2022 ANNUAL
REPORT
horizonoil.com.au
Delivering on
strategic objectives
with a further AUD 3
cents per share in
distributions
Higher realised oil
price drove significant
increase in revenue
and cash generation
during FY22
Successful
commissioning
of the new WZ12-8E
development in China,
leading to higher
production rates
Low cash operating
cost structure
< US$20/bbl
produced for FY22
2022 Investment
Highlights
Underlying profit
after tax
Total distributions
to Shareholders1
Sales revenue
US$24.3 million
AUD 3 cents per share
US$108.1 million
(~US$34 million)
Net cash
Sales volume
EBITDAX
US$42.8 million
1.205 mmbbls
US$73.0 million
1
Includes an unfranked CFI dividend of AUD 1.65 cents per share, and a AUD 1.35 cent per share proposed return
of capital (subject to shareholder approval).
CONTENTS
2022 Highlights
Chairman’s Message
CEO’s Message
Reserves and Resources Statement
Activities Review
Annual Financial Report
Shareholder Information
Glossary
Corporate Directory
Horizon Oil Annual Report 2022
1
2
3
5
10
15
112
115
117
Cost recovery entitlement
Cost recovery entitlement
Oil sales
(mmbbls)
Maari
Beibu
1.87
1.65
0.29
0.31
1.43
1.00
0.83
0.86
1.27
1.20
0.80
0.84
Revenue
(USm)
Maari
Beibu
122.4
19.2
100.0
18.0
50.9
84.0
0.1
46.8
38.1
60.9
63.6
74.3
108.1
73.0
EBITDAX2
(USm)
(Excl. cost recovery)
Cost recovery
93.0
19.2
68.5
18.0
51.4
0.1
73.8
36.4
73.0
50.5
51.3
36.4
0.58 0.60
0.48
0.47
0.36
42.3
37.1
31.2
33.8
25.5
18
19
20
21
22
18
19
20
21
22
18
19
20
21
22
1
Net of hedge settlements
2 FY20 and FY21 excludes profit and loss from discontinued operations
Underlying profit
after tax2
(USm)
(Excl. cost recovery)
Cost recovery
24.7
19.2
5.5
19
17.9
18.0
-0.1
18
24.3
24.3
22
8.3
0.1
8.2
20
7.8
7.8
21
Our strong cash generation and resultant balance sheet
strength allows us to deliver on our strategy of realising
value for shareholders. In this regard, we have announced
a total distribution of AUD 3 cents per share made up
of an AUD 1.65 cent per share dividend and an AUD 1.35
cent per share return of capital, which is subject to
shareholder approval.
AREAS OF
OPERATION
CHINA
Block 22/12 %
(Production/Exploration)
NEW ZEALAND
China
26.95%/55%
PMP 38160 (Maari/Manaia)
26%
New Zealand
Horizon Oil Annual Report 2022
Delivering on
Higher realised oil
Successful
Low cash operating
strategic objectives
price drove significant
commissioning
with a further AUD 3
increase in revenue
of the new WZ12-8E
cost structure
< US$20/bbl
cents per share in
and cash generation
development in China,
produced for FY22
distributions
during FY22
leading to higher
production rates
2022 Investment
Highlights
Underlying profit
after tax
Total distributions
to Shareholders1
Sales revenue
US$24.3 million
AUD 3 cents per share
US$108.1 million
(~US$34 million)
Net cash
Sales volume
EBITDAX
US$42.8 million
1.205 mmbbls
US$73.0 million
1
Includes an unfranked CFI dividend of AUD 1.65 cents per share, and a AUD 1.35 cent per share proposed return
of capital (subject to shareholder approval).
Reserves and Resources Statement
CONTENTS
2022 Highlights
Chairman’s Message
CEO’s Message
Activities Review
Annual Financial Report
Shareholder Information
Glossary
Corporate Directory
Horizon Oil Annual Report 2022
Oil sales
(mmbbls)
Maari
Beibu
Revenue
(USm)
Maari
Beibu
Cost recovery entitlement
Cost recovery entitlement
1.87
1.65
0.29
0.31
1.43
1.00
0.83
0.86
1.27
1.20
0.80
0.84
122.4
19.2
60.9
100.0
18.0
50.9
84.0
0.1
46.8
108.1
63.6
74.3
38.1
0.58 0.60
0.48
0.47
0.36
42.3
37.1
31.2
33.8
25.5
EBITDAX2
(USm)
(Excl. cost recovery)
Cost recovery
93.0
19.2
68.5
18.0
51.4
0.1
73.0
73.8
36.4
73.0
50.5
51.3
36.4
18
19
20
21
22
18
19
20
21
22
18
19
20
21
22
1
Net of hedge settlements
2 FY20 and FY21 excludes profit and loss from discontinued operations
Underlying profit
after tax2
(USm)
(Excl. cost recovery)
Cost recovery
24.7
19.2
5.5
19
17.9
18.0
-0.1
18
24.3
24.3
22
8.3
0.1
8.2
20
7.8
7.8
21
Our strong cash generation and resultant balance sheet
strength allows us to deliver on our strategy of realising
value for shareholders. In this regard, we have announced
a total distribution of AUD 3 cents per share made up
of an AUD 1.65 cent per share dividend and an AUD 1.35
cent per share return of capital, which is subject to
shareholder approval.
AREAS OF
OPERATION
CHINA
Block 22/12 %
(Production/Exploration)
NEW ZEALAND
China
26.95%/55%
PMP 38160 (Maari/Manaia)
26%
New Zealand
Horizon Oil Annual Report 2022 1
A MESSAGE FROM OUR CHAIRMAN
Looking ahead, the Company is in a very strong
financial position with quality assets which
continue to deliver value for shareholders.
Mike Harding
Chairman
Horizon has again posted a strong set of results
for this financial year.
Similar to last year, coupled with a strong
balance sheet and consistent
low cost
production and cash generation, we are pleased
to announce a further return of AUD 3 cents per
share to shareholders made up of a dividend and
capital return.
Our strong results were of course primarily due
to the oil price. However, our assets in China and
New Zealand are high quality and our aim is to
maximise production and cash flow through
workovers and infill drilling.
I would like to take this opportunity of thanking
Chris Hodge for his time as CEO and I am
particularly pleased to welcome the promotion
of Richard Beament to CEO. All subsequent
executive movements have been filled by
internal staff.
We have continued to progress work on
in
enhancing our ESG strategy, particularly
response to growing climate related concerns.
To this end, earlier in the year we announced our
ambition to achieve Net Zero GHG emissions by
2050. Work will continue to refine a roadmap for
achieving this ambition.
I am pleased our lenders, ANZ, Westpac and
ICBC continue to support Horizon with the
recently announced extension of our debt
facilities.
The Company has recently announced it is
moving offices. The new office provides a
smaller footprint more appropriate for the
current staff levels. Not only does this allow for
some further cost reductions, but it provides the
team with a refreshed new office space helping
to
foster a more collaborative working
environment.
2
Horizon Oil Annual Report 2022
A MESSAGE FROM OUR CEO
Financial Year 2022 was pivotal
for the
Company; not only did we bring into production
our first new oilfield development in over eight
years, but we returned a significant amount of
capital to shareholders. These milestones,
combined with the strong financial results for
the year, demonstrates our commitment to the
delivery of the Company’s strategy to focus on
production growth and cashflow generation
from our existing asset portfolio, and to
maximise shareholder returns. Pleasingly, the
investment in our assets in recent years has
continued to pay off. Strong production, aided
by a high oil price, drove cashflow generation
which in turn allowed us to announce a further
substantial return to shareholders.
During the year, our assets continued to perform
well. At Beibu, production was maintained
through a successful workover program at the
WZ12-8W field, before ramping up as the WZ12-
8E field came onto production later in the year.
Overall Beibu production rates are currently well
above the historical 9 – 10,000 bopd (gross)
average and the joint venture is continuing to
focus on further infill, appraisal and exploration
opportunities which should enable us to
maintain rates at or above the historical average
over the coming years.
At Maari, whilst
production was impacted by delays to workover
activities, efficient operations continue and we
have been encouraged by the very strong
premiums being attracted by Maari crude oil.
Whilst the long-awaited operatorship transition
continues to await regulatory approval, we have
been impressed by OMV’s continued focus on
costs and conducting safe operations.
It is a testament to the quality and focus of our
Operators at both Maari and Beibu that they
in a safe and efficient manner
operated
throughout financial year 2022, despite the
late
continued disruption caused by the COVID-19
pandemic. This was particularly so in Block
22/12, where the WZ12-8E oilfield development
achieved first oil within approximately 18
months of FID (Final
Investment Decision)
despite the pandemic and the numerous global
supply chain challenges. Whilst the WZ12-8E
development encountered some
teething
the year, on production
issues
resumption the oilfield has achieved strong
production rates, consistently exceeding over
9,000 bopd (gross) during August 2022, with a
new Block 22/12 production record achieved on
7 August 2022 of 19,956 bbls (gross). We are
encouraged by the drilling and production
results from the new development and are
hopeful continued strong production will
support further phases of development.
in
Horizon’s strong balance sheet, coupled with
consistent cashflow generation, has allowed
the company to announce further capital
management initiatives with a proposed return
of AUD 3 cents per share by way of dividend and
capital return. With continued strong cashflow
generation we hope this can continue to be a
regular feature over coming years.
Subsequent to the period end, we were very
pleased to be able to execute an extension of
our debt facility with our lenders, ANZ, Westpac
and ICBC. Our announced ambition to achieve
Net Zero GHG emissions by 2050, together with
our work conducted over recent years to
demonstrate our commitment to reducing
emissions and enhancing the Group’s ESG
disclosures, were identified by our lenders as
important to continuing to retain access to debt
markets.
Having only recently assumed the role of the
Group’s CEO and Managing Director, I feel very
3
Horizon Oil Annual Report 2022
fortunate to have such a strong and talented
team of professionals to support me
in
delivering on our strategy. Whilst the team has
shrunk over recent years to reflect operational
needs, the core group of less than a dozen staff
remain key to delivering on our objectives. The
team endured long periods of remote working
throughout financial year 2022 and I would like
to thank them all for their hard work and
dedication over such a challenging period. It is a
testament to their skill and dedication that the
Company was able to achieve such strong
results over the past year despite the personal
challenges faced by all. I would also like to
acknowledge the efforts and leadership of the
former CEO, Chris Hodge, who guided the
Company through the challenges faced over the
past few years and has left the company in a
position of financial strength. I wish him all the
very best in his retirement.
Looking to the future, our strategy remains
simple:
• We aim to continue to maximise free
cashflow from our current high quality
assets;
• We are
focussed on making
further
distributions to shareholders; and
• We will continue to
invest
in organic
production growth initiatives in China and
New Zealand, whilst keeping an eye out for
exceptional new business opportunities – our
focus is on bringing into production our
pipeline of contingent and prospective
resources.
HORIZON OIL LIMITED
2022 RESERVES AND
RESOURCES STATEMENT
S
T
H
G
I
L
H
G
I
H
Continued strong oil production from our assets in China (0.9 MMbbl
Net Working Interest) and New Zealand (0.4 MMbbl Net Working
Interest) for a total of 1.3 MMbbl produced this year, maintaining
last year’s production.
Proved plus Probable Reserves (2P) of oil declined to 5.8 MMbbl,
compared with 6.7 MMbbl last year, with production of 1.3 MMbbl
partially offset by upwards reserves revisions.
WZ12-8E project successfully installed facilities, completed drilling
the six proposed development wells, and commenced production
on 8 April before being interrupted on 10 June because of problem
with the export flexible hose. Production was restarted on
24 July. WZ12-8E has therefore been reclassified from Undeveloped
reserves to Developed reserves.
Maiden formal assessment of Prospective Resources in Horizon’s
China permits, with nine independent opportunities identified
comprising unrisked volumes of 5.9 MMbbl Horizon net.
Sustained high oil prices ensure a strong cashflow position which
allows the company to continue to take advantage of opportunities
for production optimisation and infill, appraisal and exploration
drilling.
it be
to
face
Whilst our business continues
challenges, whether
increased ESG
pressures or supply chain issues, we have the
people, the expertise and the influence to
navigate these challenges and deliver value for
shareholders.
Richard Beament
Chief Executive Officer
4
Horizon Oil Annual Report 2022
Horizon Oil Annual Report 2022
HORIZON OIL LIMITED
2022 RESERVES AND
RESOURCES STATEMENT
S
T
H
G
I
L
H
G
H
I
Continued strong oil production from our assets in China (0.9 MMbbl
Net Working Interest) and New Zealand (0.4 MMbbl Net Working
Interest) for a total of 1.3 MMbbl produced this year, maintaining
last year’s production.
Proved plus Probable Reserves (2P) of oil declined to 5.8 MMbbl,
compared with 6.7 MMbbl last year, with production of 1.3 MMbbl
partially offset by upwards reserves revisions.
WZ12-8E project successfully installed facilities, completed drilling
the six proposed development wells, and commenced production
on 8 April before being interrupted on 10 June because of problem
with the export flexible hose. Production was restarted on
24 July. WZ12-8E has therefore been reclassified from Undeveloped
reserves to Developed reserves.
Maiden formal assessment of Prospective Resources in Horizon’s
China permits, with nine independent opportunities identified
comprising unrisked volumes of 5.9 MMbbl Horizon net.
Sustained high oil prices ensure a strong cashflow position which
allows the company to continue to take advantage of opportunities
for production optimisation and infill, appraisal and exploration
drilling.
