically attributable to an operating segment.
The PNG exploration and development segment was sold on 2 December 2020. Information about this discontinued segment
is provided in Note 29.
65
Segment information provided to the chief operating decision maker
2021
CHINA
EXPLORATION &
DEVELOPMENT
NEW ZEALAND
EXPLORATION &
DEVELOPMENT
ALL OTHER
SEGMENTS
TOTAL
US$’000
US$’000
US$’000
US$’000
SEGMENT INFOMATION:
Revenue from external customers
Profit/(loss) before tax
Depreciation and amortisation
Total segment assets as at 30 June 2021
38,120
9,306
(15,889)
80,371
25,451
1,766
(7,972)
81,877
-
63,571
(5,894)
5,178
(311)
(24,172)
24,542
186,790
Additions to non-current assets other than financial assets and deferred tax during the financial year ended:
Exploration phase expenditure:
297
Development and production phase expenditure:
9,844
Plant and equipment:
-
Total segment liabilities as at 30 June 2021
35,218
-
4,229
-
39,106
-
-
16
297
14,073
16
2,191
76,515
2020
SEGMENT INFOMATION:
CHINA
EXPLORATION &
DEVELOPMENT
NEW ZEALAND
EXPLORATION &
DEVELOPMENT
US$’000
US$’000
PAPUA NEW
GUINEA
EXPLORATION &
DEVELOPMENT
US$’000
ALL OTHER
SEGMENTS
TOTAL
US$’000
US$’000
Revenue from external customers
46,958
Profit/(loss) before tax
15,346
37,067
5,670
Depreciation and amortisation
(15,554)
(10,800)
Total segment assets as at
30 June 2020
77,307
70,156
-
(71,536)
(95)
18,678
-
6,285
(263)
5,494
Additions to non-current assets other than financial assets and deferred tax during the financial year ended:
-
321
-
1,107
470
73
817
-
796
35,237
41,059
6,069
6,415
88,780
84,025
(44,235)
(26,712)
171,635
4,355
846
869
Exploration phase expenditure:
2,431
55
-
Development and production phase
expenditure:
Plant and equipment:
Total segment liabilities as at
30 June 2020
Other segment information
[i] Segment revenue
The Group’s revenue is derived from the sale of crude oil produced in China and New Zealand. The Group sells to external
customers, including through sales agreements with the respective joint venture operators.
Reportable segment revenues are equal to consolidated revenue.
66
[ii] Segment profit before tax
The chief operating decision maker assesses the performance of operating segments based on a measure of profit before
tax.
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 (loss) / gain on oil hedging derivatives
OTHER INCOME
Insurance claim income1
Interest received from unrelated entities
Other non-operating income
CONSOLIDATED
2021
US$’000
2020
US$’000
70,124
(6,553)
63,571
780
-
37
817
74,942
9,083
84,025
-
12
-
12
1
During the period, the Group recovered US$0.8 million as full and final settlement for outstanding insurance claims pertaining to the Maari asset.
Following the recovery of these funds there are no outstanding insurance claims.
Revenue for the financial year ended 30 June 2021 relates to contracts executed for the sale of crude oil and all performance
obligations have been met within the period. There is no variable consideration requiring estimation for the year ended
30 June 2021.
The Group did not have contracts that were executed in a prior period, whereby the performance obligations were partially
met at the beginning of the period. There are no existing contracts that are unsatisfied or partially unsatisfied as at 30 June
2021.
The Group’s revenue disaggregated by primary geographical markets is reported in Note 3– Segment information.
67 The Group’s revenue disaggregated by pattern of revenue recognition is as follows:
CRUDE OIL SALES
Goods transferred at a point in time
Goods transferred over a period of time
Expenses
COST OF SALES
Direct production costs
Inventory adjustments1
Amortisation expense
Royalties and other levies
1 Adjustment for the cost of inventory produced which is on hand as at the end of the financial period.
GENERAL AND ADMINISTRATIVE EXPENSES
Employee benefits expense
Employee share options expense
Corporate office expense
Depreciation expense
Rental expense relating to operating leases
INSURANCE EXPENSE
Insurance expense (including Loss of Production Income insurance)
EXPLORATION AND DEVELOPMENT EXPENSES
Exploration and development expenditure expensed
GAIN ON REMEASUREMENT OF DERIVATIVE FINANCIAL INSTRUMENTS
Gain on remeasurement of derivative financial instruments2
CONSOLIDATED
2021
US$’000
2020
US$’000
25,451
38,120
63,571
37,067
46,958
84,025
CONSOLIDATED
2021
US$’000
2020
US$’000
22,306
390
23,861
569
47,126
1,908
364
1,249
311
4
24,538
2,243
26,354
249
53,384
1,155
611
1,572
263
94
3,836
3,695
1,950
1,950
2,073
2,073
(1,413)
(1,413)
2,003
2,003
1,821
1,821
-
-
2 The gain on the remeasurement of derivative financial instruments relates to oil price swaps whereby hedge accounting has not been applied. Refer
Note 10 for details on the Group’s derivative financial instruments.
68
Note 5: Expenses (Continued)
FINANCING COSTS
Interest and finance charges
Discount unwinding on provision for restoration
Unrealised movement in fair value of derivative financial instrument3
Amortisation of prepaid financing costs
CONSOLIDATED
2021
US$’000
2020
US$’000
1,297
230
2,930
511
4,968
2,450
740
(8,047)
511
(4,346)
3 The amount shown reflects an unrealised loss of $2,930,000 (2020: gain of $8,047,000) relating to the mark to market revaluation of the derivative
financial liability arising from the share options issued in respect of the subordinated secured facility. Refer to Note 20 for further details of the
component parts recognised in relation to this financing transaction.
RESTRUCTURING EXPENSES
Restructuring expenses4
4 The Group further reduced headcount by 19%, thereby incurring one off redundancy expenses.
OTHER EXPENSES
Net foreign exchange losses / (gain)
Other expenses
Income tax expense
(a)
Royalty tax expense (benefit)
Royalty paid / payable in New Zealand – current tax expense
Tax benefit related to movements in deferred tax balances
Total royalty tax expense
(b)
Income tax expense
Current tax expense
Tax expense related to movements in deferred tax balances
Adjustments for current tax of prior periods
Total income tax (benefit)/expense
Deferred income tax expense / (benefit) included in income tax expense comprises:
Decrease in deferred tax assets
Decrease in deferred tax liabilities
Total deferred income tax (benefit)/expense
378
378
284
8
292
-
-
104
76
180
CONSOLIDATED
2021
US$’000
2020
US$’000
1,529
(255)
1,274
2,457
(2,070)
(1,345)
(958)
(2,138)
68
(2,070)
4,220
(1,271)
2,949
4,775
2,071
1,109
7,955
3,398
(1,327)
2,071
69 (c)
Numerical reconciliation between profit before tax and tax expense / (benefit)
Profit from continuing operations before income tax
Profit/(Loss) from discontinuing operations before income tax
Less: Royalty paid / payable
Tax at the Australian tax rate of 30% (2020: 30%)
Tax effect of amounts which are not deductible / (taxable) in calculating taxable income:
Expenditure not allowed for income tax purposes
Other deductible items
Non-assessable income
Other assessable income
Effect of overseas tax rates
Deferred tax asset not brought to account
Previously unrecognised deferred tax now recognised
Previously recognised tax losses now not recognised
Tax losses utilised to reduce current tax expense
Tax paid on non-resident insurance premiums
Previously unrecognised tax losses now recognised to reduce current tax expense
Adjustments for current tax of prior periods
Income tax (benefit)/expense
Royalty tax expense
Total tax expense recognised in statement of profit or loss
(d)
Amounts recognised in other comprehensive income
CONSOLIDATED
2021
US$’000
2020
US$’000
5,178
3,147
27,300
(71,535)
(1,529)
(4,220)
6,796
2,039
(48,455)
(14,537)
1,689
27,336
(1,224)
(48)
(2,946)
(9,740)
841
399
(351)
698
(368)
-
-
9
-
(1,345)
(958)
1,274
316
786
3,797
(888)
1,161
-
2,985
(212)
3
-
1,109
7,955
2,949
10,904
Aggregate deferred tax arising in the reporting period and not recognised in net profit or loss but directly debited to other
comprehensive income.
Deferred tax: Changes in fair value of cash flow hedges
Total tax expense / (benefit) recognised in other comprehensive income
(e)
Tax losses
Unused tax losses (and applicable tax rate) for which no deferred tax asset has been recognised:
Horizon Oil Limited – 30% (2020: 30%)
Potential tax benefit at applicable tax rates
352
352
(990)
(990)
3,060
3,038
3,060
3,038
The Company has no Australian subsidiaries and therefore it is not subject to the Australian tax consolidation regime.
70
Cash and cash equivalents
Cash at bank and on hand
Restricted cash1
CONSOLIDATED
2021
US$’000
37,152
7,284
44,436
2020
US$’000
23,007
2,913
25,920
1 Under the terms of Horizon’s Revolving Cash Advance Facility (refer to Note 19(B)), certain cash balances are available to the Group after certain conditions
of the relevant facility agreement are satisfied. No restricted cash was held on deposit during the year (2020: US$Nil).
Receivables
Trade and other receivables1
CONSOLIDATED
2021
US$’000
2020
US$’000
13,982
13,982
7,923
7,923
1 Of this balance US$Nil (2020: US$Nil) related to amounts receivable from related parties. Refer to Note 32 for further details.
Information about the Company’s exposure to credit and market risks, and collectability of overdue amounts, is included in
Note25(B).