Horizon Oil Annual Report 2022
Horizon Oil Annual Report 2022
5
2022 RESERVES AND RESOURCES STATEMENT (cont’d.)
2022 RESERVES AND RESOURCES STATEMENT (cont’d.)
Proved and Proved plus Probable Reserves
Proved and Proved plus Probable Reserves (Horizon Oil share)
China
Block 22/12
New Zealand
PMP 38160
Developed: WZ6-12S,M,N + WZ12-8W,M,E
Undeveloped: WZ6-12N infill well
Total China (arithmetic summation)
Developed: Maari + Manaia
Closing Balance 30 June 2022 (arithmetic summation)
Contingent Resources
Contingent Resources (Horizon Oil share)
1P
Total
Liquids
MMbbl
2P
Total
Liquids
MMbbl
1.8
0.1
1.9
1.1
3.0
3.0
0.1
3.1
2.6
5.8
China
Block 22/12
New Zealand
PMP 38160
WZ6-12 + WZ12-8 + WZ12-8E + WZ12-10
Maari + Manaia
Closing Balance 30 June 2022 (arithmetic summation)
Prospective Resources
2C
Total
Liquids
MMbbl
2.5
3.6
6.1
2C
Raw
Gas
Bcf
2C
Sales
Gas
PJ
0
0
Prospective Resources (Horizon Oil share)
China
Block 22/12
New Zealand
PMP 38160
WZ6-12 + WZ12-8
(nine independent opportunities)
Maari + Manaia
Closing Balance 30 June 2022 (arithmetic summation)
2U
Total
Liquids
MMbbl
2U
Raw
Gas
Bcf
2U
Sales
Gas
PJ
5.9
0.0
5.9
0
0
Cautionary statement: Prospective Resources are the estimated quantities of petroleum that may potentially be
recovered by the application of a future development project(s) relate to undiscovered accumulations. The estimates
have both an associated risk of discovery and risk of development. Further exploration appraisal and evaluation is
required to determine the existence of a significant quantity of hydrocarbons.
6
Horizon Oil Annual Report 2022
Reconciliation of Proved and Proved plus Probable Reserves
Production: Total production of 1.3 MMbbl Net Working Interest which is the same as
last year.
China: At a 2P level, production of 0.9 MMbbl Net Working Interest offset by upwards
reserves revisions (+0.4 MMbbl) and the addition of a WZ6-12N infill well (+0.1 MMbbls);
at a 1P level, reserves revisions of +0.7 MMbbls materially offset production.
New Zealand: 2P reserves have been reduced by production and revisions based on
production performance. 1P reserves have decreased due to production.
Proved and Proved plus Probable Reserves Reconciliation
Opening Balance 30 June 2021
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 2022
1P
Total
Liquids
MMbbl
2P
Total
Liquids
MMbbl
3.6
(1.3)
0.1
0.7
(0.1)
0.1
-
3.0
6.7
(1.3)
0.1
0.2
0.0
0.1
-
5.8
Reconciliation of Contingent Resources
China: 2C (best case) increased 1.2 MMbbl associated with identification of a number of
additional optimisation and infill well opportunities, including ongoing efforts to maximise
water handling to maintain oil rate and two new possible infill wells in existing fields.
New Zealand: 2C (best case) decreased 1.3 MMbbl due to revising the cut-off date for
contingent resource production from December 2037 to December 2032 and due to
revisions to production from the existing development post December 2027 (end of current
licence term).
Contingent Resources Reconciliation
Opening Balance 30 June 2021
Revisions of Previous Estimates
Economic Interest adjustment
Transfers, Discoveries and Extensions
Acquisitions and Divestments
Closing Balance 30 June 2022
2C
Total
Liquids
MMbbl
6.2
(1.3)
1.2
-
-
6.1
Raw Gas
Sales Gas
2C
Total
Bcf
0
2C
Total
PJ
0
0
0
Horizon Oil Annual Report 2022
Horizon Oil Annual Report 2022 2022 RESERVES AND RESOURCES STATEMENT (cont’d.)
2022 RESERVES AND RESOURCES STATEMENT (cont’d.)
Proved and Proved plus Probable Reserves
Reconciliation of Proved and Proved plus Probable Reserves
Proved and Proved plus Probable Reserves (Horizon Oil share)
China
Block 22/12
New Zealand
PMP 38160
Developed: WZ6-12S,M,N + WZ12-8W,M,E
Undeveloped: WZ6-12N infill well
Total China (arithmetic summation)
Closing Balance 30 June 2022 (arithmetic summation)
Developed: Maari + Manaia
Contingent Resources
Contingent Resources (Horizon Oil share)
1P
Total
Liquids
MMbbl
2P
Total
Liquids
MMbbl
1.8
0.1
1.9
1.1
3.0
3.0
0.1
3.1
2.6
5.8
2C
Raw
Gas
Bcf
2C
Sales
Gas
PJ
2C
Total
Liquids
MMbbl
2.5
3.6
6.1
5.9
0.0
5.9
China
Block 22/12
New Zealand
PMP 38160
WZ6-12 + WZ12-8 + WZ12-8E + WZ12-10
Maari + Manaia
Closing Balance 30 June 2022 (arithmetic summation)
0
0
Prospective Resources
Prospective Resources (Horizon Oil share)
2U
Total
Liquids
MMbbl
2U
Raw
Gas
Bcf
2U
Sales
Gas
PJ
China
Block 22/12
New Zealand
PMP 38160
WZ6-12 + WZ12-8
(nine independent opportunities)
Maari + Manaia
Closing Balance 30 June 2022 (arithmetic summation)
0
0
Cautionary statement: Prospective Resources are the estimated quantities of petroleum that may potentially be
recovered by the application of a future development project(s) relate to undiscovered accumulations. The estimates
have both an associated risk of discovery and risk of development. Further exploration appraisal and evaluation is
required to determine the existence of a significant quantity of hydrocarbons.
Production: Total production of 1.3 MMbbl Net Working Interest which is the same as
last year.
China: At a 2P level, production of 0.9 MMbbl Net Working Interest offset by upwards
reserves revisions (+0.4 MMbbl) and the addition of a WZ6-12N infill well (+0.1 MMbbls);
at a 1P level, reserves revisions of +0.7 MMbbls materially offset production.
New Zealand: 2P reserves have been reduced by production and revisions based on
production performance. 1P reserves have decreased due to production.
Proved and Proved plus Probable Reserves Reconciliation
Opening Balance 30 June 2021
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 2022
1P
Total
Liquids
MMbbl
2P
Total
Liquids
MMbbl
3.6
(1.3)
0.1
0.7
(0.1)
0.1
-
3.0
6.7
(1.3)
0.1
0.2
0.0
0.1
-
5.8
Reconciliation of Contingent Resources
China: 2C (best case) increased 1.2 MMbbl associated with identification of a number of
additional optimisation and infill well opportunities, including ongoing efforts to maximise
water handling to maintain oil rate and two new possible infill wells in existing fields.
New Zealand: 2C (best case) decreased 1.3 MMbbl due to revising the cut-off date for
contingent resource production from December 2037 to December 2032 and due to
revisions to production from the existing development post December 2027 (end of current
licence term).
Contingent Resources Reconciliation
Opening Balance 30 June 2021
Revisions of Previous Estimates
Economic Interest adjustment
Transfers, Discoveries and Extensions
Acquisitions and Divestments
Closing Balance 30 June 2022
2C
Total
Liquids
MMbbl
2C
Total
Raw Gas
Bcf
2C
Total
Sales Gas
PJ
6.2
(1.3)
-
1.2
-
6.1
0
0
0
0
Horizon Oil Annual Report 2022
Horizon Oil Annual Report 2022
7
Horizon Oil Annual Report 2022 2022 RESERVES AND RESOURCES STATEMENT (cont’d.)
2022 RESERVES AND RESOURCES STATEMENT (cont’d.)
Reconciliation of Prospective Resources
Horizon did not report Prospective Resources in the previous year.
China: Maiden formal assessment of 2U (best case) Prospective Resources comprising
nine independent opportunities within Horizon’s permits.
New Zealand: No Prospective Resource opportunities identified at this time.
Prospective Resources Reconciliation
Opening Balance 30 June 2021
Revisions of Previous Estimates
Economic Interest adjustment
Transfers, Discoveries and Extensions
Acquisitions and Divestments
Closing Balance 30 June 2022
2U
Total
Liquids
MMbbl
2U
Total
Raw Gas
Bcf
2U
Total
Sales Gas
PJ
0.0
-
-
5.9
-
5.9
0
0
0
0
Permits, Licences and Interests Held
Permit or
License
China
Block 22/12
New Zealand
PMP 38160
Operator
Material Projects
Net Working Interest (%)
30 June 2022
30 June 2021
CNOOC
WZ 6-12 South, Mid & North fields,
WZ 12-8 West, Mid & East fields
26.95%
26.95%
Roc Oil
WZ12-8 Development Area
55.00%1
55.00%1
OMV
Maari and Manaia fields
26.00%
26.00%
1 China National Offshore Oil Corporation (‘CNOOC’) is entitled to participate at up to a 51% equity level in any commercial development within
Block 22/12.
Notes
2018.
1
All estimates are prepared in accordance with the
10
For reserves and contingent resources, depending
Society of Petroleum Engineers (SPE) Petroleum
Resources Management System (PRMS) revised
on the asset, either deterministic estimates
or probabilistic estimates have been used.
For prospective resources, all estimates are
probabilistic estimates.
2
Relevant terms used in this statement, capitalised
or otherwise, have the same meaning given to
11
Reported estimates of petroleum reserves,
those terms in the SPE PRMS.
3
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.
4
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.
5
Prospective Resources are those quantities
of petroleum estimated, as of a given date, to
be potentially recoverable from undiscovered
accumulations by application of future
development projects. See also above Cautionary
Statement.
6
Contingent and Prospective 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. Prospective resources also
only include Horizon’s on block share.
and natural gas liquids where 1 barrel of
condensate or natural gas liquids equals 1 barrel
of oil.
8
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.
9
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.
contingent resources and prospective 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.
12
Estimates are reported according to Horizon Oil’s
economic interest, this being Horizon Oil’s net
working interest as adjusted for entitlements
(Economic Interest adjustment) under production-
sharing contracts and risked-service contracts;
and are reported net of royalties and lease fuel
up to the reference point. For New Zealand, the
reference point is defined as the outlet of the Raroa
Floating Production Storage and Offtake (FPSO)
facility. For China, the reference point is the exit
flange of the loading hoses at Weizhou Terminal.
13
Horizon Oil employs a Reserves Management
System to ensure the veracity of data used in the
estimation process. This process includes review
by senior staff where data is endorsed for inclusion
in the estimating process. Estimates are reviewed
annually, at a minimum, with interim reviews as
required, to respond to any material changes.
Horizon Oil undertakes semi-regular external
reviews to complement its own internal process.
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, Chief Operating Officer 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 Masters of Reservoir
Evaluation and Management from the Heriot Watt
University UK, and more than 25 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
15
Some totals in the tables may not add due to
statement.
rounding.
7
Liquids are equal to the total of oil, condensate
14
The estimates of petroleum reserves and resources
8
Horizon Oil Annual Report 2022
Horizon Oil Annual Report 2022
Horizon Oil Annual Report 2022 2022 RESERVES AND RESOURCES STATEMENT (cont’d.)
2022 RESERVES AND RESOURCES STATEMENT (cont’d.)
Reconciliation of Prospective Resources
Horizon did not report Prospective Resources in the previous year.
China: Maiden formal assessment of 2U (best case) Prospective Resources comprising
nine independent opportunities within Horizon’s permits.
New Zealand: No Prospective Resource opportunities identified at this time.
Prospective Resources Reconciliation
Opening Balance 30 June 2021
Revisions of Previous Estimates
Economic Interest adjustment
Transfers, Discoveries and Extensions
Acquisitions and Divestments
Closing Balance 30 June 2022
Permits, Licences and Interests Held
2U
Total
Liquids
MMbbl
0.0
-
-
-
5.9
5.9
Raw Gas
Sales Gas
2U
Total
Bcf
0
2U
Total
PJ
0
0
0
Operator
Material Projects
Net Working Interest (%)
30 June 2022
30 June 2021
CNOOC
WZ 6-12 South, Mid & North fields,
WZ 12-8 West, Mid & East fields
26.95%
26.95%
Roc Oil
WZ12-8 Development Area
55.00%1
55.00%1
OMV
Maari and Manaia fields
26.00%
26.00%
Permit or
License
China
Block 22/12
New Zealand
PMP 38160
Block 22/12.
1 China National Offshore Oil Corporation (‘CNOOC’) is entitled to participate at up to a 51% equity level in any commercial development within
Notes
1
All estimates are prepared in accordance with the
Society of Petroleum Engineers (SPE) Petroleum
Resources Management System (PRMS) revised
2018.
2
3
4
5
6
7
8
9
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.
Prospective Resources are those quantities
of petroleum estimated, as of a given date, to
be potentially recoverable from undiscovered
accumulations by application of future
development projects. See also above Cautionary
Statement.
Contingent and Prospective 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. Prospective resources also
only include Horizon’s on block share.
Liquids are equal to the total of oil, condensate
and natural gas liquids where 1 barrel of
condensate or natural gas liquids equals 1 barrel
of oil.
Raw Gas is natural gas as it is produced from the
reservoir which may include varying amounts
of heavier hydrocarbons which liquefy at
atmospheric conditions, water vapor and other
non-hydrocarbon gases such as hydrogen
sulphide, carbon dioxide, nitrogen or helium.
Sales Gas represents volumes that are likely to
be present a saleable product. Sales Gas are
reported assuming average values for fuel, flare
and shrinkage considering the variable reservoir
fluid properties of each constituent field on an
energy basis the customary unit is PJ. PJ means
petajoules and is equal to 1015 joules.
10
11
12
13
14
For reserves and contingent resources, depending
on the asset, either deterministic estimates
or probabilistic estimates have been used.
For prospective resources, all estimates are
probabilistic estimates.
Reported estimates of petroleum reserves,
contingent resources and prospective resources
have been aggregated by arithmetic summation
by category. 1P reserves reported beyond the
field, property or project level aggregated by
arithmetic summation may be a very conservative
estimate due to the portfolio effects of arithmetic
summation.
Estimates are reported according to Horizon Oil’s
economic interest, this being Horizon Oil’s net
working interest as adjusted for entitlements
(Economic Interest adjustment) under production-
sharing contracts and risked-service contracts;
and are reported net of royalties and lease fuel
up to the reference point. For New Zealand, the
reference point is defined as the outlet of the Raroa
Floating Production Storage and Offtake (FPSO)
facility. For China, the reference point is the exit
flange of the loading hoses at Weizhou Terminal.
Horizon Oil employs a Reserves Management
System to ensure the veracity of data used in the
estimation process. This process includes review
by senior staff where data is endorsed for inclusion
in the estimating process. Estimates are reviewed
annually, at a minimum, with interim reviews as
required, to respond to any material changes.
Horizon Oil undertakes semi-regular external
reviews to complement its own internal process.
The estimates of petroleum reserves and resources
contained in this statement are based on, and
fairly represent, information and supporting
documentation prepared by staff and independent
consultants under the supervision of Mr Gavin
Douglas, Chief Operating Officer 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 Masters of Reservoir
Evaluation and Management from the Heriot Watt
University UK, and more than 25 years of relevant
experience. Mr Douglas consents to the use of the
petroleum reserves and resources estimates in
the form and context in which they appear in this
statement.
15
Some totals in the tables may not add due to
rounding.
Horizon Oil Annual Report 2022
Horizon Oil Annual Report 2022
Horizon Oil Annual Report 2022
9
10
Horizon Oil Annual Report 2022
HORIZON OIL LIMITED
ACTIVITIES
REPORT
Horizon Oil Annual Report 2022
11
Block 22/12, Beibu Gulf, Offshore China
HORIZON INTEREST
%
PRODUCTION
EXPLORATION
26.95
55
During the year, the Group's working interest share of
production from the Beibu Gulf fields was 925,405 barrels
of oil. Crude oil sales were 842,086 barrels at an average
price of US$92.14/bbl, exclusive of executed hedging.
Gross oil production for the 2022 financial year averaged
9,407 bopd, of which the Group’s working interest share
was 2,535 bopd. The Group’s share of sales volumes over
the year was an average of 2,307 bopd.
Average cash operating costs including workovers for the
year were US$13.15/bbl (produced). Strong low cost
production ensured continued strong free cashflow
generation from the Beibu Gulf fields, with revenue growth
driven by sustained higher oil prices.
A four well workover programme on the WZ12-8W field was
completed during the August 2021 annual maintenance
involved the
The workover programme
shut-down.
installation of
production rates.
larger pumps enabling
increased
Following a Final Investment Decision (FID) of the WZ12-8
East development in October 2020, and the construction
of the leased HYSY163 self-elevating wellhead platform
between November 2020 and December 2021, the
platform was installed in the WZ12-8E development area.
On 17 March 2022, drilling operations began on a 7 well
drilling programme (six production wells and one water
disposal well), targeting the Weizhou and Jiaowei
reservoirs.
Successful installation, hook-up and commissioning of
the WZ12-8E project facilities was completed in April 2022,
and first production was achieved from the WZ12-8E A2H
well. Construction and drilling activities were undertaken
safely, within budget and on schedule.
12
Horizon Oil Annual Report 2022 On 10 June 2022, production from the WZ12-8E oilfield was
temporarily shut-in following detection of an issue with
the pipeline connecting the field to the WZ12-8W wellhead
platform. Whilst the field was shut-in, the Strike rig
completed
three
development wells.
the drilling of
remaining
the
Following repairs, production from the field was restarted
on 24 July with wells progressively being brought back on-
line. Production from WZ12- 8E following restart has
averaged over 9,000 bopd (gross) through August with a
new Block 22/12 daily production record achieved on
7 August 2022 of 19,956 bbls (gross).
The WZ6-12 A8 exploration well was successfully drilled
from the WZ12-8E platform in July 2022 to a total depth of
3,597m measured depth
intersected the
targeted Tertiary stacked sandstones and Basement. The
well intersected two minor oil columns of approximately
3.6m true vertical depth (TVD) and 2.0m (TVD) in the target
sandstone intervals. However, the Basement target failed
to encounter hydrocarbons.
(MD) and
The A8 well has been plugged and abandoned, which
frees up a rig slot on the WZ12-8E platform for a possible
Phase 2 development well. In the meantime, the joint
venture continues
the geological and
to assess
commercial implications of the well result.
in the WZ6-12 area.
In August 2022, a workover and drilling programme
commenced
This programme
comprises of a five well workover programme designed to
reinstate and enhance production from existing WZ6-12
wells and the drilling of the WZ6-12 M3 appraisal well
targeting an undrilled fault block of Weizhou reservoir
sands located adjacent to the producing WZ6-12 M1 and
WZ6-12 South fault blocks. CNOOC is operating the
workover and WZ6-12 M3 drilling programme which is
expected to conclude around the end of September.
In addition, the Joint Venture is considering adding a WZ6-
12 North field development infill well to the end of the
programme. A final decision on this opportunity will be
made shortly.
13
Horizon Oil Annual Report 2022 HORIZON INTEREST
PRODUCTION
%
26
During the year the Group's working interest share of
production from the Maari and Manaia fields was 406,798
barrels of oil. Crude oil sales were 363,017 barrels at an
average effective price of US$96.44/bbl exclusive of
executed hedging.
Average gross production from the field over the financial
year was approximately 4,287 bopd, of which Horizon’s
share was 1,115 bopd. Crude oil inventory as at 30 June
2022 was 57,831 bbls with the next lifting due to take place
in September 2022. Maari crude continues to attract
strong premiums with the May 2022 lifting sold at a
premium to dated Brent of US$7/bbl.
Production for the year was impacted by temporary shut-
ins of production wells MR6A, MR8A and MN1 along with a
scheduled 10-day annual maintenance shutdown
in
February 2022.
The MR8A well was successfully worked over during the
second quarter of the financial year.
The MR6A well was precautionarily shut in after low levels
of sand were detected in the produced well fluid. In April
2022, a temporary desander on the wellhead platform was
installed which processed the sand production. While the
temporary desander was able to process the sand
production, the well did not produce hydrocarbons so was
shut in, and the desander unit was demobilised. The Joint
Venture is planning a subsequent workover of the MR6A
well which involves setting a plug along the wellbore to
isolate the damaged sand producing section of the well,
with the aim of reinstating oil production.
The MN1 well suffered an electric submersible pump (ESP)
failure in May 2022. A workover was commenced in July to
replace the ESP with production expected to commence
before the end of the current quarter.
Cash operating costs have been impacted by the MR6A
sanding issue and the MN1 ESP failure and averaged
US$28.43/bbl produced for the 2022 financial year,
excluding the cost of workovers.
Horizon has been advised that the previously announced
acquisition by Jadestone Energy Inc. (AIM:JSE, TSXV:JSE)
of OMV New Zealand Limited’s 69% interest in the Maari
field remains unchanged and regulatory processes are
continuing.
14
Horizon Oil Annual Report 2022
HORIZON OIL LIMITED
FINANCIAL
REPORT
For the financial year ended
30 June 2022
Level 4
360 Kent Street
Sydney NSW 2011
The annual financial report was
authorised for issue by the Board
of Directors on 25 August 2022.
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 2022 Reserves and
Resources Statement dated
25 August 2022.
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:
15
Horizon Oil Annual Report 2022 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 2022.
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
R Beament (Appointed 1 July 2022)
C Hodge (Resigned 1 July 2022)
G de Nys (Resigned 19 November 2021)
S Birkensleigh
G Bittar
B Clement
N Burgess (Appointed 1 July 2021)
R Beament was appointed as Chief Executive Officer and Managing Director on 1 July 2022.
C Hodge was a director from the beginning of the period until his retirement and resignation from the board on 1 July 2022.
G de Nys was a director from the beginning of the period until his retirement and resignation from the board at the Company’s
2021 Annual General Meeting on 19 November 2021.
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 10 to 14
of this annual financial report.
16
Horizon Oil Annual Report 2022 Group Financial Performance
Consolidated Statement of Profit or Loss and Other Comprehensive Income
2022 Profit Drivers
The Group reported a statutory profit after tax of US$24.3 million for the financial year (2021: profit of US$8.0 million). The
profit result includes non-cash financing expense of US$nil (2021: profit of US$2.9 million) associated with the final
revaluation of the options issued under the subordinated loan facility and US$nil profit from discontinued operations (2021:
US$3.1 million profit), which once excluded results in an Underlying Profit After Tax of US$24.3 million (2021: US$7.8 million).
Non-cash items impacting on the financial year result include US$27.0 million (2021: US$23.9 million) in amortisation of
production phase assets, US$1.0 million gain on the remeasurement of derivative financial instruments (2021: US$1.4 million),
US$0.4 million (2021: US$0.3 million) related to the value of share options and share appreciation rights granted to Horizon
employees and US$0.5 million (2021: US$0.5 million) financing expense related to amortised establishment fees on the senior
debt facility.
EBITDAX from continuing operations was US$73.0 million (2021: US$36.4 million), and EBIT from continuing operations was
US$44.7 million (2021: US$10.1 million). EBITDAX and EBIT from continuing operations exclude profit from discontinued
operations. Cashflows from operating activities of US$56.9 million (2021: US$23.2 million) and cash reserves enabled the
Group to complete the US$34.8 million capital return, meet its capital expenditure commitments and also repay a further
US$11.5 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 after tax information have not been audited. However, they have been extracted from
the audited annual financial reports for the financial years ended 30 June 2022 and 30 June 2021.
Basic earnings per share from continuing operations for the financial year was a profit of 1.54 US cents based on a weighted
average number of fully and partly paid ordinary shares on issue of 1,580,442,962 shares.
Sales and Production
The Group’s producing assets performed well, with net production of 1,332,103 barrels of oil (2021: 1,334,814 barrels).
Production at Block 22/12 benefited from the commencement of production from the WZ12-8E development, whilst
production at Maari was impacted by temporary shut-ins of two production wells. Workovers at Maari are underway to restore
production from these wells. Sales volumes were 1,205,103 bbls (2021: 1,265,725 bbls) with 57,831 bbls of crude oil inventory
on hand as at 30 June 2022.
17
Horizon Oil Annual Report 2022
Crude oil sales revenue of US$108.1 million (2021: US$63.6 million) was generated during the financial year resulting from a
net realised oil price of ~US$90 per barrel (2021: ~US$50 per barrel), inclusive of hedge settlements. Throughout the year
45% of sales were hedged (2021: 58%) with a hedging settlement of US$4.5 million (2021: gain US$6.6 million) realised on
545,000 barrels hedged at a weighted average fixed price of US$80.97 per barrel (2021: 740,000 barrels at US$45.31 per barrel).
Operating costs for the period of US$57.4 million were higher than the prior comparative period of US$47.1 million. The cost
increase was driven by an US$8.3 million increase in levies and in particular the special oil gain levy in China following the
higher realised oil price during the financial year. The residual increase is attributable to amortisation.
General and Administrative Expenses
General and administrative expenses reduced by US$0.5 million during the financial year to US$3.3 million (2021: US$3.8
million). This expense comprised net employee benefits expense of US$2.0 million (including non-cash share-based
payment expense of US$0.4 million), corporate office expense of US$0.9 million, and depreciation of US$0.4 million.
Insurance Expense
Insurance expense of US$2.0 million (2021: US$2.0 million) was consistent with the prior financial period.
Exploration and Development Expenses
Exploration and development expenses were US$0.8 million (2021: US$2.1 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.
Finance Costs
The Group’s borrowing costs of US$0.9 million were US$0.3 million lower during the period following the progressive
repayment of debt and reduced global interest rates. Other non-cash financing expense of US$nil (2021: income US$2.9
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$18.4 million (2021: US$0.3 million) incurred during the financial year included
a current tax expense of US$13.9 million, a deferred income tax expense of US$1.0 million and a royalty related tax expense
of US$3.8 million. The net income tax expense was driven by cash taxes of US$10.9 million in China and US$3.0 million in
New Zealand. Royalty tax expense of US$3.8 million reflected cash and deferred royalty tax associated with the Maari/Manaia
field.
Consolidated Statement of Financial Position
At 30 June 2022, total assets were US$182.5 million (2021: US$186.8 million) and total liabilities were US$83.2 million (2021:
US$76.5 million), resulting in net assets of US$99.2 million (2021: net assets of US$110.3 million). The Group had a working
capital surplus of US$32.1 million (2021: US$36.1 million) resulting predominately from the strong cash flow generation which
was partially offset by the US$11.5 million in debt repayments.
At 30 June 2022, the Group reported an US$11.1 million increase in its net cash position to US$42.8 million, despite the
settlement of the US$34.8 million capital return completed in August 2021. Net cash of US$42.8 million comprised of cash
and cash equivalents held of US$44.1 million (2021: US$44.4 million) offset by borrowings of US$1.2 million (2021: US$12.7
million). At financial year end, borrowings consisted of US$1.2 million principal outstanding on the US$95 million Syndicated
Revolving Cash Advance Facility executed with senior lenders in November 2018.
18
Horizon Oil Annual Report 2022 Consolidated Statement of Cash Flows
2022 Cash Drivers
Net cash generated from operating activities was significantly higher for the financial year at US$56.9 million (2021: US$23.2
million) due predominantly to the higher oil price environment. Production and sales volumes were maintained in line with
the prior period at 1.3 mmbbls and 1.2 mmbbls respectively. Pleasingly, production from the WZ12-8E project commenced
at the beginning of April 2022, reaching up to 5,900 bopd gross (1,500 bopd Horizon net) from three wells prior to a temporary
shut-in towards the end of the financial year for repair works to the pipeline connecting the field to the WZ12-8W wellhead
platform. Production was restarted on 24 July following the successful execution of repairs. All six development wells have
now been successfully drilled and are on production.
The free cash available after operating and investing activities, enabled further debt reduction with US$11.5 million of the
senior debt facility having been repaid and allowed for further distributions to shareholders.