Inventories
Crude oil, at cost
Drilling and workover spares inventory
Derivative financial instruments
CURRENT:
Derivative asset – Oil price swaps – fair value through profit and loss
Derivative liability - Oil price swaps – cash flow hedges
Derivative asset – Foreign exchange contracts – cash flow hedges
Derivative liability – Foreign exchange contracts – cash flow hedges
CONSOLIDATED
2021
US$’000
2020
US$’000
1,473
1,082
2,555
1,483
2,027
3,510
CONSOLIDATED
2021
US$’000
2020
US$’000
1,413
-
-
-
1,413
-
(1,197)
15
(147)
(1,329)
71
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 fluctuations in accordance with the Group’s financial risk management policies (refer to
Note 25(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 Group’s financial
position remains sound and that the Group is able to meet its financial obligations in the event of low oil prices. At
30 June 2021, the Group had no outstanding oil price swaps.
Oil price swap contracts (fair value through profit and loss)
During the financial year, oil price swaps for the purchase of crude oil were executed to mitigate the Group’s exposure to oil
price volatility and the impact of a higher oil price on the drilling costs of the WZ12-8E development which are directly linked
to the oil price. Hedge accounting has not been applied, and therefore any gain or losses are recognised through profit and
loss. At 30 June 2021, the Group had 50,000 barrels of crude oil hedged through Brent oil price swaps (30 June 2020: nil)
purchasing crude oil at a weighted average price of US$43.21, covering the period 1 October 2021 to 31 March 2022.
Foreign exchange contracts (cash flow hedges)
During the financial year, foreign currency hedging was undertaken as a risk mitigation measure to ensure the Group’s
financial position remains sound and that the Group is able to meet its financial obligations in the event of a weakening
United States Dollar against the Group’s major operating currencies, the NZD, AUD and RMB. As at 30 June 2021, the Group
had no outstanding foreign exchange contracts.
The gain or loss arising from re-measurement of the hedge-accounted 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 net loss of
US$6,096,126 (2020: profit of US$8,795,268) was transferred to profit or loss.
Other assets & current tax receivable
Current tax receivable1
Other assets - prepayments
CONSOLIDATED
2021
US$’000
2020
US$’000
1,005
1,005
564
564
-
-
585
585
1 The current tax receivable relates to payments made in excess of the current tax obligations in New Zealand. The balance can be applied against future
periods tax obligations and/or withdrawn in cash.
72
Intangible assets
CURRENT ASSETS
FINANCIAL YEAR ENDED 30 JUNE 2020
Cost – 1 July 2019
Additions
Disposals - settlements
Closing value
FINANCIAL YEAR ENDED 30 JUNE 2021
Cost – 1 July 2020
Additions
Disposals - settlements
Closing value
CONSOLIDATED
NEW ZEALAND
CARBON
CREDITS1
TOTAL
US$’000
796
1,025
(1,019)
802
802
494
-
796
1,025
(1,019)
802
802
494
-
1,296
1,296
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 cost and are not amortised and are tested for impairment at each balance sheet date. NZU’s have been reclassified to intangible
assets in the prior financial period to align the classification with industry practice.
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
2021
US$’000
2020
US$’000
358
8,298
-
166
8,822
(122)
8,700
-
6,824
352
128
7,304
(220)
7,084
2021
TAX LOSSES
MOVEMENTS
US$’000
DEVELOPMENT &
PRODUCTION
EXPENDITURE
$US’000
CASH FLOW HEDGES
PROVISIONS AND
OTHER
TOTAL
US$’000
US$’000
$US’000
AT 1 JULY 2020
(Charged)/credited
– to profit or loss
6,824
352
358
1,474
– to other comprehensive income
At 30 June 2021
358
8,298
(352)
-
128
38
166
7,304
1,870
(352)
8,822
73
2020
TAX LOSSES
DEVELOPMENT &
PRODUCTION
EXPENDITURE
$US’000
CASH FLOW HEDGES
PROVISIONS AND
OTHER
TOTAL
US$’000
US$’000
$US’000
US$’000
MOVEMENTS
AT 1 JULY 2019
(Charged)/credited
– to profit or loss
– to other comprehensive income
At 30 June 2020
2,804
6,681
78
(2,804)
-
-
143
-
6,824
-
274
352
865
(737)
-
128
10,428
(3,398)
274
7,304
Property, plant and equipment
LAND(2)
BUILDING(2)
US$’000
US$’000
OTHER PLANT &
EQUIPMENT(2)
US$’000
LEASEHOLD
IMPROVEMENTS
US$’000
TOTAL
US$’000
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
Net book amount
FINANCIAL YEAR ENDED 30 JUNE 2021
Opening net book amount
Additions
Disposals
Depreciation expense[1]
Closing net book amount
As at 30 June 2021
Cost
Accumulated depreciation
Net book amount
-
16
-
16
16
-
(8)
(8)
-
-
-
-
-
-
-
-
-
-
-
-
-
103
-
103
103
547
(17)
(203)
430
603
(173)
430
430
-
(6)
(197)
227
547
(320)
227
2,247
21
(2,163)
105
105
37
-
(53)
89
2,305
(2,216)
89
89
-
(8)
(47)
34
1,720
(1,686)
34
1,263
-
(819)
444
444
-
-
(94)
350
1,263
(913)
350
350
16
(38)
(88)
240
1,103
(863)
240
3,510
140
(2,982)
668
668
584
(25)
(358)
869
4,171
(3,302)
869
869
16
(52)
(332)
501
3,370
(2,869)
501
74
[1] Depreciation expense in relation to the right of use assets is US$210,540.
[2] Included in the net book amount of buildings, and other plant and equipment are right-of-use assets as follows:
Office premises
Photocopier and IT equipment
Total
Exploration phase expenditure
30 JUN 2021
US$’000
1 JUL 2020
US$’000
228
9
237
430
24
454
CONSOLIDATED
2021
US$’000
2020
US$’000
EXPLORATION PHASE EXPENDITURE
Deferred geological, geophysical, drilling and other exploration and evaluation expenditure
-
8,225
The reconciliation of exploration phase expenditure carried forward above is as follows:
Balance at beginning of financial year
Disposal of exploration asset (Note 29)
Reassessment of rehabilitation asset
Transfer of costs to production phase
Exploration expenditure incurred during financial year
Exploration expenditure expensed during financial year
Impairment expenditure
Balance at end of financial year
Oil and gas assets
8,225
56,903
(3,352)
-
-
(5,037)
297
(133)
-
-
1,695
(1,372)
3,538
(3,811)
(48,728)
8,225
CONSOLIDATED
2021
US$’000
2020
US$’000
DEVELOPMENT AND PRODUCTION PHASE EXPENDITURE
Producing oil and gas property acquisition, deferred geological, seismic and drilling,
production and distribution facilities and other development expenditure
522,870
506,855
Transfer from exploration phase
Development costs expensed during financial year
Reassessment of rehabilitation asset
Disposal of oil and gas assets (Note 29)
Carried forward accumulated impairment losses
Impairment expenditure recognised during the period
Less accumulated amortisation
5,037
-
2,795
(2,408)
(116,598)
-
(299,358)
112,338
-
(407)
2,349
-
(98,041)
(18,557)
(275,497)
116,702
75
The reconciliation of development and production phase expenditure carried forward above is as follows:
CONSOLIDATED
DEVELOPMENT PHASE
EXPENDITURE
US$’000
PRODUCTION PHASE
EXPENDITURE
US$’000
BALANCE AT 1 JULY 2019
Amortisation incurred
Increase in restoration asset
Transfer from exploration phase
20,960
-
-
-
Impairment expenditure (Note 29)
(18,557)
Development and production costs incurred during financial year
469
Development and production costs expensed during financial year
(464)
Balance at 30 June 2020
Amortisation incurred
Increase in restoration asset
Transfer from exploration phase
Disposal of oil and gas assets (Note 29)
Development and production costs incurred during financial year
Balance at 30 June 2021
Payables
2,408
-
-
5,037
(2,408)
4,569
9,606
136,493
(26,354)
2,349
1,372
-
377
57
114,294
(23,861)
2,795
-
-
9,504
102,732
TOTAL
US$’000
157,453
(26,354)
2,349
1,372
(18,557)
846
(407)
116,702
(23,861)
2,795
5,037
(2,408)
14,073
112,338
CURRENT LIABILITIES
Trade creditors
Share of joint operation creditors and accruals
ETS obligation1
Lease liabilities2
Other creditors
NON-CURRENT LIABILITIES
Lease liabilities2
Other creditors
CONSOLIDATED
2021
US$’000
2020
US$’000
2,988
10,703
227
223
2,264
16,405
59
122
181
784
3,996
361
223
1,523
6,887
262
123
385
1
The ETS liability represents Horizon Oil International Limited’s 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 the cost of the units acquired to settle the obligation. When the number of units required to settle the obligation exceeds
the units on hand, the excess will be accounted for at the cost of obtaining the incremental units required to settle the obligation.
2 The Group has leases for offices in Sydney and various equipment. The lease liabilities are secured by the related underlying assets.