Corporate
Group liquidity
At 30 June 2022, the Group’s net cash position had further increased to US$42.8 million (30 June 2021: US$31.7 million), an
increase of US$11.1 million during the financial year despite the settlement of the US$34.8 million capital return completed
in August 2021, aided by a strong oil price environment. Net cash comprises cash and cash equivalent assets held of US$44.1
million (30 June 2021: US$44.4 million) offset by the nominal value of borrowings drawn down of US$1.2 million (30 June 2021:
US$12.7 million), on the Syndicated Revolving Cash Advance Facility. Details of the Group’s debt facilities are set out in Note
18.
Oil Price Hedging
The Company maintains leverage to the higher oil prices with a minimal hedge position of 60,000 bbls of swaps and put
options which hedge the period July – September 2022. These hedges have a weighted average price of ~US$105/bbl.
Group business strategies and prospects for future financial years
The Company’s exploration, development and production activities are focused in Southeast Asia. The robust 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, with surplus funds returned to shareholders. The growth
program is focussed on enhancing shareholder value by bringing into production the Company’s substantial inventory of
contingent and prospective resources in fields in China and New Zealand, whilst keeping an eye on potential other value
accretive growth opportunities.
The Company has a targeted and selective exploration policy with specific focus on plays providing material scale and upside
in and around existing permits with ready access to development infrastructure. The reserves and contingent resources in
19
Horizon Oil Annual Report 2022
the company’s inventory provide shareholders with exposure to commodity price upside and potential production growth
opportunities.
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.
Outlook
It is expected that the 2023 financial year and beyond will be underpinned by continued strong oil production and cashflow
generation, subject to oil price, from the Group’s China and New Zealand operations. Continued water injection at Maari
combined with further planned infill drilling in China, are forecast to help sustain production rates and partially 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 and the elevated production rates from Block 22/12 following
the recent commissioning of the WZ12-8E field. The forecast cashflow from the producing oil fields are expected to enable
existing capital commitments to be met, shareholder distributions to be funded, and provide funding for further organic
growth in the portfolio, particularly in Block 22/12.
The Group’s short-term focus is on:
– Optimising production performance from the Block 22/12 and Maari/Manaia fields through various well intervention
activities;
– Successful completion of the WZ6-12 drilling program to further enhance Block 22/12 production;
– Continued evaluation and optimisation of WZ12-8E field production, to assess viability of a possible Phase II drilling
program; and
– Continued evaluation of nearby prospects and infill drilling opportunities in Block 22/12.
Significant changes in the state of affairs
Management changes
As announced on 15 June 2022, Christopher Hodge, retired from his role as Managing Director and Chief Executive Officer
effective 1 July 2022. Richard Beament, the Group’s former Chief Financial Officer and Company Secretary has replaced
Mr Hodge as Managing Director and Chief Executive Officer, effective 1 July 2022. Mr Hodge has agreed to assist in an orderly
transition of his executive responsibilities to Mr Beament until 31 October 2022.
In other changes to the leadership team, and with effect from 1 July 2022:
Gavin Douglas will assume the role of Chief Operating Officer, having previously held the position of Group General Manager
– Production & Exploration. Gavin is a geologist with over 25 years of oil and gas experience, having joined Horizon in 2014.
Kyle Keen will assume the role of Chief Financial Officer, having previously held the positions of Group Financial Controller
and Assistant Company Secretary. Kyle joined Horizon in 2018.
Vasilios (Vas) Margiankakos will assume the role of Company Secretary, as well as continuing his role as Horizon’s Group Tax
Manager. Vas joined Horizon in 2017.
20
Horizon Oil Annual Report 2022
Matters subsequent to the end of the financial year
The Group executed and reached financial close on a 12-month extension of the senior debt facility with ANZ, Westpac and
Industrial and Commercial Bank of China (ICBC) with a revised facility limit of US$20 million. The extended facility matures
on 31 July 2023 and retains the key existing terms including interest rate at a LIBOR equivalent +2.75%.
On 25 August 2022, the Company announced total distributions of AUD 3 cents per share comprising an AUD 1.65 cent per
share unfranked (conduit foreign income) dividend and an AUD 1.35 cent per share return of capital, which is subject to
shareholder approval. The Company will hold an Extraordinary General Meeting (EGM) on 7 October 2022 seeking shareholder
approval for the capital return.
Other than the matters noted above and disclosed in the review of operations, there has not been any matter or circumstance
which has arisen since 30 June 2022 that has significantly affected, or may significantly affect:
[1] -
[2] -
[3] -
the Group’s operations in future financial years; or
the results of those operations in future financial years; or
the Group’s state of affairs in future financial years.
Environmental regulation
The Group is subject to significant environmental regulation in respect of exploration, development and production activities
in all countries in which it operates – China and New Zealand. Horizon Oil Limited is committed to undertaking all of its
exploration, development and production activities in an environmentally responsible manner.
The Directors believe the Group has adequate systems in place for managing its environmental requirements and is not
aware of any breach of those environmental requirements as they apply to the Group.
Reporting currency
The Company’s and the Group’s functional and reporting currency is United States dollars. All references in this annual
financial report to “$” or “dollars” are references to United States dollars, unless otherwise stated.
21
Horizon Oil Annual Report 2022
Information on Directors
The following persons held office as Directors or Secretaries of Horizon Oil Limited at the date of this Directors’ Report:
Chairman, Independent Non-
Executive Director
Responsibilities:
Experience:
Directorships:
Mike Harding
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 a Director of Cleanaway Waste Management Limited. He is a
former Chairman of Downer, 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 (until 1 July 2022)
Chris Hodge
Responsibilities:
Experience:
Directorships:
Qualifications:
Mr Hodge has been Managing Director and Chief Executive Officer of Horizon since
February 2020, and a Director since April 2019. 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).
Managing Director, Chief Executive
Officer (effective 1 July 2022)
Richard Beament
Chief Financial Officer & Company
Secretary (until 1 July 2022)
Responsibilities:
Experience:
Directorships:
Qualifications:
Mr Beament has been Chief Financial Officer of Horizon since July 2018 and was
appointed Company Secretary in September 2021. He joined Horizon as Finance and
Commercial Manager in May 2010. Since that time, he has been actively engaged in
arranging and managing the Group’s funding, as well as managing the Group’s
investments in Maari and Block 22/12. He is a Member of Horizon’s Risk Management
and Disclosure Committees.
Mr Beament has over 20 years’ experience in accounting and finance, and prior to
joining Horizon, held senior positions with PwC in Sydney and London.
Nil
Mr Beament holds a Bachelor of Commerce degree and is a member of the Chartered
Accountants Australia and New Zealand (CAANZ).
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Horizon Oil Annual Report 2022
Independent Non-Executive Director
Sandra Birkensleigh
Responsibilities:
Experience:
Directorships:
Qualifications:
Non-executive Director
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.
in financial services, risk
Ms Birkensleigh has 24 years’ experience
management,
with
governance
compliance
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.
corporate
and
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.
Greg Bittar
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 is currently Chairman of Kingwest Resources Limited and 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:
Qualifications:
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.
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. He is Chairman of Horizon’s Risk Management Committee.
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 has held senior managerial roles at Santos Limited, Ampolex
Limited and Esso Australia Limited (Exxon).
Mr Clement 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.
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Horizon Oil Annual Report 2022
Non-Executive Director
Nigel Burgess
Responsibilities:
Experience:
Directorship:
Mr Burgess was appointed as a non-executive director on 1 July 2021. He is a Member of
Horizon’s Audit Committee.
Nigel 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.
Nigel is a nominee director of Samuel Terry Asset Management, which manages the Samuel
Terry Absolute Return Fund, a substantial shareholder in Horizon. Due to his association
with Samuel Terry, he is not considered independent. He is a former director of Spicers
Limited (ASX: SRS; de-listed 2019) and Yellow Holdings Limited (New Zealand).
Chief Financial Officer / Assistant
Company Secretary
Kyle Keen
Responsibilities:
Experience:
Qualifications
Mr Keen has been Horizon’s Group Financial Controller until his appointment as Chief
Financial Officer on 1 July 2022. Mr Keen has been Horizon’s Assistant Company Secretary
since 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 11 years’ experience
including working in top tier accounting practices such as EY and KPMG.
Mr Keen holds a Bachelor of Accounting (Hons) degree and is a member of the South
African Institute of Chartered Accountants.
Group Tax Manager / Company
Secretary
Vasilios (Vas) Margiankakos
Responsibilities:
Experience:
Mr Margiankakos has been Horizon’s Group Tax Manager since October 2017.
Mr Margiankakos has over 20 years’ experience in corporate and international taxation and
mergers and acquisitions across a vast number of industries including oil and gas, banking
and financial services, infrastructure, media, manufacturing and consumer goods, and
technology. Prior to joining Horizon, Vas was Head of Tax at Bravura Solutions Limited and
BBC Worldwide Australia (now BBC Studios), prior to which he held a number of senior tax
positions at top tier accounting practices such as EY, Deloitte and KPMG.
Qualifications
Mr Margiankakos holds a Bachelor of Economics degree from the University of New South
Wales.
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
M Harding
C Hodge
R Beament
DIRECT
500,000
1,000,000
100,184
S Birkensleigh
-
G Bittar
B Clement
N Burgess1
B Lorenzon (as alternate)
1,000,000
-
-
-
ORDINARY SHARES
INDIRECT
-
-
-
-
-
-
TOTAL
500,000
1,000,000
100,184
-
1,000,000
-
314,212,423
314,212,423
-
-
1 Mr Burgess is a Director of Samuel Terry Asset Management Pty Ltd, the Trustee and Investment Manager of Samuel Terry Absolute Return Fund which
holds the 314,212,423 shares.
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Horizon Oil Annual Report 2022
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 Nys3
S Birkensleigh
G Bittar
B Clement
N Burgess2
B Lorenzon (as alternate for G Bittar)
2
2
2
2
2
2
11
11
11
7
11
11
11
11
0
2
2
2
1
1
2
1
1
1
3
3
3
1
3
3
2
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.
1
2 Mr Burgess was appointed as a non-executive director effective 1 July 2021 and attended all meetings from that date.
3 Mr de Nys retired as non-executive director on 19 November 2021 at Horizon’s 2021 Annual General Meeting.
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Horizon Oil Annual Report 2022
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 25 August 2022.
The Company’s Corporate Governance Statement for the year ended 30 June 2022 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 4th
edition, released in 2019.
Sustainability Reporting
Sustainability continues to be an important focus for Horizon with progress made during the current financial year on the 3
year Environmental Social and Governance (ESG) Action Plan and the Company is pleased to present its Sustainability Report
for the year ended 30 June 2022.
The Company’s Sustainability Report for the year ended 30 June 2022 may be accessed from the Company’s website at
www.horizonoil.com.au.
Health, safety & environment (HSE)
As at the financial year ended 30 June 2022, Horizon achieved a Total Recordable Injury Frequency Rate (TRIFR) of 0.69, and
a Lost Time Injury Frequency Rate (LTIFR) of 0, both less than the Australian National Offshore Petroleum Safety &
Environmental Management Authority (NOPSEMA) industry averages. There were zero fatalities and zero significant
environmental incidents for FY2022.
The Beibu operations achieved a strong safety record with no recordable safety incidents despite significant drilling,
production, and project development activities during the period.
The Maari operations achieved a LTIFR of zero, a TRIFR below the NOPSEMA industry average and zero environmental
incidents for the reported period.
Governance
Governance continues to be a core focus for the Group. During the period Horizon conducted its annual assessments on its
value and supply chain for risks and incidences of modern slavery. The second Modern Slavery Statement, for the calendar
year 2021, was submitted to the Australian Government on 31 December 2021 in line with the requirements of the Australian
Modern Slavery Act 2018. The work on 2022 Modern Slavery Statement is currently underway to be submitted in December
2022. This statement may be accessed from the Company’s website at www.horizonoil.com.au.
Climate change
Horizon continues to develop its climate change strategy with the ambition of achieving Net Zero GHG emissions by 2050, in
alignment with the Paris Agreement on climate change. Horizon is currently developing a decarbonisation and climate
transition roadmap which it intends to release in the FY23 reporting period.
During the first half of FY22, Horizon acquired ~15,000 tonnes of carbon units for a United Nations (UNFCC) Clean Development
Mechanism (CDM) accredited project in Sichuan province, China (Cooking with Gas POA 2898). These carbon units were
surrendered and are intended to significantly offset Beibu Scope 1 emissions whilst also supporting the communities in which
we operate. The project is certified to various UN Sustainable Development Goals (SDG) including good health and wellbeing,
and affordable clean energy. The Company continues to acquire and surrender carbon credits in New Zealand (NZUs) under
the NZ Emissions Trading Scheme (ETS) to cover 100% of the Group’s share of Maari Scope 1 emissions. Through participation
in the NZ ETS, the Company is supporting New Zealand in achieving its stated commitment to Net Zero GHG emissions by
2050 in alignment with the Paris Agreement.
During the first half of FY22, Horizon also completed its submission for the 2021 Carbon Disclosure Project (CDP). Horizon’s
responses were assessed against the CDP scoring methodology, with an overall score of B- being achieved (scoring range
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Horizon Oil Annual Report 2022 from A to D). This score is in the Management band where the Company is assessed as ‘taking coordinated action of climate
issues’. At the date of this report, Horizon is working on the 2022 CDP submission.
People – Employees & Community
During the period the COVID-19 pandemic continued to impact our employees and the communities within which our
operations are conducted. Our Sydney staff were subjected to a long period of lockdown with a return to remote working.
We continued to support our employees during this challenging period and provided staff with the tools and support to work
remotely. We were actively engaged with our operators regarding the impact of COVID-19 on operations and provided our
continued support to their efforts to maintain operations whilst also responding to the risks and challenges faced as a result
of the pandemic.
As mentioned above, the Company voluntarily acquired carbon offsets in China with the primary objective of offsetting Scope
1 and 2 emissions from Block 22/12. In considering the carbon offsets to acquire, the Company was motivated to identify
carbon offsets which also served to have a local community benefit. The Cooking with Gas project builds biogas digesters
for families in the Sichuan province, China, that capture methane emissions from animal and human waste and converts it
to renewable energy for cooking. The project (POA GS 1239 or GS ID 7049) is a Gold Standard verified project and can be found
on the Clean Development Mechanism (CDM) projects registry. The project meets 5 UN sustainable development goals. The
Company is proud to support such a worthwhile project that provides both a community and environmental benefit in our
area of operation.
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Horizon Oil Annual Report 2022
Remuneration Report
REMUNERATION REVIEW
During the reporting period, the Remuneration and Nomination Committee (RNC) reviewed the current remuneration
framework and both the long-term (LTI’s) and short-term incentive (STI’s) plans at Horizon within the context of the
Company’s corporate strategy. The outcome of the review was to modify the future remuneration structure to reduce fixed
remuneration and increase at risk remuneration (STI’s & LTI’s) which better aligns remuneration outcomes with value
creation for shareholders. The majority of these changes are effective for remuneration post 1 July 2022 unless otherwise
noted in this remuneration report. The key outcomes and changes were:
– Reduction in overall management costs following the retirement of Mr Hodge effective 1 July 2022 and the resignation
of Ms Quinlivan during the reporting period and a reduced fixed remuneration cost for the new CEO.
– A deferred equity component has been introduced to the STI applicable to senior executives remaining with the
business.
– The proposed changes to the STI will apply to any STIs awarded for the FY22 financial year for senior executives
remaining with the business.
– Following a review of the current long term incentive plan (award of Share Appreciation Rights), the RNC formalised a
revised LTI Plan (New LTI Plan). The rationale for the New LTI plan is to create a stronger link between performance and
reward and to align the interests of Senior Executives more strongly with those of the shareholders of Horizon.
– A clawback provision has been included in all performance rights issued giving the Board the discretion to determine
that some or all of the unvested rights will lapse if a situation arises that impacts the assessment of performance. Such
a situation may include material misrepresentations or material misstatements in the company accounts.
– There are 5 non-executive directors (a reduction from 6) and the RNC has made no recommendation to the Board during
the reporting period to increase Non-Executive Director remuneration.
CEO APPOINTMENT
On 16 June 2022, the Company announced that Mr Chris Hodge would retire from the role of CEO/MD and Mr Richard Beament
would be appointed into the role of MD/CEO with effect from 1 July 2022. Key terms of his remuneration arrangements were
released to the market on 16 June 2022 and include:
– Total Fixed Remuneration of AUD527,000 per annum (including superannuation).
– STI -up to 75% of Total Fixed Remuneration, subject to individual and corporate performance hurdles being met. Any
STI award is to be provided in two components – 50% cash and 50% shares (provided certain conditions are met), with
deferral of receipt of the shares for 12 months.
– LTI -eligible to participate in Horizon’s New LTI Plan and will receive a one-off grant of 19,600,000 Performance Rights
on his appointment as Managing Director and Chief Executive Officer.
– The grant will comprise four tranches of Performance Rights. The vesting and exercise of the Performance Rights will
be dependent on meeting a service condition (remaining in employment subject to leaver provisions) and the
satisfaction of share price and trading volume performance hurdles (set separately for each tranche).
– Any equity component requiring shareholder approval will be subject to shareholder approval at the 2022 Annual General
Meeting.
The RNC remains focused on ensuring that the remuneration framework is competitive and rewards executives for meeting
or exceeding strategic objectives and facilitating long-term wealth creation for shareholders. The Company’s STI and LTI
plans are designed to support these strategic objectives and align remuneration outcomes with Horizon’s short-term and
long-term goals.
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Horizon Oil Annual Report 2022
This Remuneration Report (Report) outlines the remuneration arrangements for the Key Management Personnel (KMP) of the
Company for the financial year ended 30 June 2022. 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:
NAME
TITLE
PERIOD AS KMP
DIRECTORS
Mike Harding
Chairman (non-executive)
Chris Hodge1
Gerrit de Nys2
Director (executive)
Director (non-executive)
Sandra Birkensleigh
Director (non-executive)
Greg Bittar
Director (non-executive)
Bruce Clement
Director (non-executive)
Nigel Burgess3
Director (non-executive)
Bruno Lorenzon
Alternate Director (non-executive)
OTHER KMP (EXECUTIVES)6
Full financial year
Until 30 June 2022
Until 19 November 2021
Full financial year
Full financial year
Full financial year
From 1 July 2021
Full financial year
Richard Beament4
Chief Financial Officer/Company Secretary
Full financial year
Kylie Quinlivan5
General Counsel/Company Secretary
Until 30 September 2021
1 Mr Hodge retired as managing director and Chief Executive Officer effective 30 June 2022.
2 Mr de Nys retired as non-executive director on 19 November 2021 at Horizon’s 2021 Annual General Meeting.
3 Mr Burgess was appointed as a non-executive director effective 1 July 2021.
4 Mr Beament was appointed as managing director and Chief Executive Officer effective 1 July 2022.
5 Ms Quinlivan ceased to be a KMP and Company Secretary effective 30 September 2021.
6 Mr Gavin Douglas became a KMP on 1 July 2022 as a result of his appointment as the Group’s Chief Operating Officer.
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Horizon Oil Annual Report 2022
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;
– 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
C Hodge
Performance-based
Total Fixed Remuneration (TFR)
Maximum STI
Maximum LTI1
50%
25%
25%
Chief Financial Officer/ Company Secretary2
R Beament
Total Fixed Remuneration (TFR)
Maximum STI
Maximum LTI1
51%
38%
11%
Fair value of LTI determined at 1 July in accordance with the Long Term Incentive Plan.
During the period the Board resolved to amend Mr Beament’s maximum STI opportunity to 75% of fixed remuneration with any resultant award being
settled with 50% cash and 50% deferred equity. This was to remunerate for Mr Beament for assuming the role of Company Secretary during the period
and in light of his appointment to Chief Executive Officer and Managing Director effective 1 July 2022.
1
2
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Horizon Oil Annual Report 2022
[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 paid in a
combination of cash and deferred equity in the first quarter of the new financial year. The deferred equity
element is subject to the specific terms of the executive’s employment agreement which for FY22 applied
to executives remaining with the Company. 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?
STI opportunity
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 a combination of cash and deferred equity in the first quarter of the new financial
year. The deferred equity element is subject to the specific terms of the executive’s employment
agreement which for FY22, 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.
Up to 50% of the FY22 CEO’s TFR and up to 75% of the FY22 Chief Financial Officer’s TFR. A deferred equity
component has been adopted for executives remaining in the employment of the Company. The proportion
of the STI opportunity paid in cash or deferred will depend on the employee’s position in the Company.
Deferring a proportion of the STI outcome into rights to Shares creates further alignment between the
interests of shareholders and extends the focus beyond the short term.
How is STI deferred
equity granted?
Any deferred component of STI awarded in relation to a financial year (Performance Year) will be delivered in
the form of rights to acquire fully paid ordinary shares in the Company ('Shares') for nil consideration ('Deferred
STI Rights').
How is the number of
Deferred STI Rights
determined?
The number of Deferred STI Rights granted in relation to any Performance Year will be determined by dividing
the cash amount of the STI to be deferred by the volume weighted average price ('VWAP') of Shares for the final
10 trading days of the Performance Year (usually 10 trading days up to 30 June).
What are the
performance
conditions on the
Deferred STI Rights?
Distribution and capital
reorganisation
Deferred STI Rights are designed to reward past performance and encourage retention. Once granted,
ordinarily, no further performance conditions will attach to Deferred STI Rights other than the employee
remaining in the Company's employment at the time of vesting.
The number of Deferred STI Rights will be adjusted in the event of reorganisation of capital and a participant
will be entitled to receive a distribution equivalent payment in the form of additional shares to the value of
dividends the participant would have received during the deferral period. Deferred STI rights will not attract
dividend and voting rights.
When and how do
Deferred STI Rights
vest?
Deferred STI Rights will vest (subject to Board discretion and satisfaction of any applicable condition) 100%
after 12 months. Vesting periods will generally commence on 1 July of the year in which the Deferred STI Rights
are granted. The Board may satisfy any Deferred STI Rights that vest by procuring that Shares are purchased
on market and transferred or issue new Shares in the Company.
Clawback and Board
discretion in relation to
STI Rights
The Board retains a broad discretion to:
•
•
allow for accelerated vesting in special circumstances (e.g., death and incapacity);
determine that some or all unvested Deferred STI Rights will lapse if any situation arises that, in the
Board’s view should impact the assessment of performance. Such situations may include material
misrepresentations and material misstatements in the Company's accounts;
allow for accelerated vesting in certain circumstances e.g. change of control event; and
determine that any Deferred STI Rights that vest are settled in cash not Shares (subject to any ASX
Listing Rule or Corporations Act requirements).
•
•
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Horizon Oil Annual Report 2022
LONG-TERM INCENTIVE (LTI)
EXISTING LTI PLAN
(SARS)
The existing LTI plan applies to LTI s awarded prior to 1 July 2022. It will not apply to the award of LTIs after
1 July 2022.
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 14% above the Index equates to a performance level likely to exceed the 75th percentile of
market returns of companies in the Index (weighted by company size).
Performance period?
SARs will first be tested for vesting at 3 years from award; and thereafter re-tested every 6 months until
5 years from award.
What is the LTI
opportunity?
The CEO has an LTI opportunity equal to 50% of TFR, and other Executives have an LTI opportunity equal to
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-Scholes 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.
32
Horizon Oil Annual Report 2022
NEW LTI PLAN
(PERFORMANCE
RIGHTS)
How is the LTI linked
to performance?
THE HORIZON OIL LIMITED PERFORMANCE RIGHTS PLAN (NEW LTI PLAN) WAS ADOPTED BY THE BOARD ON
15 JUNE 2022. THE FOLLOWING TABLE SETS OUT THE MATERIAL TERMS OF THE NEW LTI PLAN.
The objective the Performance Rights granted pursuant to the New LTIP is to create a stronger link between
eligible employees’ performance and reward, increasing shareholder value via the proposed New LTIP. The
New LTI Plan forms part of the Company’s performance-based remuneration system and provides “at risk”
incentives based on longer term Company performance.
Offer to participate in
the Plan and
consideration
The Board may from time to time make offers (each a Plan Offer) to an ‘Eligible Person’’ (being, any person
who is an employee (including in full-time or permanent part-time employment) or a director of, or a person
who provides services to, the Company or its related bodies corporate, or any other person so designated by
the Board) to participate in the Plan and receive a right to be allocated a fully paid ordinary share in the
Company (SShhaarree), subject to the rules of the Plan (Share Right).
A Plan Offer may be subject to such restrictions and conditions as the Board determines in its absolute
discretion (including, in relation to the applicable expiry date, exercise period and performance criteria).
Unless otherwise stated in the Plan Offer, a participant in the Plan (Participant) is not required to pay for a
grant of Share Rights or the allocation of Shares under a Plan Offer.
Participation in the Plan does not give the Participant a legal or beneficial interest in a Share prior to its
allocation to the Participant, nor any entitlement to a Share, otherwise than in accordance with the Plan Offer
and the rules of the Plan.
Grant of Share Rights
As soon as reasonably practicable following receipt by the Company of an Eligible Person’s acceptance of a
Plan Offer, the Company will, provided that the relevant person continues to be an Eligible Person, grant to
the person the number of Share Rights the subject of the accepted Plan Offer.
Share Rights will not give a Participant any right to dividends or give a Participant a right to vote. However,
Shares issued, transferred or allocated (as applicable) upon a relevant Participant exercising their vested
Share Rights will convey the same rights to dividends and voting as Shares in the same class.
Term of Share rights
Subject to the terms of the Plan (including in relation to circumstances relating to cessation of employment),
the ‘Last Exercise Date‘ (being, the latest date on which a Share Right may be exercised if the Share Right
vests) and ‘Plan Acceptable Date‘ (being, the latest date on which the Company must receive a completed
plan acceptance form from a relevant Participant), are determined by the Board in respect of each grant of
Share Rights. The Share Rights granted have an expiry date no longer than 5 years.
Performance criteria
applicable to Share
Rights
The Board has a broad discretion to prescribe the conditions which must be satisfied or waived before a
particular grant of Share Rights vests and becomes exercisable by the relevant Participant.
A Share Right may only be exercised if it is a vested Share Right and it has not lapsed in accordance with the
terms of the Plan.
Exercise price on
vested Share Rights
The Board may determine whether any exercise price must be paid by the participant on the exercise of
vested Share Rights.
Allocation of Shares
If a relevant Participant opts to exercise vested Share Rights, the Company will allocate to the Participant the
number of Shares to which the Participant is entitled by either (or a combination of) issuing new Shares to the
Participant or procuring the transfer of Shares acquired on market to the Participant.
Cessation of
Employment
In the case of an “Uncontrollable Events” (including death, permanent disablement, retirement,
retrenchment, or such other circumstances which result in the Participant leaving the employment of the
Company or any of its related bodies corporate and which the Board determines is an uncontrollable event)
resulting in a Participant’s cessation of employment, the Board may determine that any unvested Share
Rights either lapse or become vested Share Rights.
If the Participant ceases employment other than because of an Uncontrollable Event, all of the Participant‘s
unvested Share Rights will automatically lapse .
Lapse of Share Rights
Share Rights may lapse in other circumstances, including where the applicable performance criteria are not
wholly satisfied by the time specified in the Plan Offer (unless otherwise specified in the Plan Offer), or where
the Participant commits any act of fraud, defalcation or gross misconduct in relation to the Company’s, or
any of its related bodies corporate’s affairs.
Change of Control
If a Change of Control Event occurs, or the Board determines in its absolute discretion that a Change of Control
Event is likely to occur, subject to the performance criteria applicable to unvested Share Rights, the Board
will determine the appropriate treatment regarding any unvested Share Rights, which may include waiving
the relevant performance criteria, replacing unvested Share Rights with rights to Shares in a new controlling
entity, or causing the unvested Share Rights to lapse .