Future minimum lease payments at 30 June 2021 were as follows:
76 MINIMUM LEASE PAYMENTS DUE
Within one year
US$’000
One to five years
US$’000
After five years
US$’000
Total
US$’000
232
(9)
223
59
(0)
59
-
-
-
291
(9)
282
CONSOLIDATED
2021
US$’000
1,085
-
689
1,774
2020
US$’000
134
1,638
1,170
2,942
CONSOLIDATED
2021
US$’000
2020
US$’000
10,939
10,939
1,196
1,196
12,135
12,236
12,236
12,079
12,079
24,315
30 June 2021
Lease payments
Finance charges
Net present values
Current tax payable
Current tax payable – China
Current tax payable – New Zealand
Current royalty tax payable – New Zealand
Borrowings
CURRENT:
Bank loans1 (b)
NON-CURRENT:
Bank loans1 (b)
Total Borrowings
1
Bank loans are shown net of associated transaction costs.
77 Net debt reconciliation
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
Borrowings2 – repayable within one year (including overdraft)
Borrowings2 – repayable after one year
Net cash/(debt)
Cash and liquid investments
Gross debt2 – variable interest rates
Net cash
2021
US$’000
44,436
(11,500)
(1,240)
31,696
44,436
(12,740)
31,696
2020
US$’000
25,920
(12,758)
(12,673)
489
25,920
(25,431)
489
2
Borrowings and gross debt represent the nominal value of the Syndicated Revolving Cash Advance Facility drawn down.
CASHFLOWS
NON-CASH CHANGES
OPENING
1 JULY 2020
DRAWDOWN
REPAYMENTS
AMORTISATION OF
TRANSACTION
COSTS
CLOSING
30 JUNE 2021
Syndicated Revolving Cash
Advance Facility
Total liabilities from financing
activities
24,315
24,315
-
-
(12,691)
(12,691)
511
511
12,135
12,135
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 Horizon’s
interests in PNG. 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 2021, total debt drawn under the facility was US$12.74 million. Floating interest in respect of the facility is at LIBOR
plus a weighted average margin of 2.75%.
The facility was secured by a floating charge over the shares and assets of the borrowers (Horizon Oil International Limited
and Horizon Oil (Beibu) Limited which are wholly owned subsidiaries of Horizon Oil Limited) and other Horizon Oil Limited
subsidiaries, in favour of ANZ Fiduciary Services Pty Limited as security trustee. Horizon Oil Limited has guaranteed the
performance of Horizon Oil International Limited and Horizon Oil (Beibu) Limited (which have also given guarantees) in relation
to the loan facility from ANZ, Westpac and ICBC. In addition, the shares of the following Horizon Oil Limited subsidiaries have
been mortgaged to ANZ Fiduciary Services Pty Limited: Horizon Oil International Limited and Horizon Oil (Beibu) Limited. The
Group is subject to covenants which are common for a facility of this nature.
78
Other financial liabilities
CURRENT
Fair value of share options
NON-CURRENT
Fair value of share options
Total other financial liabilities
CONSOLIDATED
2021
US$’000
2020
US$’000
-
-
-
-
3,791
3,791
The amount recorded 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
were 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 were 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.
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. On 31 May 2021, the 300 million general
options were exercised with the Group receiving cash consideration of A$18.3 million for the issuance of 300,000,000 Ordinary
shares of Horizon Oil Limited. Upon exercise, the options were revalued through the profit and loss at an amount equal to
their fair value resulting in a non-cash finance cost of US$2.9 million. Following the issuance of the Ordinary shares the
options liability of US$6.7 million was transferred to equity within common stock.
The following is a reconciliation of the fair value of the share options:
Balance at beginning of financial year
Unrealised loss/(gain) on revaluation during the period
Transferred to equity on issuance of shares
Balance at end of financial year
1
The weighted average fair value of the options at 30 June 2020 was A$0.0184.
CONSOLIDATED
2021
US$’000
3,791
2,930
(6,721)
-
2020
US$’000
11,838
(8,047)
-
3,791
79
Provisions
Restoration (current)
Restoration (non-current)
The reconciliation of the movement in the total of the restoration provisions is as follows:
Balance at beginning of financial year
Additional provision during financial year
Unwinding of discount
Unwinding of discount for discontinued operations
Disposal of PNG restoration liability (Note 29)
Effect of change in inflation/discount rate
Balance at end of financial year
Non-current liabilities – Deferred tax liabilities
RECOGNISED DEFERRED TAX LIABILITIES ARE ATTRIBUTABLE TO:
Development and production expenditure
Accounting profits royalty
Cash flow hedges
Other
Total deferred tax liabilities
Set off of deferred tax assets pursuant to set off provisions
Net deferred tax liabilities
CONSOLIDATED
2021
US$’000
2020
US$’000
-
31,212
31,212
-
33,947
33,947
33,947
29,018
-
230
71
(5,831)
2,795
31,212
1,695
885
-
-
2,349
33,947
CONSOLIDATED
2021
US$’000
2020
US$’000
12,202
1,972
-
756
14,930
(122)
14,808
-
11,919
2,227
4
1,239
15,389
(220)
15,169
80
DEVELOPMENT
AND
PRODUCTION
EXPENDITURE
US$’000
ACCOUNTING
PROFITS ROYALTY
CASH FLOW
HEDGES
OTHER
TOTAL
US$’000
US$’000
US$’000
US$’000
2021
AT 1 JULY 2020
(Charged]/credited
-
-
To profit or loss
To other comprehensive income
11,919
283
2,227
(255)
4
(4)
-
1,239
(483)
15,389
(455)
(4)
756
14,930
At 30 June 2021
12,202
1,972
DEVELOPMENT
AND
PRODUCTION
EXPENDITURE
US$’000
11,345
574
2020
AT 1 JULY 2019
(Charged]/credited
To profit or loss
-
-
To other comprehensive income
-
At 30 June 2020
11,919
Contributed equity
Issued share capital
Ordinary shares
Fully paid
Partly paid to A$0.01
Movements in ordinary share capital
[i] Ordinary shares (fully paid)
ACCOUNTING
PROFITS ROYALTY
CASH FLOW
HEDGES
OTHER
TOTAL
US$’000
US$’000
US$’000
US$’000
3,498
[1,271]
-
2,227
711
-
[707]
4
3,140
[1,901]
-
1,239
18,694
[2,598]
[707]
15,389
CONSOLIDATED
NUMBER OF SHARES
CONSOLIDATED
2021
‘000
2020
‘000
2021
US$‘000
2020
US$‘000
1,578,943
1,301,981
193,655
174,342
1,500
1,500
459
459
1,580,443
1,303,481
194,114
174,801
Date
Details
Number of shares
30/06/2020
Balance as at 30 June 2020
1,301,981,265
07/04/2021
02/06/2021
28/06/2021
30/06/2021
Unmarketable parcel buy back and
cancellation of shares
(2,738,303)
Issuance of shares on exercise of
general options
300,000,000
Buy-back and cancellation of shares
(20,300,000)
Balance as at 30 June 2021
1,578,942,962
US$'000
174,342
(173)
20,861
(1,375)
193,655
81
[ii] Ordinary shares (partly paid to A$0.01):
Date
Details
Number of shares
US$'000
30/06/2020
30/06/2021
Balance as at 30 June 2020
Balance as at 30 June 2021
1,500,000
1,500,000
459
459
Ordinary shares
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 Company’s Constitution. In summary, on a 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 Company’s
Constitution. In summary, on a show of hands every holder of partly paid ordinary shares present at a meeting 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 33.
Share buy-backs
During the 2021 financial year, the Group announced capital management initiatives in the form of an on-market buy-back
and an unmarketable parcel buy-back.
The on-market but back commenced on 4 March 2021 and resulted in the purchase and cancellation of 20,300,000 ordinary
shares. The shares were acquired at an average price of A$0.087 per share, with prices ranging from A$0.081 to A$0.10. The
total cost of A$1,775,621 (US$1,375,061) net of after-tax transaction costs, was deducted from share capital. The on-market
buy-back was cancelled on 28 June 2021 following the announcement of a proposed share capital return.
The unmarketable parcel buy-back was completed on 7 April 2021 with a total of 2,738,303 Ordinary shares bought back. The
shares were bought back at a fixed price of A$0.083 per share resulting in a reduction of A$227,279 (US$173,050) net of after-
tax transaction costs, being deducted from share capital.
Issuance of Ordinary shares
On 2 June 2021, the Group issued 300 million Ordinary shares of Horizon Oil Limited to Samuel Terry Asset Management Pty
Ltd . The Ordinary shares were issued following the exercise of 300
million general options on 31 May 2021 which were exercisable at A$6.1 cents per share raising A$18.3 million (US$14.1 million)
in cash. The general options were previously issued as part of an historical subordinated debt facility which was executed
in 2016 and repaid in full in 2018.
82 Reserves and retained profits
Reserves
SHARE-BASED PAYMENTS RESERVE
Movements:
Balance at beginning of financial year
Employee share-based payments expense
Settlement of exercised options
Balance at end of financial year
HEDGE RESERVE
Movements:
Balance at beginning of financial year
Movement in net market value of hedge contracts
Reclassification to profit and loss
Deferred tax
Balance at end of financial year
TREASURY SHARES
Movements:
Balance at beginning of financial year
Acquisition of shares by the Employee Share Trust (average price A$ 7.2 cents per share)
Issue of treasury shares as settlement of exercised options
Balance at end of financial year
Total reserves
Accumulated (losses)/retained profits
Accumulated losses at beginning of financial year
Net profit/(loss) for financial year
Accumulated losses at end of financial year
Nature and purpose of reserves
CONSOLIDATED
2021
US$’000
2020
US$’000
13,581
364
(336)
13,609
(982)
-
1,330
(348)
-
-
(998)
86
(912)
12,697
14,144
(563)
-
13,581
1,767
(1,328)
(2,402)
981
(982)
-
-
-
-
12,599
CONSOLIDATED
2021
US$’000
(104,545)
8,009
(96,536)
2020
US$’000
(49,406)
(55,139)
(104,545)
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(Y)([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 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(V).
Treasury shares:
Treasury shares are shares in Horizon that are held by the Horizon Employee Share Trust for the purpose of issuing shares
under the Horizon Employee Option Scheme and the Horizon Long Term Incentive (LTI) Plan. Refer to Note 33 for further
information. Shares issued to employees are recognised on a weighted average basis.
83
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.
The Group held the following financial instruments at 30 June 2021 and 30 June 2020:
FINANCIAL ASSETS
Cash and cash equivalents
Receivables
Derivative financial instruments
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 2021
US$’000
30 JUNE 2020
US$’000
44,436
13,982
1,413
59,831
16,405
1,774
181
12,135
-
-
30,495
25,920
7,923
15
33,858
6,887
2,942
385
24,315
1,344
3,791
39,664
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
are denominated in a currency that is not the Group’s functional currency.
The Group operates internationally and is exposed to foreign exchange risk arising predominately from Australian and New
Zealand dollars and Chinese Renminbi.
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 and Chinese Renminbi cash balances are maintained.
The objective of the Group’s foreign exchange risk management policy is to ensure its financial viability despite potential
periods of unfavourable exchange rates. Regular sensitivity analysis is conducted to evaluate the potential impact of
84
unfavourable exchange rates on the Group’s future financial position. The results of this evaluation are used to determine
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 2021, the Group had no outstanding foreign currency contracts and swaps (30 June 2020: US$15,000 derivative
asset and US$147,000 derivative liability).
Effects of hedge accounting
The effects of the foreign currency related hedging instruments on the Group’s financial position and performance are as
follows:
CONSOLIDATED
30 JUNE 2021
US$’000
30 JUNE 2020
US$’000
FOREIGN CURRENCY SWAPS (USD/RMB)
Carrying amount – (liability)/asset
Notional amount
Maturity date
Hedge ratio1
Change in discounted spot value of outstanding hedging instruments since
30 June 2020
Change in value of hedged item used to determine hedge ineffectiveness
Weighted average hedged rate for the year
FOREIGN CURRENCY FORWARDS (USD/NZD)
Carrying amount – (liability)/asset
Notional amount
Maturity date
Hedge ratio1
Change in discounted spot value of outstanding hedging instruments since 30
June 2020
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 2020
Change in value of hedged item used to determine hedge ineffectiveness
Weighted average hedged rate for the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(75)
6,801
1 July 2020 – 30 June 2021
1:1
(75)
-
US$1: RMB7.0580
(72)
3,900
15 July 2020 – 16
December 2020
1:1
(72)
-
US$1: NZD0.6501
15
1,013
10 July 2020 – 10
December 2020
1:1
15
-
US$1: A$0.6755
1
The foreign currency swaps and foreign currency forward contracts are denominated in the same currencies as the highly probable future operating
and corporate overhead expenditures (RMB and NZD operating and AUD corporate expenditures), therefore the hedge ratio is 1:1.
85 Exposure to foreign exchange risk
The Group’s exposure to foreign exchange risk at the end of each reporting period was as follows:
GROUP
30 JUNE 2021
30 JUNE 2020
AUD
US$’000
NZD
US$’000
PGK
US$’000
RMB
US$’000
AUD
US$’000
NZD
US$’000
PGK
US$’000
RMB
US$’000
Cash and cash
equivalents
Receivables
Current tax payable
Current payables
Non-current payables
15,082
1,021
76
-
1,988
179
249
689
492
-
-
-
-
-
-
-
-
1,085
264
-
937
111
-
2,073
96
804
178
2,808
391
-
72
12
-
65
-
9
-
134
19
-
For the financial year ended and as at 30 June 2021, if the currencies set out in the table below had strengthened or weakened
against the US dollar by the percentage shown, with all other variables held constant, the net result for the financial year
would increase/(decrease) and net assets would increase/(decrease) by:
GROUP
NET RESULT
NET ASSETS
NET RESULT
NET ASSETS
Change in currency1
Australian dollar impact
New Zealand dollar impact
Papua New Guinea kina impact
Chinese Renminbi impact
2021
US$’000
+10%
2020
US$’000
+10%
2021
US$’000
+10%
2020
US$’000
+10%
340
50
-
-
(553)
(422)
(56)
-
909
136
-
(101)
(78)
(102)
2
(11)
2021
US$’000
-10%
(340)
(50)
-
-
2020
US$’000
-10%
2021
US$’000
-10%
2020
US$’000
-10%
553
422
56
-
(909)
(136)
-
101
78
102
(2)
11
1
This has been based on the change in the exchange rate against the US dollar in the financial years ended 30 June 2021 and 30 June 2020. The
sensitivity analysis has been based on the sensitivity rates when reporting foreign exchange risk internally to key management personnel and
represents management’s assessment of the possible change in foreign exchange rates based on historic volatility. In management’s opinion, the
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.
The objective of the Group’s commodity price risk management policy is to ensure its financial viability despite potential
periods of unfavourable prices. Regular sensitivity analysis is conducted to evaluate the potential impact of unfavourable
prices on the Group’s future financial position. The results of this evaluation are used to determine 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 or
where required by its financing arrangements. During the current financial year, oil price hedging was undertaken as a risk
mitigation measure to ensure the Group’s financial position remains sound and that the Group is able to meet its financial
obligations in the event of low oil prices.
As at 30 June 2021, the Group had no outstanding oil price hedges (30 June 2020: US$1,197,000 derivative asset, 220,000 bbls)
protecting revenue generation. During the financial year, oil price swaps for the purchase of crude oil were executed to
mitigate the Group’s exposure to oil price volatility and the impact of a higher oil price on the drilling costs of the WZ12-8E
development which are directly linked to the oil price. Hedge accounting has not been applied, and therefore any gain or
losses are recognised through profit and loss. At 30 June 2021, the Group had 50,000 barrels of crude oil hedged through
Brent oil price swaps (30 June 2020: nil) purchasing crude oil at a weighted average price of US$43.21, covering the period
1 October 2021 to 31 March 2022.
86 Effects of hedge accounting
The effects of the oil price swaps on the group’s financial position and performance are as follows:
OIL PRICE SWAPS
Carrying amount – (liability)/asset
Notional amount
Maturity date
Hedge ratio1
Change in fair value of outstanding hedging instruments since 30 June 2020
Change in value of hedged item used to determine hedge ineffectiveness
Weighted average hedged rate for the year
CONSOLIDATED
30 JUNE 2021
US$’000
30 JUNE 2020
US$’000
-
-
-
-
-
-
-
(1,197)
7,865
1 July 2020 – 31
December 2020
1:1
(1,197)
-
US$35.75/bbl
1
The oil price swaps were executed in the same oil price benchmark as the highly probable future oil sales, therefore the hedge ratio is 1:1.
For the financial year ended and as at 30 June 2021, if the crude oil price rose or fell by the percentage shown, with all other
variables held constant, the result for the financial year would increase/(decrease) and net assets would increase/(decrease)
by:
GROUP
NET RESULT
NET ASSETS
NET RESULT
NET ASSETS
2021
US$’000
+10%
1,994
2020
US$’000
+10%
965
2021
US$’000
+10%
1,994
2020
US$’000
+10%
965
2021
US$’000
-10%
(1,994)
2020
US$’000
-10%
(1,587)
2021
US$’000
-10%
(1,994)
2020
US$’000
-10%
(1,587)
Change in crude oil price
Impact
[iii] Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes
in market interest rates.
The Group has no interest-bearing assets considered to materially expose the Group’s core income and/or operating cash
flows to changes in market interest rates.
As at 30 June 2021 and 30 June 2020, the Group’s interest rate risk arises from long term borrowings, issued at variable rates,
exposing the Group to cash flow interest rate risk. Group policy is to manage material interest rate exposure. Regular
sensitivity analysis is conducted to evaluate the potential impact of unfavourable interest rate movements on the Group’s
future financial position. The results of this evaluation are used to determine the most appropriate risk mitigation tool to be
used.
The Group manages its cash flow interest rate risk by using floating to fixed interest rate swaps. Such interest rate swaps
have the economic effect of converting borrowings from floating to fixed rates. Under the interest rate swaps, the Group
agrees with other parties to exchange, at specific intervals, the difference between fixed contract rates and floating-rate
interest amounts calculated by reference to the agreed notional principal amounts.
As at 30 June 2021, the Group had no outstanding LIBOR swaps (30 June 2020: nil).
87
Effects of hedge accounting
The effects of the interest rate swaps on the group’s financial position and performance are as follows:
INTEREST RATE SWAPS
Carrying amount – liability
Notional amount
Maturity date
Hedge ratio1
Change in fair value of outstanding hedging instruments since 30 June 2020
Change in value of hedged item used to determine hedge effectiveness
Weighted average hedged rate for the year
CONSOLIDATED
30 JUNE 2021
US$’000
30 JUNE 2020
US$’000
-
-
-
-
-
-
-
307
36,600
30 June 2020
1:1
(307)
307
2.867%
1
The interest rate swaps were executed with the same reference rate as the interest rate applied against the senior debt facility, therefore the hedge
ratio is 1:1.