33
Horizon Oil Annual Report 2022
Re-organisation of
capital, rights issue,
dividend or other
such event
Upon any re-organisation of the issued ordinary capital of the Company, the number of Share Rights, or the
number of Shares allocated on the exercise of the Share Rights, or both will be reconstructed or adjusted to
the extent necessary to comply with, and in accordance with, the ASX Listing Rules applying to a re-
organisation of capital at the time of the reorganisation (as their application in the circumstances is affected
by any waiver granted by ASX).
Key Terms of the
Share Rights issued
onwards from 1 July
2022
The table below sets out the material terms of Share Rights issued under the New LTIP. Share Rights issued
to Richard Beament are subject to shareholder approval at the 2022 AGM.
Start Date
1 July 2022
Last Exercise Date
30 June 2027
TRANCHE
Tranche A Rights
Tranche B Rights
Tranche C Rights
Tranche D Rights
SHARE PRICE
HURDLE (A$)
0.13
0.16
0.18
0.20
EXPIRY DATE
30 June 2027
30 June 2027
30 June 2027
30 June 2027
Share Price Hurdle
Each tranche of Share Rights vests independently of each other tranche of Share Rights.
The Share Price Hurdles are subject to the following adjustments:
•
the relevant Share Price Hurdle will be increased by 10% on each anniversary of the Start Date,
commencing on the third anniversary of the Start Date.
the relevant Share Price Hurdle will be decreased by an amount determined by the Board (in its
absolute discretion) to account for any dividends or return of capital; and
the relevant Share Price Hurdle will be increased or decreased (as applicable) by an amount
determined by the Board (in its absolute discretion) to account for any share consolidation or other
re-organisation of capital of the Company.
•
•
Performance Criteria
Each tranche of Share Rights will vest on the first and any relevant subsequent date following 1 July 2022
upon satisfaction of the following conditions:
•
•
•
•
the price per share meets or exceeds the relevant Share Price Hurdle at the close of trade (each, a
Relevant Gateway Date);
the volume weighted average price of the shares on the ASX for the preceding 1-month period meets or
exceeds the relevant Share Price Hurdle at close of trading on the date that is one year thereafter each
Relevant Gateway Date (each, a Relevant Anniversary Date);
Shares traded in the twelve-month period from the Relevant Gateway Date to the Relevant Anniversary
Date at or above the relevant Share Price Hurdle have a cumulative market value (assessed at the time
each trade was made) of $25,000,000 or more; and
the recipient remains an employee of the Company on the vesting date.
Accordingly, the Share Rights granted in respect of each Tranche may be tested in relation to more than one
period (i.e. in respect of successive Relevant Gateway Dates and associated Relevant Anniversary Dates) and,
subject to the terms of the Plan and the Plan Offer, will vest in their entirety on the earliest Relevant
Anniversary Date on which all of the vesting conditions noted above are satisfied.
Share Right Exercise
Price
Nil
Expiry of exercise
period
If a Share Right vests, then the Share Right may be exercised at any time up to the date which is the earlier
of:
•
•
three years after the Share Right vested; and
the date on which a Change of Control Event occurs or the date on which the Board makes a
determination that a Change of Control Event is likely to occur.
[2.4] - Associated policies
The Group has adopted several policies to support remuneration framework and governance, including the Securities Trading
Policy, Continuous Disclosure Policy and the Corporate Code of Conduct. These policies are available on the Group’s website
www.horizonoil.com.au.
34
Horizon Oil Annual Report 2022
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 40 – 41 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.
Actual remuneration received in respect of the financial year
TOTAL FIXED
REMUNERATION (INCL.
SUPERANNUATION)
US$
NON-
MONETARY
BENEFITS
US$
STI AMOUNTS
US$1
VALUE
DEFERRED
STI RIGHTS
US$
LTI
AWARDS2
TOTAL
EXECUTIVE
C Hodge3
R Beament4
K Bramley6
Total
2022
452,243
55,256
171,261
2021
463,934
32,135
186,897
-
-
2022
333,993
12,040
94,862
94,862
2021
330,790
15,313
59,077
K Quinlivan5
2022
78,652
2021
318,267
5,683
5,985
-
54,876
2022
-
-
-
2021
254,622
12,306
44,109
-
-
-
-
-
-
-
-
-
175,580
-
-
-
678,760
682,966
535,757
405,180
259,915
379,128
-
311,037
1,474,432
1,778,311
2022
864,888
72,979
266,123
94,862
175,580
2021
1,367,613
65,739
344,959
-
-
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 Mr Hodge retired as managing director and Chief Executive Officer effective 30 June 2022.
4 During the period the Board resolved to amend Mr Beament’s maximum STI opportunity to 75% of fixed remuneration with any resultant award being
settled with 50% cash and 50% deferred equity. The above STI Amount of US$94,862 represents the cash component with a further entitlement to an
equivalent share component (Deferred STI rights) which will be settled in shares 12 months after 30 June 2022, subject to meeting certain vesting
conditions.
5 Ms Quinlivan ceased to be a KMP and Company Secretary effective 30 September 2021.
6 Mr Bramley ceased to be a KMP on 19 May 2021.
35
Horizon Oil Annual Report 2022
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
C Hodge
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.
Subsequent to year end and with effect from 1 July 2022, Mr Beament was appointed MD/CEO of the Company and the key
terms of the revised contractual arrangement for Mr Beament is 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 6 months remuneration.
Pro rata STI award based on Board’s reasonable assessment of Mr Beament’s
performance and period of employment during that STI year.
Entitlement to any previously granted LTIP award to be dealt with in accordance
with LTIP rules and the terms of offer.
Termination of employment (with cause)
STI is not awarded.
Board has discretion to lapse all LTIP awards (SARs and Performance Rights).
36
Horizon Oil Annual Report 2022
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 (SARs) 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:
Horizon Oil Limited share price ("HZN") versus S&P/ASX200 Energy Index and Brent Crude Oil
$0.18
$0.16
$0.14
$0.12
$0.10
$0.08
$0.06
$0.04
$0.02
$0.00
70,000,000
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
-
e
m
u
o
V
l
7
1
-
l
u
J
7
1
-
p
e
S
7
1
-
v
o
N
8
1
-
n
a
J
8
1
-
r
a
M
8
1
-
y
a
M
8
1
-
l
u
J
8
1
-
p
e
S
8
1
-
v
o
N
9
1
-
n
a
J
9
1
-
r
a
M
9
1
-
y
a
M
9
1
-
l
u
J
9
1
-
p
e
S
9
1
-
v
o
N
0
2
-
n
a
J
0
2
-
r
a
M
0
2
-
y
a
M
0
2
-
l
u
J
0
2
-
p
e
S
0
2
-
v
o
N
1
2
-
n
a
J
1
2
-
r
a
M
1
2
-
y
a
M
1
2
-
l
u
J
1
2
-
p
e
S
1
2
-
v
o
N
2
2
-
n
a
J
2
2
-
r
a
M
2
2
-
y
a
M
2
2
-
l
u
J
HZN Trading Volume (RHS)
HZN Share Price (Rebased for capital return)
S&P/ASX 200 Energy Index (Rebased)
Brent Crude Oil (Rebased)
The table below sets out information regarding the Group’s performance over the last five years as required by the
Corporations Act.
Profit/(loss) before tax (US$’000)
EBITDAX (US$’000)
Net cash/(debt) (US$’000)
FY22
42,739
73,008
42,849
FY211
5,178
36,391
31,696
FY201
27,300
51,392
489
FY19
FY18
48,409
93,012
(1,580)
68,482
(27,959)
(88,608)
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.
37
Horizon Oil Annual Report 2022
[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
Financial Metrics &
Profitability
Achievement of budgeted
revenue, operating costs and
cashflow across the Block
22/12 and Maari/Manaia fields
Maintain average Group
operating costs 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
OPERATIONAL
Production
Optimisation
Achieve budgeted production
Maximise profitability and cashflow
Achieved
USINESS
DEVELOPMENT
Organic growth and
an opportunistic
approach to inorganic
growth
Focus on organic growth
opportunities resulting in
reserve additions
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 on requirements of
Horizon’s sustainability
roadmap, with enhanced
reporting in accordance with
TCFD guidelines
Ensure sustainability of the business
and cashflow whilst creating value
for shareholders
Exceed
Promote safe operations with a safe
workplace for employees
Achieved
Ensure Company has the necessary
resources to achieve strategic
objectives
Exceed
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.
The table below shows the STIs awarded during the financial year:
EXECUTIVE
C Hodge
R Beament2
TOTAL OPPORTUNITY
US$1
% OF FIXED REMUNERATION
%
AWARDED
%
FORFEITED
214,076
237,154
50%
75%
80%
80%
20%
20%
1
2
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 2022.
During the period the Board resolved to amend Mr Beament’s maximum STI opportunity to 75% of fixed remuneration with any resultant award being settled
with 50% cash and 50% deferred equity. This was to remunerate for Mr Beament for assuming the role of Company Secretary during the period and in light
of his appointment to Chief Executive Officer and Managing Director effective 1 July 2022.
38
Horizon Oil Annual Report 2022
[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 FY22
LTI quantum for
FY22
LTI awards for Executives are made at the beginning of the financial year. During calendar year 2021, LTIs were
awarded to Executives in respect of FY22.
LTI awards were in the form of SARs. For FY22, each SAR had a fair value of A$0.0535, calculated by an
independent expert using the Black-Scholes model. The Horizon share price at allocation (known as ‘strike price’)
was A$0.103.
The table below shows the financial year LTI grants.
EXECUTIVE % OF TFR
NUMBER OF
SARS GRANTED
DURING FY22
VALUE OF SARS AT
EFFECTIVE
ALLOCATION DATE1
NUMBER OF SARS
VESTED DURING FY22
NUMBER OF SARS
LAPSED DURING
FY22
C Hodge
50%
5,808,411
233,252
-
R Beament
21.4%
1,836,000
73,729
K Quinlivan
21.4%
-
-
1,318,690
4,553,298
-
-
1,113,561
1
The value of a SAR at allocation (1 July 2021) is calculated in accordance with AASB 2 ‘Share-based Payment’ of SARs.
Awards vesting
in FY22
During the year 5,871,988 SARs held by KMP’s vested and 4,553,298 SARs were exercised. The exercised SARs
were settled in cash with consideration of A$0.03746 per SAR.
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 eight years. Note that the remuneration table set out on page 41 shows
remuneration in US$ in line with the Group’s functional currency.
The table below shows the levels for NEDs (exclusive of superannuation) for FY22.
FEES
Board Fees
DESCRIPTION
Chair
PER ANNUM
A$162,365
Other Non-executive Directors
A$81,183
There were no additional fees paid to NEDs during the financial year for being members of the Board committees. The NEDs
are reimbursed for expenses reasonably incurred in attending to the affairs of the Company. There are no retirement
allowances in place for NEDs.
39
Horizon Oil Annual Report 2022
Statutory and share based reporting
[7.1] - Director remuneration for the financial year
The following table sets out the statutory disclosures required under the Corporations Act 2001 (Cth) and in accordance with
Australian Accounting Standards remuneration for Directors for the years ended 30 June 2022 and 30 June 2021.
SHORT-TERM BENEFITS
POST-EMPLOYMENT BENEFITS
TOTAL5
CASH SALARY / BOARD FEES
US$
SUPERANNUATION4
US$
FINANCIAL YEAR ENDED
30 JUNE 2022 AND 2021
NON-EXECUTIVE DIRECTOR
M Harding
G de Nys1
S Birkensleigh
G Bittar2
B Clement
N Burgess3
2022
117,150
2021
121,945
2022
24,826
2021
60,973
2022
58,576
2021
60,973
2022
58,576
2021
60,973
2022
58,576
2021
51,294
2022
64,434
2021
-
Total Director remuneration
2022
382,138
2021
356,158
Total Director remuneration(A$)
2022
520,923
2021
475,739
11,715
11,585
2,483
5,792
5,858
5,792
5,858
5,792
5,858
4,873
-
-
31,772
33,834
52,092
45,195
US$
128,865
133,530
27,309
66,765
64,434
66,765
64,434
66,765
64,434
56,167
64,434
-
413,910
389,992
573,015
520,934
1 Mr de Nys retired as non-executive director at Horizon’s 2021 Annual General Meeting.
2 Mr Lorenzon, as alternate Director to Mr Bittar, received no fees during the current and prior financial periods.
3 Mr Burgess was appointed as a non-executive director effective 1 July 2021. Mr Burgess’s gross fees are paid to Samuel Terry Asset Management (Pty) Ltd.
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.
40
Horizon Oil Annual Report 2022
[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 2022 and
30 June 2021.
FINANCIAL YEAR ENDED
30 JUNE 2022 AND 2021
SHORT-TERM BENEFITS
POST-EMPLOYMENT
BENEFITS
OTHER KEY MANAGEMENT
PERSONNEL
CASH
SALARY &
FEES
STIs
NON-
MONETARY1
SUPERAN
NUATION2
TERMINA
TION
BENEFIT
TOTAL
CASH OR
IN-KIND
BENEFIT
431,502
171,261
55,256
14,303
285,434
957,756
C Hodge6
Chief Executive
Officer
R Beament9
Chief Financial
Officer
K Quinlivan7
General Counsel
K Bramley8
GM, Commercial &
Business Dev
Total KMP
remuneration
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
447,740
186,897
32,135
16,194
319,069
94,862
12,040
312,128
59,077
15,313
17,164
18,662
60,466
-
5,683
5,073
299,605
54,876
5,985
18,662
-
-
-
-
238,199
44,109
12,306
16,423
-
-
-
-
-
-
-
LONG-TERM
BENEFITS
SHARE
BASED
PAYMENTS
SARs4
TOTAL
LONG
SERVICE
LEAVE
ACCRUAL3
-
-
77,680
1,035,436
-
682,966
682,966
443,135
(21,379)
69,560
491,316
405,180
6,311
68,680
480,171
71,222
379,128
-
-
-
-
57,069
128,291
57,997
437,125
-
-
311,037
4,612
51,231
366,880
811,037
266,123
72,979
36,540
285,434
1,472,113
(21,379)
204,309
1,655,043
1,297,672
344,959
65,739
69,941
-
1,778,311
10,923
177,908
1,967,142
Total KMP
remuneration (A$)
2022
1,113,031
386,30
0
100,292
50,087
414,333
2,064,043
(29,380)
283,393
2,318,056
2021
1,739,601
458,845
88,067
93,777
-
2,380,290
14,632
250,964
2,645,886
1 non-monetary benefits include the value of car parking, insurances, accommodation 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 Mr Hodge retired as managing director and Chief Executive Officer effective 30 June 2022. Mr Hodge has agreed to assist in an orderly transition of his executive
responsibilities to Mr Beament until 31 October 2022. Mr Hodge will receive his ordinary fixed remuneration during the transitional period and will receive a final
payment of $285,434 for residual contract entitlement including a payment in lieu of notice. At 31 October 2022 any unvested SARs held by Mr Hodge will lapse.