The Group’s exposure to interest rate risk for financial instruments is set out below:
FLOATING
INTEREST
RATE
US$’000
262
-
-
262
0.10%
-
-
-
-
12,740
12,740
3.05%
(12,478)
FIXED INTEREST RATE MATURING IN:
NON-
INTEREST
BEARING
CARRYING
AMOUNT
1 YEAR OR
LESS
US$’000
OVER 1 TO 2
YEARS
US$’000
OVER 2 TO 5
YEARS
US$’000
US$’000
US$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
44,174
13,982
1,413
59,569
16,405
1,774
181
-
-
18,360
44,436
13,982
1,413
59,831
16,405
1,774
181
-
12,740
31,100
41,209
28,731
AS AT 30 JUNE 2021
FINANCIAL ASSETS
Cash and cash equivalents
Receivables
Derivative financial instruments
Weighted average interest rate p.a.
FINANCIAL LIABILITIES
Trade and other payables
Current tax payable
Non-current payables
Derivative financial instruments
Borrowings
Weighted average interest rate p.a.
Net financial assets/(liabilities)
88
FLOATING
INTEREST
RATE
US$’000
4,233
-
-
4,233
0.15%
-
-
-
-
25,431
25,431
4.92%
(21,198)
FIXED INTEREST RATE MATURING IN:
NON-
INTEREST
BEARING
CARRYING
AMOUNT
1 YEAR OR
LESS
US$’000
OVER 1 TO 2
YEARS
US$’000
OVER 2 TO 5
YEARS
US$’000
US$’000
US$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,687
7,923
15
29,625
6,887
2,942
385
1,344
-
11,558
25,920
7,923
15
33,858
6,887
2,942
385
1,344
25,431
36,989
18,067
(3,131)
AS AT 30 JUNE 2020
FINANCIAL ASSETS
Cash and cash equivalents
Receivables
Derivative financial instruments
Weighted average interest rate p.a.
FINANCIAL LIABILITIES
Trade and other payables
Current tax payable
Non-current payables
Derivative financial instruments
Borrowings
Weighted average interest rate p.a.
Net financial assets/(liabilities)
As at 30 June 2021 and 30 June 2020, the Group had the following variable rate borrowings outstanding:
External loans
Net exposure to cash flow interest rate risk
30 JUNE 2021
30 JUNE 2020
WEIGHTED AVERAGE
INTEREST RATE
% P.A.
3.05%
BALANCE
US$’000
12,740
12,740
WEIGHTED AVERAGE
INTEREST RATE
% P.A.
4.92%
BALANCE
US$’000
25,431
25,431
At 30 June 2020, if the interest rates had been 1.0% p.a. higher or lower and all other variables held constant, the net result
for the financial year would increase/(decrease) and net assets as at 30 June 2020 would increase/(decrease) by:
GROUP
NET RESULT
NET ASSETS
NET RESULT
NET ASSETS
2021
US$’000
2020
US$’000
2021
US$’000
2020
US$’000
2021
US$’000
2020
US$’000
2021
US$’000
2020
US$’000
CHANGE IN INTEREST
RATE p.a.
Impact of Assets
Impact of Liabilities
Impact of Net Assets
+1%
16
167
(151)
Credit risk
+1%
38
51
(13)
+1%
16
167
(151)
+1%
38
51
(13)
-1%
(2)
(167)
165
-1%
(6)
(51)
45
-1%
(2)
(167)
165
-1%
(6)
(51)
45
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.
It is acknowledged that the Group’s sales of crude oil are currently concentrated with two counterparties. However, the
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.
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.
89
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.
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
Total receivables
CONSOLIDATED
2021
US$’000
2020
US$’000
43,597
24,819
-
-
9
7
43,597
24,835
839
-
839
44,436
325
-
-
4,675
8,842
-
13,842
140
-
140
13,982
1,019
66
1,085
25,920
111
178
2,795
2,434
2,073
12
7,603
273
47
320
7,923
The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. The expected loss rates are based on the payment profiles of sales over a period of 36
months before 30 June 2021 and the corresponding historical credit losses experienced within this period. The historical
rates are adjusted to reflect current and forward-looking information on key factors affecting the ability of the customers to
settle the receivables. Management has assessed the collectability of these amounts based on the customer relationships
and historical payment behaviour and believe that the amounts are still collectable in full.
On that basis, the loss allowance as at 30 June 2021 was determined as follows for trade receivables:
90
AS AT 30 JUNE 2021
CURRENT
MORE THAN 30 DAYS
DUE PAST
MORE THAN 60 DAYS
DUE PAST
TOTAL
Expected loss rate
Gross carrying amount
Loss Allowance
0%
13,982
-
0%
-
-
0%
-
-
13,982
-
As at 30 June 2021, there were no financial assets that are past due (30 June 2020: US$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
CONSOLIDATED
30 JUNE 2021
US$’000
30 JUNE 2020
US$’000
-
-
1,599
-
Maturities of financial liabilities
An analysis of the Group’s financial liability maturities for the current and prior financial year is set out below:
NON-INTEREST BEARING
US$’000
VARIABLE RATE1
US$’000
FIXED RATE
US$’000
AS AT 30 JUNE 2021
Less than 6 months
6 – 12 months
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
18,091
-
180
-
-
Total contractual cash flows
18,271
1
Includes principal repayments and future interest payments.
3,993
7,716
1,240
-
-
12,949
-
-
-
-
-
-
91 AS AT 30 JUNE 2020
Less than 6 months
6 – 12 months
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
Total contractual cash flows
NON-INTEREST BEARING
US$’000
VARIABLE RATE1
US$’000
FIXED RATE
US$’000
9,829
1,354
375
-
-
11,558
5,556
13,230
7,662
-
-
26,448
-
-
-
-
-
-
1
Includes principal repayments and future interest payments.
Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
AASB 7 ‘Financial Instruments: Disclosures’ requires disclosure of fair value measurements by level of the following fair value
measurement hierarchy:
(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
The following table presents the Group’s assets and liabilities measured and recognised at fair value as at 30 June 2021 and
30 June 2020:
AS AT 30 JUNE 2021
ASSETS
LEVEL 1
US$’000
LEVEL 2
US$’000
LEVEL 3
US$’000
TOTAL
US$’000
Financial assets at fair value through profit or loss:
Oil price swaps
Total Assets
-
-
1,413
1,413
-
-
1,413
1,413
AS AT 30 JUNE 2020
ASSETS
Derivatives used for hedging
Total Assets
LIABILITIES
Derivatives used for hedging
Financial liabilities at fair value through profit or loss:
Options over unissued shares
Total liabilities
LEVEL 1
US$’000
LEVEL 2
US$’000
LEVEL 3
US$’000
TOTAL
US$’000
-
-
-
-
-
15
15
1,344
-
1,344
-
-
-
3,791
3,791
15
15
1,344
3,791
5,135
There were no transfers between levels 1, 2 or 3 for recurring fair value measurements during the year.
92
The Group’s policy 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 2021.
[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.
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 2021 for recurring fair value
measurements:
Opening balance at 1 July 2020
Unrealised loss on revaluation during the period
Transferred to equity on issuance of shares
Closing balance at 30 June 2021
OPTIONS OVER UNISSUED SHARES
US$’000
3,791
2,930
(6,721)
-
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. On 31 May 2021, the 300 million general
options were exercised with the Group receiving cash consideration of A$18.3 million for the issuance of 300,000,000 Ordinary
shares of Horizon Oil Limited. Upon exercise, the options were revalued through the profit and loss at an amount equal to
93
their fair value resulting in a non-cash finance cost of US$2.9 million. The fair value each option at the date of exercise was
the excess of the closing price of the Horizon Ordinary share, being A$0.09, over the strike price of A$0.061 per option.
Following the issuance of the Ordinary shares the options liability of US$6.7 million was transferred to equity within common
stock.
[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.
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 19 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 2021, 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 2021 would
increase/(decrease) by:
GROUP
NET RESULT
NET ASSETS
NET RESULT
NET ASSETS
2021
US$’000
2020
US$’000
2021
US$’000
2020
US$’000
2021
US$’000
2020
US$’000
2021
US$’000
2020
US$’000
Change in NZU price
Impact
+10%
38
+10%
(42)
+10%
146
+10%
44
-10%
(38)
-10%
42
-10%
(146)
-10%
(44)
New Zealand Imputation Credits
Imputation credits available for subsequent financial years1
CONSOLIDATED
2021
US$’000
3,289
2020
US$’000
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.
94
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
New Zealand
Horizon Oil (New Zealand) Limited
New Zealand
Horizon Oil International Holdings Limited
Horizon Oil (Beibu) Limited
Horizon Oil (China Holdings) Limited
Horizon Oil (PNG Holdings) Limited
BVI
BVI
BVI
BVI
Horizon Oil (Papua) Limited
Bermuda
Horizon Oil (Ketu) Limited
Horizon Oil (Ubuntu) Limited
BVI
BVI
2021
%
100
100
100
100
100
-1
-1
-1
-1
Horizon Oil Employee Incentive Trust
Australia
1002
2020
%
100
100
100
100
100
100
100
100
100
-
New Zealand
New Zealand
BVI
China
BVI
BVI
PNG
PNG
PNG
Australia
1 On 2 December 2020, the Group disposed of 100% of the share capital in Horizon Oil (PNG Holdings) Limited, Horizon Oil
(Papua) Limited, Horizon Oil (Ubuntu) Limited and Horizon Oil (Ketu) Limited. The financial performance of these entities
for the current and prior period has been disclosed as profit/(loss) from discontinued operations in the consolidated
statement of profit and loss and other comprehensive income. Accordingly, these subsidiaries are not consolidated into
the financial statements for the 30 June 2021 financial period.
2 During the financial year, the Group established the Horizon Oil Employee Incentive Trust to administer the Long-Term
Incentive Plan and Horizon Employee Option Scheme. The Horizon Oil Employee Incentive Trust is consolidated in
accordance with the principles in Note 1(C).
95 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
liabilities of these joint operations. The Group’s share of current assets and liabilities of the joint operations is included in
the consolidated statement of financial position in accordance with the accounting policy described in Note 1(C), and the
carrying values of Group’s share of exploration, development and production phase expenditure is recorded in accordance
with the accounting policies set out in Note 1(P) and (Q), 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
Contingent liabilities in respect of joint operations are detailed in Note 36.
CONSOLIDATED
2021
US$’000
2020
US$’000
839
140
2,555
3,534
-
-
112,338
112,338
115,872
10,703
10,703
-
-
10,703
105,169
1,019
273
3,510
4,802
-
8,225
116,702
124,927
129,729
3,996
3,996
-
-
3,996
125,733
Exploration and development expenditure commitments in respect of joint operations are detailed in Note 39.
96
The Group had an interest in the following joint operations:
PERMIT OR LICENCE
PRINCIPAL ACTIVITIES
INTEREST (%)
30 JUNE 2021
INTEREST (%)
30 JUNE 2020
NEW ZEALAND
PMP 38160 (Maari/Manaia)
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
CHINA
Block 22/12
PNG
PDL 10
PRL 21
PRL 28
Oil and gas development
Oil and gas exploration and development
Oil and gas exploration and development
PPL 259/574
Oil and gas exploration
PPL 372
PPL 373
PRL 40
Oil and gas exploration
Oil and gas exploration
Oil and gas exploration
0%2
0%2
0%2
0%2
0%2
0%2
0%2
30.00%
30.15%
30.00%
80.00%
95.00%
100.00%
20.00%
1
2
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.
During 2011 CNOOC exercised its right to participate in the development of WZ6-12 and WZ 12-8W within Block 22/12 at 51%.
On 2 December 2020, the Group disposed of 100% of the share capital in Horizon Oil (PNG Holdings) Limited, Horizon Oil (Papua) Limited, Horizon Oil
(Ubuntu) Limited and Horizon Oil (Ketu) Limited. Accordingly, the Group no longer owns an interest in any PNG licence or permit.
Discontinued operation
(a) Description
On 27 October 2020, the Group announced that it had agreed to sell all of the shares in its wholly owned subsidiary Horizon
Oil (PNG Holdings) Limited. The sale completed on 2 December 2020 resulting in the transfer of the Group’s entire asset
portfolio in Papua New Guinea to Arran Energy Investments Pty Ltd. On completion of the sale the Group received cash
consideration of US$3,500,000, with a further US$264,225 received upon the finalisation of customary working capital
adjustments. Following the completion of the sale, the Group does not have any operations in Papua New Guinea and no
longer holds an interest in Horizon Oil (PNG Holdings) Limited, Horizon Oil (Papua) Limited, Horizon Oil (Ubuntu) Limited and
Horizon Oil (Ketu) Limited.
(b) Financial performance and cash flow information
The financial performance and cash flow information presented for the financial year ended 30 June 2021 reflects the
discontinued PNG operations for the 5 months ended 2 December 2020.
97
FINANCIAL PERFORMANCE
Revenue
Expenses
Impairment expense
Loss before income tax
Income tax expense
Loss after tax of discontinued operation
Gain on sale of subsidiary after tax (refer to Note 29 (c) below)
Profit/(Loss) from discontinued operation
Net cash outflow from operating activities
Net cash inflow/(outflow) from investing activities (includes proceeds from sale)
Net increase/(decrease) in cash generated by subsidiaries
(c) Details of the sale of the subsidiaries
GAIN ON SALE OF SUBSIDIARIES
Cash
Cash for working capital
Total disposal consideration
Cash
Accounts receivable
Fixed assets
Exploration assets
Development assets
Accounts payable
Restoration liabilities
Less: Carrying value of net assets sold
Gain on sale of subsidiaries
30 JUNE 2021
US$’000
30 JUNE 2020
US$’000
-
(380)
-
(380)
-
(380)
3,527
3,147
(74)
3,493
3,419
-
(4,250)
(67,285)
(71,535)
-
(71,535)
-
(71,535)
(1,035)
(3,215)
(4,250)
30 JUNE 2021
US$’000
3,500
264
3,764
246
171
52
3,352
2,408
(161)
(5,831)
237
3,527
98
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:
CONSOLIDATED
2021
US$
2020
US$
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
Total auditors’ remuneration
159,509
158,282
11,822
14,267
171,331
172,549
9,819
9,819
15,895
15,895
10,567
8,085
10,567
8,085
191,717
196,529
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.
It is the Group’s policy to employ PricewaterhouseCoopers on assignments additional to its statutory external audit duties
where PricewaterhouseCoopers’ expertise and experience with the Group are important. It is the Group’s policy to seek
competitive tenders for all major consulting projects.
Remuneration of key management personnel
See the Remuneration Report within the Directors’ Report for details of directors and other key management and their
detailed remuneration.
KEY MANAGEMENT PERSONNEL COMPENSATION
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments (non-cash)
2021
US$
2020
US$
1,720,215
2,485,483
69,941
(922)
177,908
86,860
22,810
312,706
Total key management personnel remuneration
1,967,142
2,907,859
Detailed remuneration disclosures are provided in sections 1-7 of the audited Remuneration Report.
Loans to key management personnel
There were no loans to directors or other key management personnel during the current or prior financial year.
99
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 33.
Subsidiaries
Interests in subsidiaries are set out in Note 27. Details in respect of guarantees provided to subsidiaries are set out in Note
42([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 2021 and 30 June 2020 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:
2021
US$
2020
US$
SUPERANNUATION CONTRIBUTIONS
Superannuation contributions to superannuation funds on behalf of employees
275,623
284,020
OTHER TRANSACTIONS
Payments to Horizon Oil Limited under financial guarantee contract arrangements from wholly
owned subsidiary
510,900
1,158,521
Dividends from Horizon Oil International Limited to Horizon Oil Limited
Dividends from Horizon Oil (Beibu) Limited to Horizon Oil Limited
-
-
9,500,000
4,000,000
Debt capitalised for issuance of equity from Horizon Oil International Limited to Horizon Oil Limited
12,400,000
-
100
LOANS TO/FROM RELATED PARTIES
Balance at beginning of the financial year
Loans advanced
Loan repayments received
Interest charged
PNG related loans written-off
Balance at end of financial year
2021
US$
2020
US$
185,605,193
170,251,852
37,488,407
36,090,468
(48,847,617)
(22,456,323)
939,021
1,719,196
(104,991,919)
-
70,193,085
185,605,193
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. The
average interest rate on loans attracting interest during the financial year was LIBOR plus 4.53% (2020: LIBOR plus 5.14%).
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 2021
SHARE APPRECIATION RIGHTS ISSUED
01/07/2015
01/07/2020
A$0.092
7,458,777
01/07/2016
01/07/2021
A$0.092
16,617,522
01/07/2016
01/07/2021
A$0.052
12,186,198
01/07/2017
01/07/2022
A$0.052
55,691,714
01/07/2018
01/07/2023
A$0.072
8,680,899
01/07/2019
01/07/2024
A$0.112
12,859,747
-
-
-
-
-
-
01/07/2020
01/07/2025
A$0.062
-
10,004,499
-
-
-
(10,500,000)
-
-
-
-
-
-
-
(7,458,777)
-
-
16,617,522
16,617,522
12,186,198
12,186,198
45,191,714
45,191,714
8,680,899
(1,857,091)
11,002,656
-
10,004,499
-
-
-
TOTAL
113,494,857
10,004,499
(10,500,000)
(9,315,868)
103,683,488
73,995,434
Weighted average exercise price
A$0.07
A$0.06
A$0.05
A$0.09
A$0.07
A$0.06
OPTIONS ISSUED
02/11/2015
02/11/2020
A$0.201
1,000,000
15/09/2016
15/09/2021
A$0.063
300,000,000
TOTAL
301,000,000
Weighted average exercise price
A$0.06
-
-
-
-
-
(1,000,000)
(300,000,000)
-
(300,000,000)
(1,000,000)
-
-
-
-
-
-
-
-
-
-
1
2
3
Relates to options issued under the Employee Option Scheme.
No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a SAR. Following shareholder approval of a A$ 3 cent capital
return, at an extraordinary general meeting on 10 August 2021, the strike prices of SARs on issue have been reduced by A$ 3 cents.
Relates to general options issued in connection with the subordinated secured debt facility. Refer to Note 20 for further details.
101
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
01/07/2019
A$0.372
7,402,177
01/07/2015
01/07/2020
A$0.092
17,629,840
01/07/2016
01/07/2021
A$0.092
16,617,522
01/07/2016
01/07/2021
A$0.052
24,372,395
01/07/2017
01/07/2022
A$0.052
55,691,714
01/07/2018
01/07/2023
A$0.072
8,680,899
-
-
-
-
-
-
01/07/2019
01/07/2024
A$0.112
-
12,859,747
-
7,402,177
-
-
10,171,063
-
12,186,198
-
-
-
-
-
-
-
-
-
7,458,777
7,458,777
16,617,522
16,617,522
12,186,197
12,186,197
55,691,714
8,680,899
12,859,747
-
-
-
TOTAL
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
02/11/2020
A$0.201
1,000,000
15/09/2016
15/09/2021
A$0.063
300,000,000
TOTAL
301,000,000
Weighted average exercise price
A$0.06
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
-
300,000,000
300,000,000
301,000,000
300,000,000
A$0.06
-
1
2
3
Relates to options issued under the Employee Option Scheme.