7 Ms Quinlivan tendered her resignation and cease to be a KMP and Company Secretary effective 30 September 2021.
8 K Bramley was issued notice of redundancy on 19 May 2021 where he ceased to be a KMP.
9 During the period the Board resolved to amend Mr Beament’s maximum STI opportunity to 75% of fixed remuneration with any resultant award being
settled with 50% cash and 50% deferred equity. The above US$94,862 represents the cash component with a further entitlement to an equivalent share
component which will be settled in shares 12 months after 30 June 2022.
41
Horizon Oil Annual Report 2022
[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 2022:
KMP
Opening Balance
30 June 2022
Acquired
during FY22
Disposed of
during FY22
Received during financial
year on the exercise of
options
Closing Balance
30 June 2022
DIRECTORS
M Harding
C Hodge
G de Nys
-
-
2,203,639
S Birkensleigh
G Bittar
B Clement
-
-
-
N Burgess1
314,212,423
OTHER KMP
R Beament
38,184
K Quinlivan
-
500,000
1,000,000
-
-
-
-
1,000,000
-
-
62,000
-
(1,500,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
1,000,000
703,639
-
1,000,000
-
314,212,423
100,184
-
1
Mr Burgess is a Director of Samuel Terry Asset Management Pty Ltd, the Trustee and Investment Manager of Samuel Terry Absolute Return Fund which
holds the 314,212,423 shares.
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 2022:
KMP
BALANCE AT
START OF
FINANCIAL
YEAR
GRANTED AS
REMUNERATION
DURING
FINANCIAL YEAR
EXERCISED
DURING
FINANCIAL
YEAR
LAPSED
DURING
FINANCIAL
YEAR
BALANCE AT
END OF
FINANCIAL YEAR
VESTED AND
EXERCISABLE AT
END OF FINANCIAL
YEAR
UNVESTED
C Hodge1
-
5,808,411
R Beament
6,710,753
1,836,000
-
-
-
-
5,808,411
-
5,808,411
8,546,753
1,318,690
7,228,063
K Quinlivan
5,666,859
-
(4,553,298)
(1,113,561)
-
-
-
1
Mr Hodge retired as managing director and Chief Executive Officer effective 30 June 2022. Mr Hodge has agreed to assist in an orderly transition of his
executive responsibilities to Mr Beament until 31 October 2022 upon which time any unvested SARs will lapse.
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.
[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.
42
Horizon Oil Annual Report 2022 [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
01/07/2017
01/07/2018
01/07/2019
01/07/2020
01/07/2021
01/07/2022
01/07/2023
01/07/2024
01/07/2025
01/07/2026
Nil
Nil
Nil
Nil
Nil
A$0.0153
A$0.1139
A$0.0754
A$0.033
A$0.073
A$0.0197
A$0.0730
A$0.0576
A$0.0264
A$0.0535
100% after 20/10/20204
100% after 20/10/20214
100% after 20/10/20224
100% after 20/10/20234
100% after 20/10/20244
1
2
3
4
The ‘strike price’ for SARs is the 10-day volume weighted average price for Horizon shares at effective allocation date. Following shareholder approval of
a A$ 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.
The strike prices above reflect this reduction.
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 2022 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 2021
1 July 2026
Nil1
A$0.103
55% p.a.
0.72% p.a.
0.00% p.a.
43
Horizon Oil Annual Report 2022
Details of remuneration –SARs
For each grant of SARs currently on issue to KMP in the current or prior financial years which results in an amount being
disclosed in the Remuneration Report as a share-based payment to KMP for the financial year, the percentage of the grant
that vested in the financial year and the percentage that was forfeited because the person did not meet the vesting or
performance conditions is set out below. The SARs may vest after three years, subject to the performance conditions being
met. No SARs will vest if the performance conditions are not fulfilled, therefore the minimum value of SARs yet to vest is
US$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
C Hodge
FORMER KMP
K Quinlivan
M Sheridan
A Fernie
B Emmett
2019
2020
2021
2022
2022
2019
2020
2021
2018
2019
2020
2018
2018
100%
-
-
-
-
-
100%
100%
100%
100%
-
100%
100%
-
-
-
-
-
Fully vested
30/06/2023
30/06/2024
30/06/2025
30/06/2025
100%
Lapsed
-
-
-
-
-
-
-
Exercised
Exercised
Fully vested
Fully vested
30/06/2023
Fully vested
Fully vested
-
-
22,576
49,175
155,359
-
-
-
-
-
-
-
-
1
The above values have been converted to dollars at the exchange rate prevailing on the date of the grant of the SARs.
Distributions
On 25 August 2022, the Company announced total distributions of AUD 3 cents per share comprising an AUD 1.65 cent per
share unfranked (conduit foreign income) dividend and an AUD 1.35 cent per share return of capital, which is subject to
shareholder approval. The Company will hold an Extraordinary General Meeting (EGM) on 7 October 2022 seeking shareholder
approval for the capital return.
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.
44
Horizon Oil Annual Report 2022 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
2022
US$
2021
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
161,925
159,509
24,186
11,822
186,111
171,331
-
-
-
-
9,819
9,819
10,567
10,567
Total auditors’ remuneration
186,111
191,717
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.
45
Horizon Oil Annual Report 2022 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 47.
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
25 August 2022
R Beament
Chief Executive Officer
46
Horizon Oil Annual Report 2022
Auditor’s Independence Declaration
As lead auditor for the audit of Horizon Oil Limited for the year ended 30 June 2022, 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
25 August 2022
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.
Horizon Oil Annual Report 2022 47
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 2022 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 2022
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
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
Liability limited by a scheme approved under Professional Standards Legislation.
48 Horizon Oil Annual Report 2022
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
● Amongst other relevant
topics, we communicated
the following key audit
matter to the Audit and
Risk Committee:
− Restoration provision
● This is further described
in the Key audit matters
section of our report.
● Our audit focused on where
the Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
● Our audit focused on the joint
arrangements in place for the
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 restoration
provision on an annual basis.
Our scope included
assessing the work of the
internal expert.
● For the purpose of our audit we
used overall Group materiality of
$1,460,000, 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.
We determined that a 2%
threshold was appropriate based
on our professional judgement,
noting it is within the range of
commonly acceptable thresholds.
Horizon Oil Annual Report 2022 49
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
Restoration provision
(Refer to note 19)
During the year there has been a change in the New
Zealand legislation around restoration of oil and gas
offshore sites which requires the Group to reassess
its estimates in relation to the restoration provision.
Separately, the China operations have commenced
production at the WZ 12-8E oil field during the year.
Therefore, a restoration provision in relation to the
demobilisation of the new production platform has
been recognised for the first time.
There is a level of subjectivity involved in determining
the required restoration activities and the related
costs. Moreover, there are also estimates of inflation
and discount rates used within the calculation to
arrive at the present value of the provision. Hence,
due to the multiple assumptions and the estimation
uncertainty associated with the overall calculation, it
has been considered as a key audit matter.
We have performed the following procedures
amongst others:
● Assessed the changes in the key
components of cost from the previous year
estimate.
● Re-calculated the balance of the estimate as
per the Group’s valuation model.
● Assessed the significant assumptions used
in the valuation model i.e., the discount rate
and the inflation rate and compared these to
the available market information.
● Assessed the competence and experience
of the internal expert.
● Assessed the reasonableness of the
relevant disclosures against the
requirements of the Australian Accounting
Standards.
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 2022, 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.
50 Horizon Oil Annual Report 2022
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.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 28 to 44 of the directors’ report for the
year ended 30 June 2022.
In our opinion, the remuneration report of Horizon Oil Limited for the year ended 30 June 2022
complies with section 300A of the Corporations Act 2001.
Horizon Oil Annual Report 2022 51
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
25 August 2022
52 Horizon Oil Annual Report 2022
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 2022 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
25 August 2022
R Beament
Chief Executive Officer
53
Horizon Oil Annual Report 2022 HORIZON OIL LIMITED
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2022
NOTE
4
5
4
5
5
5
5
5
5
5
5
6a
6b
27b
-
CONSOLIDATED
2022
US$’000
108,133
(57,365)
2021
US$’000
63,571
(47,126)
50,768
16,445
1
(3,341)
(1,944)
(810)
977
(1,998)
-
-
(914)
42,739
(3,549)
(14,864)
24,326
24,326
6
24,332
24,326
24,326
24,332
24,332
817
(3,836)
(1,950)
(2,073)
1,413
(2,038)
(2,930)
(378)
(292)
5,178
(1,274)
958
4,862
3,147
8,009
982
8,991
8,009
8,009
8,991
8,991
REVENUE
Cost of sales
Gross profit
Other income
General and administrative expenses
Insurance expense
Exploration and development expenses
Gain on remeasurement of derivative financial instruments
Finance costs – interest, transaction costs, other
Finance (costs)/income – unrealised movement in value of options
Restructuring expense
Other expenses
Profit before income tax
NZ royalty tax expense
Income tax benefit/(expense)
Profit from continuing operations
Profit from discontinued operations
Profit for the financial year
OTHER COMPREHENSIVE INCOME - ITEMS THAT MAY BE RECLASSIFIED TO PROFIT AND LOSS
Changes in the fair value of cash flow hedges
Total comprehensive income for the financial year
Profit attributable to:
Security holders of Horizon
Profit for the financial year
Total comprehensive income attributable to:
Security holders of Horizon
Total comprehensive income for the financial year
Earnings per share for profit attributable to ordinary equity holders of Horizon:
US cents
US cents
Basic earnings per ordinary share
Diluted earnings per ordinary share
Basic earnings per ordinary share from continuing operations
Diluted earnings per ordinary share from continuing operations
39a
39b
39c
39d
1.54
1.49
1.54
1.49
0.61
0.49
0.37
0.30
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
54
Horizon Oil Annual Report 2022
HORIZON OIL LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2022
CONSOLIDATED
NOTE
2022
US$’000
2021
US$’000
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Current tax receivable
Derivative financial instruments
Other assets
Intangible assets
Total current assets
NON-CURRENT ASSETS
Deferred tax assets
Plant and equipment
Oil and gas assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Payables
Current tax payable
Borrowings
Derivative financial instruments
Total current liabilities
NON-CURRENT LIABILITIES
Payables
Deferred tax liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Profit reserve
TOTAL EQUITY
7
8
9
11
10
11
12
13
14
15
16
17
18
10
16
20
18
19
21
22a
22b
22c
44,086
18,087
4,183
763
162
420
1,202
68,903
6,618
62
106,879
113,559
182,462
26,350
9,087
1,177
156
36,770
111
13,038
-
33,317
46,466
83,236
99,226
159,343
12,093
(96,536)
24,326
99,226
44,436
13,982
2,555
1,005
1,413
564
1,296
65,251
8,700
501
112,338
121,539
186,790
16,405
1,774
10,939
-
29,118
181
14,808
1,196
31,212
47,397
76,515
110,275
194,114
12,697
(96,536)
-
110,275
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
55
Horizon Oil Annual Report 2022
HORIZON OIL LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED
30 JUNE 2022
CONSOLIDATED
ATTRIBUTABLE TO MEMBERS OF HORIZON
CONTRIBUTED
EQUITY
RESERVES
ACCUMULATED
LOSSES
PROFIT
RESERVE
TOTAL
EQUITY
NOTE
US$’000
US$’000
US$’000
US$’000
US$’000
BALANCE AS AT 1 JULY 2020
174,801
12,599
(104,545)
Profit for the financial year
Changes in the fair value of cash flow hedges
Total comprehensive loss 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
22(b)
22(a)
22(a)
22(a)
22(a)
-
-
-
-
-
-
Shares bought back and cancelled
21(e)
(1,548)
Exercise of general options and ordinary shares
issued
21(f)
20,861
-
982
982
28
(998)
86
-
-
8,009
-
8,009
-
-
-
-
-
Balance as at 30 June 2021
Balance as at 1 July 2021
Profit for the financial year
Changes in the fair value of cash flow hedges
Total comprehensive income for the financial
year
Transactions with owners in their capacity as
equity holders:
Employee share-based payments expense
Settlement of exercised options
Acquisition of treasury shares
Issue of treasury shares
Capital return
194,114
194,114
12,697
(96,536)
12,697
(96,536)
22(b)
22(a)
22(a)
22(a)
22(a)
22(a)
-
-
-
-
-
-
-
21(b)(i)
(34,771)
-
6
6
370
(1,063)
(706)
430
359
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
82,855
8,009
982
8,991
28
(998)
86
(1,548)
20,861
110,275
110,275
24,326
24,326
-
6
24,326
24,332
-
-
-
-
-
370
(1,063)
(706)
430
(34,412)
Balance as at 30 June 2022
159,343
12,093
(96,536)
24,326
99,226
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
56
Horizon Oil Annual Report 2022
HORIZON OIL LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED
30 JUNE 2022
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
Capital Return
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
2022
US$’000
2021
US$’000
101,433
57,411
(32,820)
(28,106)
68,613
29,305
1
(976)
(10,712)
-
(1,226)
(4,918)
38
56,926
23,161
-
(58)
3,764
(670)
(10,380)
(6,434)
(3)
(16)
(10,441)
(3,356)
(213)
-
(347)
-
(191)
(1,548)
(998)
14,140
(34,771)
-
18a
(11,503)
(12,691)
(46,834)
(1,288)
(349)
44,436
(1)
18,517
25,920
(1)
Cash and cash equivalents at the end of the financial year
7
44,086
44,436
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
57
Horizon Oil Annual Report 2022
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 2022 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 2022. 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 2022.