No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a SAR.
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 2.31 years (2020:
1.89 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 shareholder return (‘TSR’) achieved in
the vesting period, relative to an appropriate index.
Under the LTI Plan, the board has the discretion, subject to the ASX Listing Rule requirements, to grant share appreciation
rights (’SARs’) to executives as long-term incentives. The board has determined that up to 25% of senior executive’s total
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 (’SAR Value’). The SAR Value is
the excess, if any, of the volume weighted average price (’VWAP’) of shares in the Company for the ten business day period
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
up to the day before the “Effective Allocation Date” for the SARs. The Effective Allocation Date for the SARs is the grant date
of the SARs or any other day determined by the board, at the time of the grant. The Effective Allocation Date would generally
be the date the executive’s entitlement was determined.
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
102
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 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
Company. Executive directors and the Company’s senior executives were eligible to participate until April 2010, when the
board resolved to modify the remuneration arrangements for the Company’s senior executives.
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 business
day prior to the date of the directors’ meeting at which the directors resolved to grant the option; and
(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.
During the financial year, the Horizon Long-Term Incentive Plan and Horizon Employee Option Scheme are also administered
by the Horizon Employee Share Trust. This trust is consolidated in accordance with Note 1(C ).
Shares issued by the trust to the employees are acquired on-market prior to the issue. Shares held by the trust and not yet
issued to employees at the end of the reporting period are shown as treasury shares in the financial statements. Refer to
Note 24(C) for details.
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. On 31 May 2021, the 300 million general
options were exercised with the Group receiving cash consideration of A$18.3 million for the issuance of 300,000,000 Ordinary
shares of Horizon Oil Limited. Upon exercise, the options were revalued through the profit and loss at an amount equal to
their fair value resulting in a non-cash finance cost of US$2.9 million. Following the issuance of the Ordinary shares the
options liability of US$6.7 million was transferred to equity within common stock. Refer to Note 20 for further details.
Share appreciation rights issued
10,004,499 share appreciation rights were issued under the Long-Term Incentive Plan. The weighted average exercise price
of these SARs is A$0.063 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$0.0264 per SAR.
The Group engages external, independent and qualified valuers to determine the fair value at effective allocation date. The
fair value of the share appreciation rights is determined based on a risk neutral framework using the Black-Scholes Model.
103 The Black-Scholes Model used to calculate the theoretical value of the share appreciation rights uses current stock prices,
expected dividend yield, expected interest rates, time to expiration and expected volatility. A calculated share price volatility
of 55.0% was applied in the valuation. All other parameters were based on the specific terms of the share appreciation rights
issued or observable market data
The model inputs for the grant of share appreciation rights during the financial year ended 30 June 2021 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 2020
1 July 2025
N/A
A$0.063
55% p.a.
0.40% p.a.
0.00% p.a.
No options were issued under the Employee Option Scheme during the year.
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the financial year as part of employee
benefits expense in profit or loss were as follows:
SHARE APPRECIATION RIGHTS ISSUED UNDER:
Long Term Incentive Plan
OPTIONS ISSUED UNDER:
Employee Option Scheme
Total employee share-based payments expense
CONSOLIDATED
2021
US$’000
2020
US$’000
364
-
364
611
-
611
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 10,500,000 SARs were exercised and settled with cash payments of US$250,185 and 1,556,119
Ordinary shares transferred from the Horizon Oil Employee Incentive Trust.
On 31 May 2021, the 300 million general options were exercised with the Group receiving cash consideration of A$18.3 million
for the issuance of 300,000,000 Ordinary shares of Horizon Oil Limited.
Options/SARs lapsing or cancelled during the financial year
During the financial year 10,315,868 options and SARs lapsed.
Options/SARs exercised and options/SARs issued subsequent to 30 June 2021
Subsequent to year end and in accordance with contract entitlement, 9,194,811 SARs were issued to Horizon employees.
5,808,411 SARs issued to C Hodge remain subject to shareholder approval at the 2021 Annual General Meeting.
No options or SARs have been exercised subsequent to financial year end.
Options/SARs lapsed subsequent to 30 June 2021
No options or SARs have lapsed subsequent to financial year end.
104
Employee entitlements
EMPLOYEE ENTITLEMENT LIABILITIES ARE INCLUDED WITHIN:
Current – other creditors
Non-current - other creditors (Note 17)
CONSOLIDATED
2021
US$’000
2020
US$’000
427
122
NUMBER
2021
396
123
NUMBER
2020
EMPLOYEE NUMBERS
Average number of employees during financial year
16
23
Contingent asset
The Group had no contingent assets as at 30 June 2021.
Contingent liabilities
The Group had contingent liabilities as at 30 June 2021 and 30 June 2020 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
Subsequent to the period end, on 10 August 2021 the Company held an Extraordinary General Meeting of shareholders to
consider the proposed capital return of AUD 3 cents per share. The resolution was passed at the meeting, with the
subsequent payment and reduction in the Group’s cash balance of AUD 47.4 million (US$35.1 million) occurring during August
2021.
Other than the matters disclosed in this report, there has not been any matter or circumstance which has arisen since
30 June 2021 that has significantly affected, or may significantly affect:
– the Group’s operations in future financial years; or
– the results of those operations in future financial years; or
– the Group’s state of affairs in future financial years.
105 The financial statements were authorised for issue by the Board of Directors on 26 August 2021. The Board of Directors has
the power to amend and reissue the financial statements.
Commitments for expenditure
Non-cancellable operating leases
On 1 July 2019, the Group adopted AASB 16 ‘Leases’ (issued during January 2016), the new standard for lease accounting
which eliminates the classification of leases as either ‘operating’ or ‘finance’ and requires a lessee to recognise on
statements of financial position assets and liabilities. Accordingly, there were no commitments for minimum leases
payments in relation to non-cancellable operating leases as at 30 June 2021 and 30 June 2020 as the financial obligations
are recognised on the balance sheet at that date.
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.
2021
NEW ZEALAND
DEVELOPMENT
CHINA EXPLORATION
& DEVELOPMENT
TOTAL
Within one financial year
684
Later than one financial year but not later than 5 financial years
482
3,332
14,230
-
17,562
-
1,166
After 5 financial years
Total
2020
NEW ZEALAND
DEVELOPMENT
CHINA EXPLORATION &
DEVELOPMENT
PAPUA NEW GUINEA
EXPLORATION &
DEVELOPMENT
Within one financial year
2,810
Later than one financial year but not
later than 5 financial years
After 5 financial years
-
-
8,319
12,537
-
1,098
-
-
Total
2,810
20,856
1,098
4,016
14,712
-
18,728
TOTAL
12,227
12,537
-
24,764
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.
106 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
PROFIT/(LOSS) 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
Profit/loss from discontinued operations
Unrealised fair value movements on derivatives
Unrealised movement in in fair value of other financial liabilities
CHANGE IN OPERATING ASSETS AND LIABILITIES:
(Increase) in trade debtors
(Increase)/Decrease in other debtors and prepayments
Decrease in inventory
Decrease in net deferred tax liabilities
Decrease in tax payable
Increase in trade creditors
Decrease in other creditors
NET CASH INFLOW FROM OPERATING ACTIVITIES
CONSOLIDATED
2020
US$’000
(55,139)
67,285
4,218
358
(24)
51
611
2021
US$’000
8,009
-
-
332
-
(263)
364
23,861
26,354
511
301
(3,147)
(1,413)
2,930
(6,215)
(317)
955
(1,255)
(2,173)
2,205
(1,524)
23,161
511
885
-
(8,047)
(154)
426
2,243
(181)
(1,247)
77
(1,496)
36,731
107
Earnings per share
CONSOLIDATED
2021
US CENTS
2020
US CENTS
(a) Basic earnings per share attributable to the ordinary equity holders of the Company
(b) Diluted earnings per share attributable to the ordinary equity holders of the Company
(c) Basic earnings per share from continuing operations attributable to the ordinary equity
holders of the Company
(d) Diluted earnings per share from continuing operations attributable to the ordinary
equity holders of the Company
0.61
0.49
0.37
0.30
(4.23)
(4.23)
1.26
1.01
2021
NUMBER
2020
NUMBER
WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE DENOMINATOR
Weighted average number of ordinary shares used as the denominator in calculating basic
earnings per share
1,322,129,812
1,303,481,265
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share
1,634,485,232
1,303,481,265
Weighted average number of ordinary shares used as the denominator in calculating basic
earnings per share from continuing operations
1,322,129,812
1,303,481,265
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share from continuing operations
1,634,485,232
1,622,104,389
RECONCILIATION OF EARNINGS USED IN CALCULATING EARNINGS PER SHARE
Profit/(loss) attributable to the ordinary equity holders of the company used in calculating
basic and diluted earnings per share
(Profit)/loss from discontinued operations
Profit from continuing operations attributable to the ordinary equity holders of the company
used in calculating basic and diluted earnings per share
2021
US$’000
2020
US$’000
8,009
(3,147)
4,862
(55,139)
71,535
16,396
Information concerning the classification of securities
Partly paid ordinary shares
Partly paid ordinary shares carry the rights of fully paid ordinary shares and to that extent they have been recognised as
ordinary share equivalents in the determination of basic earnings per share. All partly paid shares on issue are held by the
Company.
Details regarding the partly paid ordinary shares are set out in Note 23.
Options and share appreciation rights granted as compensation
Options and share appreciation rights (SARs) granted to employees under the Long-Term Incentive Plan or Employee Option
Scheme and general options issued (including the 300 million options issued in connection with the drawdown of the
subordinated secured non-amortising loan facility in a prior period), are included in the calculation of diluted earnings per
share to the extent to which they are dilutive. The SARs are considered to be contingently issuable shares and are treated
as outstanding and included in the calculation of diluted earnings per share if the relevant performance hurdles have been
met. Options and SARs have not been included in the determination of basic earnings per share.
Details regarding the options and share appreciation rights are set out in Note 33.
108
Parent Entity financial information
[i] Summary financial information
The individual financial statements for the Parent Entity show the following aggregate amounts:
STATEMENT OF FINANCIAL POSITION
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Contributed equity
Share-based payments reserve
Accumulated losses
Total equity
Loss for the financial year
Total comprehensive loss for the financial year
[ii] Guarantees entered into by the parent entity
PARENT ENTITY
2021
US$’000
2020
US$’000
24,041
4,697
109,993
120,518
134,034
125,215
2,011
180
2,191
2,524
3,891
6,415
131,843
118,800
194,114
12,697
174,801
13,592
(74,968)
(69,593)
131,843
118,800
(5,375)
(5,375)
(28,753)
(28,753)
The parent entity has provided guarantees in respect of bank loans and hedge derivatives of its subsidiaries amounting to
US$12,740,000 (2020: US$26,775,165) and has also provided customary joint venture guarantees.
No liability has been recognised for guarantees provided. After factoring in the likelihood that the parent entity would be
required to perform under the guarantees the fair value of the liability was not considered material.
[iii] Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2021 or 30 June 2020. For information about guarantees
given by the parent entity, see above.
[iv] Contractual commitment for the acquisition of property, plant or equipment
As at 30 June 2021, the parent entity had no contractual commitments for the acquisition of property, plant or equipment
(30 June 2020 – US$Nil).
109 Horizon Oil Limited and Controlled Entities
Securities Exchange Information as at 10 August 2021
DISTRIBUTION OF EQUITY SECURITIES
The distribution of equity security holders ranked according to size at 10 August 2021 was as follows:
SIZE OF HOLDING
SHARES
UNLISTED OPTIONS
SHARE APPRECIATION RIGHTS
ORDINARY SHARES
SHAREHOLDER INFORMATION
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
290
129
654
1,969
861
3,903
-
-
-
-
-
-
-
-
-
-
6
6
A total of 382 holders held less than a marketable parcel of 4,348 ordinary shares.
TWENTY LARGEST SHAREHOLDERS
The names of the twenty largest shareholders of the Company’s ordinary shares are listed below:
NAME
NO. OF ORDINARY SHARES
% OF ISSUED ORDINARY
SHARES
IMC Investments Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
BNP Paribas Nominees Pty Ltd
Carrington Land Pty Ltd
Mr Geoffrey Victor Day & Mrs Anne Margaret Day
400,574,175
389,927,967
118,362,841
47,687,668
22,701,215
20,000,000
20,000,000
CPU Share Plans Pty Limited BNP Paribas Nominees Pty Limited
16,409,819
1
2
3
4
5
6
7
8
9
National Nominees Limited
10
Global Mosaic Pty Limited
11
Finot Pty Ltd
12
Grizzley Holdings Pty Limited
13 Mr Michael Francis Sheridan
14
Neweconomy Com Au Nominees Pty Limited
15 Mr John Bernard Porteous
16
Berne No 132 Nominees Pty Ltd
17 Mr Christian James Hausted
18
Grandway Holdings Pty Ltd
19 Mr David Harvey Peek
20 Mr Leendert Hoeksema & Mrs Aaltje Hoeksema
12,454,268
11,052,100
8,857,143
8,511,941
7,968,201
7,623,768
7,558,716
7,002,058
6,930,000
6,693,612
6,361,827
6,000,000
25.34
24.67
7.49
3.02
1.44
1.27
1.27
1.04
0.79
0.70
0.56
0.54
0.50
0.48
0.48
0.44
0.44
0.42
0.40
0.38
TOTAL
1,132,677,319
71.67
SHAREHOLDER INFORMATION
ISSUED SECURITIES
Issued securities as at 10 August 2021:
SECURITY
NUMBER ON ISSUE
NUMBER OF HOLDER
Ordinary fully paid shares1
1,578,942,962
Ordinary partly paid shares
1,500,000
Unlisted share appreciation rights
103,683,488
3,902
1
6
1
The Company’s ordinary fully shares are listed on the Australian Securities Exchange.
SUBSTANTIAL HOLDERS
Substantial holders in the Company are set out below:
ORDINARY SHARES
NO. OF ORDINARY
SHARES
% OF ISSUED
ORDINARY SHARES
IMC Investments Ltd (an associate of Austral-Asia Energy Pty Ltd)
400,574,175
Samuel Terry Asset Management Pty Limited
Spheria Asset Management Pty Limited
TOTAL
VOTING RIGHTS
a)
Ordinary shares – fully paid
314,232,423
142,661,910
857,468,508
25.34
19.90
9.03
54.27
Voting of members is governed by the Company’s Constitution. In summary, every member present in person or by proxy
attorney or representative shall have one vote on a show of hands and one vote for each share on a poll.
b)
Ordinary shares – partly paid
Voting of members is governed by the Company’s Constitution. In summary, every member present in person or by proxy
attorney or representative shall have one vote on a show of hands and upon a poll, is entitled to one vote to the proportion
of the total issue price then paid up.
c)
Share appreciation rights - unlisted
No voting rights.
A-IFRS
ASIC
ASX
bbl(s)
bcf
boe
boepd
bopd
CNOOC
DEC
DPE
GLOSSARY
Australian equivalents to International Financial Reporting Standards
Australian Securities and Investments Commission
Australian Securities Exchange
Blue barrel(s), oil barrel volume is 0.159 cubic metres
Billion cubic feet of natural gas
Barrel of oil equivalent. The factor used to convert gas to oil equivalent is based upon an
approximate energy value of 6,000 cubic feet per barrel and not price equivalence at the time
Barrel of oil equivalent per day
Barrel of oil per day inclusive of NGLs
China National Offshore Oil Corporation
Department of Environment and Conservation (PNG)
Department of Petroleum and Energy (PNG)
EBITDAX
Earnings before interest, tax, depreciation, depletion and amortisation, and exploration
expenses
ESP
FID
FPSO
GST
JOA
km
LIBOR
LNG
Electrical submersible pump
Final investment decision
Floating production, storage and offloading vessel
Goods and services tax
Joint operating agreement
Kilometres
London inter-bank offered rate
Liquified natural gas
mmbbl/mmbo
Million barrels of oil
mmboe
mmcfb
NDRC
NGL(s)
ODP
PL
PDL
PEP
Million barrels of oil equivalent
Millions cubic feet barrels
National Development and Reform Commission
Natural gas liquid(s)
Overall Development Plan
Pipeline licence
Petroleum development licence
Petroleum exploration permit
PMP
PRL
Reserves
GLOSSARY
Petroleum mining permit
Petroleum retention licence
Reserves as included in this report refers to both Proven and Probable reserves (2P). Proven and
Probable reserves are reserves that analysis of geological and engineering data suggests are
more likely than not to be recoverable – there is at least a 50% probability that reserves
recovered will exceed Proven and Probable reserves.
Contingent Resources
The Company’s technically recoverable resources (2C) for its discovered oil and gas fields are
classified as contingent resources. These resources would be expected to be booked in
reserves (Proven and Probable reserves) once commercialisation arrangements have been
finalised.
PSA
PNG
SDA
Production Sharing Agreement
Papua New Guinea
Supplemental Development Agreement
SPE-PRMS
Society of Petroleum Engineers – Petroleum Resources Management System
Sq km
tcf
Square kilometres
Trillion cubic feet of natural gas
USD / $US
United States dollars
WHP
WOU
2D Seismic
3D Seismic
Wellhead platform
Workover unit
Seismic recorded in 2 dimensions
Seismic recorded in 3 dimensions
DIRECTORY
HORIZON OIL LIMITED
ABN 51 009 799 455
Board of Directors
Michael Harding (Chairman)
Chris Hodge (Chief Executive Officer)
Gerrit de Nys
Sandra Birkensleigh
Gregory Bittar (Alternate: Bruno Lorenzon)
Bruce Clement
Nigel Burgess
General Counsel/Company Secretary
Kylie Quinlivan
Assistant Company Secretary
Kyle Keen
Australian Registered Office
(Principal place of business)
Level 6, 134 William Street,
SYDNEY NSW 2011
Telephone:
Facsimile:
E-mail:
Web site:
+(612) 9332 5000
+(612) 9332 5050
info@horizonoil.com.au
www.horizonoil.com.au
Domicile and country of incorporation
Australia
Share Registrar
Solicitors
Auditor
Computershare Investor Services Pty Limited
Level 4, 60 Carrington Street
SYDNEY NSW 2000
Telephone:
+(613) 9415 4000
King & Wood Mallesons
Level 30 Waterfront Place
1 Eagle Street
BRISBANE QLD 4000
PwC
One International Towers Sydney
Watermans Quay, Barrangaroo
SYDNEY NSW 2000
Stock Exchanges
Horizon Oil Limited shares are listed on the ASX (ASX code: HZN)
Notice of annual general meeting
The Annual General Meeting of Horizon Oil Limited will be held as
a virtual meeting.
Time:
Date:
10.00am
19 November 2021