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 2022, except as disclosed in Note 2.
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Horizon Oil Annual Report 2022
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 2022 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 26.
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.
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Horizon Oil Annual Report 2022
Foreign currency translation
[[ii]] 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.
[[iiii]] 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.
[[iiiiii]] 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.
60
Horizon Oil Annual Report 2022
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
[[ii]]
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.
[[iiii]] 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
61
Horizon Oil Annual Report 2022 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 Note1(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 2022 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
62
Horizon Oil Annual Report 2022 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
[[ii]] 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.
63
Horizon Oil Annual Report 2022 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).
[[iiii]] 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).
[[iiiiii]] 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.
[[iivv]] Reserves
The estimated reserves include those determined on an annual basis by Mr Gavin Douglas, Chief Operating Officer 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).
64
Horizon Oil Annual Report 2022 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
[[ii]] 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 do not expire.
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 22(A).
65
Horizon Oil Annual Report 2022 [[ii]] 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.
[[iiii]] 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$28,476 borrowing costs (2021: US$Nil) capitalised during the current financial year and the amount of
borrowing costs amortised to the income statement were US$739,552 (2021 US$705,396).
Employee benefits
[[ii]] 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.
[[iiii]] 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
66
Horizon Oil Annual Report 2022 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.
[[iiiiii]] 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 31.
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 prior financial year, the Group established the Horizon Oil Employee Incentive Trust to administer the Long-Term
Incentive Plan and Horizon Oil 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 Oil 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.
67
Horizon Oil Annual Report 2022
Earnings per share
[[ii]] 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.
[[iiii]] 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 40, has been prepared on the same
basis as the consolidated financial statements, except as set out below.
[[ii]]
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.
[[iiii]] Financial guarantees
Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no
compensation, the fair values of these guarantees are accounted for as contributions and recognised as part of the cost of
the investment.
Critical accounting estimates and judgements
This section considers estimates and judgements which are continually evaluated and are based on historical experience
and other factors, including expectations of future events that may have a financial impact on the Group and that are
believed to be reasonable under the circumstances.
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The most significant estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amount of assets and liabilities relate to:
68
Horizon Oil Annual Report 2022
[[ii]] 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.
[[iiii]] 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.
[[iiiiii]] 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 activities, as well as, the
discount rate. The carrying amount of the provision for restoration is disclosed in Note 19.
New Zealand, Maari Restoration
During the financial year, the Group revised the future cost estimates from which the provision for restoration of the New
Zealand licence is derived. Following continued volatility in yields and inflation rates, the Group revised the discount and
inflation rate used in quantifying the New Zealand restoration provision. In addition to the discount and inflation rate
changes, the Group also made minor scope changes to the decommissioning methodology. The resultant effect is an
increase in the restoration provision and rehabilitation asset of US$1.09 million.
China, WZ12-8E Restoration
During the financial year, significant works were completed in relation to the WZ12-8E development, which included
modifications to the 12-8W platform, laying and trenching of 8.2 km 12-8E oil export pipeline and the installation of a riser, J-
tube and expansion joint at the 12-8W end. Taking these works into consideration, a decommissioning provision of US$0.5
million has been recorded.
[[iivv]] 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 created by
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 10%.
[[vv]] Share-based payments
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 is ascertained using an appropriate
pricing model, being either the Black-Scholes or Monte Carlo simulation, depending on the terms and conditions upon which
69
Horizon Oil Annual Report 2022 the share performance rights and employee 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 and employee options outstanding are disclosed in Note 31.
[[vvii]] 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, WZ12-8W and WZ12-8E oil field developments 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.
70
Horizon Oil Annual Report 2022
Segment information provided to the chief operating decision maker
2022
CHINA
EXPLORATION &
DEVELOPMENT
NEW ZEALAND
EXPLORATION &
DEVELOPMENT
ALL OTHER
SEGMENTS
TOTAL
US$’000
US$’000
US$’000
US$’000
SEGMENT INFORMATION:
Revenue from external customers
Profit/(loss) before tax
Depreciation and amortisation
Total segment assets as at 30 June 2022
74,325
30,881
(19,222)
89,649
33,808
12,803
(7,796)
69,026
-
(945)
(442)
108,133
42,739
(27,460)
23,787
182,462
Additions to non-current assets other than financial assets and deferred tax during the financial year ended:
Development and production phase expenditure:
18,619
Plant and equipment:
-
189
-
-
3
18,808
3
Total segment liabilities as at 30 June 2022
39,455
42,027
1,754
83,236
2021
CHINA
EXPLORATION &
DEVELOPMENT
NEW ZEALAND
EXPLORATION &
DEVELOPMENT
ALL OTHER
SEGMENTS
TOTAL
US$’000
US$’000
US$’000
US$’000
SEGMENT INFORMATION:
Revenue from external customers
Profit/(loss) before tax
Depreciation and amortisation
Total segment assets as at 30 June 2021
38,120
9,306
(15,889)
80,371
25,451
1,766
(7,972)
81,877
-
63,571
(5,894)
5,178
(311)
(24,172)
24,542
186,790
Additions to non-current assets other than financial assets and deferred tax during the financial year ended:
Exploration phase expenditure:
297
Development and production phase expenditure:
9,844
Plant and equipment:
-
Total segment liabilities as at 30 June 2021
35,218
-
4,229
-
39,106
-
-
16
297
14,073
16
2,191
76,515
Other segment information
[[ii]] Segment revenue
The Group’s revenue is derived from the sale of crude oil produced in China and New Zealand. The Group sells to external
customers, including through sales agreements with the respective joint venture operators.
Reportable segment revenues are equal to consolidated revenue.
[[iiii]] Segment profit before tax
The chief operating decision maker assesses the performance of operating segments based on a measure of profit before
tax.
Segment profit before tax is equal to consolidated profit before tax.
71
Horizon Oil Annual Report 2022
[[iiiiii]] Segment assets
The amounts provided to the chief operating decision maker with respect to total assets are measured in a manner
consistent with that of the financial statements.
Reportable segment assets are equal to consolidated total assets.
[[iivv]] Segment liabilities
The amounts provided to the chief operating decision maker with respect to total liabilities are measured in a manner
consistent with that of the financial statements.
Reportable segment liabilities are equal to consolidated total liabilities.
Revenue
FROM CONTINUING OPERATIONS
Crude oil sales
Net realised (loss) / gain on oil hedging derivatives
OTHER INCOME
Insurance claim income1
Interest received from unrelated entities
Other non-operating income
CONSOLIDATED
2022
US$’000
2021
US$’000
112,602
(4,469)
70,124
(6,553)
108,133
63,571
-
1
-
1
780
-
37
817
1
During the prior period, the Group recovered US$0.8 million as full and final settlement for outstanding insurance claims pertaining to the Maari asset.
Following the recovery of these funds there are no outstanding insurance claims.
Revenue for the financial year ended 30 June 2022 relates to contracts executed for the sale of crude oil and all performance
obligations have been met within the period. There is no variable consideration requiring estimation for the year ended
30 June 2022.
The Group did not have contracts that were executed in a prior period, whereby the performance obligations were partially
met at the beginning of the period. There are no existing contracts that are unsatisfied or partially unsatisfied as at
30 June 2022.
The Group’s revenue disaggregated by primary geographical markets is reported in Note 3 – Segment information.
72
Horizon Oil Annual Report 2022
The Group’s revenue disaggregated by pattern of revenue recognition is as follows:
CRUDE OIL SALES
Goods transferred at a point in time
Goods transferred over a period of time
Expenses
COST OF SALES
Direct production costs
Inventory adjustments1
Amortisation expense
Royalties and other levies
1 Adjustment for the cost of inventory produced which is on hand as at the end of the financial period.
GENERAL AND ADMINISTRATIVE EXPENSES
Employee benefits expense
Employee share options expense
Corporate office expense
Depreciation expense
Rental expense relating to operating leases
INSURANCE EXPENSE
Insurance expense (including Loss of Production Income insurance)
EXPLORATION AND DEVELOPMENT EXPENSES
Exploration and development expenditure expensed
GAIN ON REMEASUREMENT OF DERIVATIVE FINANCIAL INSTRUMENTS
Gain on remeasurement of derivative financial instruments2
CONSOLIDATED
2022
US$’000
2021
US$’000
33,808
74,325
108,133
25,451
38,120
63,571
CONSOLIDATED
2022
US$’000
2021
US$’000
23,393
(1,927)
27,018
8,881
57,365
1,585
370
939
442
5
22,306
390
23,861
569
47,126
1,908
364
1,249
311
4
3,341
3,836
1,944
1,944
810
810
(977)
(977)
1,950
1,950
2,073
2,073
(1,413)
(1,413)
2 The gain on the remeasurement of derivative financial instruments relates to oil price swaps whereby hedge accounting has not been applied. Refer
Note 10 for details on the Group’s derivative financial instruments.
73
Horizon Oil Annual Report 2022
Note 5: Expenses (Continued)
FINANCING COSTS
Interest and finance charges
Discount unwinding on provision for restoration
Unrealised movement in fair value of derivative financial instrument3
Amortisation of prepaid financing costs
CONSOLIDATED
2022
US$’000
2021
US$’000
949
475
-
574
1,998
1,297
230
2,930
511
4,968
3 During the prior period, the Group reported an unrealised loss of $2,930,000 relating to the mark to market revaluation of the derivative financial
liability arising from the share options issued in respect of the subordinated secured facility.
RESTRUCTURING EXPENSES
Restructuring expenses4
-
-
4 During the prior period, the Group further reduced headcount by 19%, thereby incurring one off redundancy expenses.
OTHER EXPENSES
Net foreign exchange losses5
Other expenses
560
354
914
378
378
284
8
292
5 The net foreign exchange loss in the current period predominately relates to the non-recurring foreign exchange movement of the AUD cash proceeds
received (AUD 18.3 million) on exercise of the 300 million general options received in June 2021 and subsequently distributed to shareholders as part of
the capital return paid in August 2021. The foreign exchange movement arises due to the depreciation of the AUD over the period between receipt of the
funds and subsequent capital return. This is required to be recorded for accounting purposes as the Group has a USD functional currency despite the
funds being received, held and subsequently distributed in AUD.
Income tax expense
(a)
Royalty tax expense (benefit)
Royalty paid / payable in New Zealand – current tax expense
Tax benefit related to movements in deferred tax balances
Total royalty tax expense
(b)
Income tax expense
Current tax expense
Tax expense related to movements in deferred tax balances
Adjustments for current tax of prior periods
Total income tax (benefit)/expense
Deferred income tax expense / (benefit) included in income tax expense comprises:
Decrease/(increase) in deferred tax assets
(Decrease)/increase in deferred tax liabilities
Total deferred income tax (benefit)/expense
74
CONSOLIDATED
2022
US$’000
2021
US$’000
4,300
(751)
3,549
14,295
1,063
(494)
14,864
1,186
(123)
1,063
1,529
(255)
1,274
2,457
(2,070)
(1,345)
(958)
(2,138)
68
(2,070)
Horizon Oil Annual Report 2022
(c)
Numerical reconciliation between profit before tax and tax expense / (benefit)
Profit from continuing operations before income tax
Profit / (Loss) from discontinuing operations before income tax
Less: Royalty paid / payable
Tax at the Australian tax rate of 30% (2021: 30%)
Tax effect of amounts which are not deductible / (taxable) in calculating taxable income:
Expenditure not allowed for income tax purposes
Other deductible items
Non-assessable income
Other assessable items
Effect of overseas tax rates
Deferred tax asset not brought to account
Previously unrecognised deferred tax now recognised
Tax paid on non-resident insurance premiums
Adjustments for current tax of prior periods
Income tax (benefit)/expense
Royalty tax expense
CONSOLIDATED
2022
US$’000
2021
US$’000
42,739
5,178
-
3,147
(4,300)
(1,529)
38,439
6,796
11,532
2,039
490
(380)
23
5,324
5,457
(2,394)
755
-
8
(494)
14,864
3,549
1,689
(1,224)
(2,946)
841
399
(351)
698
(368)
9
(1,345)
(958)
1,274
Total tax expense recognised in statement of profit or loss
18,413
316
(d)
Amounts recognised in other comprehensive income
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% (2021: 30%)
Potential tax benefit at applicable tax rates
111
111
352
352
2,884
3,060
2,884
3,060
The Company also did not recognise further deferred income tax assets of US$445,935 (2021: US$576,561) in respect of other
timing differences amounting to US$1.486,451 (2021: US$1,921,869).
The Company has no Australian subsidiaries and therefore it is not subject to the Australian tax consolidation regime.
75
Horizon Oil Annual Report 2022
Cash and cash equivalents
Cash at bank and on hand
Restricted cash1
CONSOLIDATED
2022
US$’000
26,975
17,111
44,086
2021
US$’000
37,152
7,284
44,436
1 Under the terms of Horizon’s Revolving Cash Advance Facility (refer to Note 18(B)), certain cash balances are available to the Group after certain conditions
of the relevant facility agreement are satisfied. No restricted cash was held on deposit during the year (2021: US$Nil).
Receivables
Trade and other receivables1
CONSOLIDATED
2022
US$’000
18,087
18,087
2021
US$’000
13,982
13,982
1 Of this balance US$Nil (2021: US$Nil) related to amounts receivable from related parties. Refer to Note 30 for further details.
Information about the Company’s exposure to credit and market risks, and collectability of overdue amounts, is included in
Note 23(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 asset - Oil price swaps – cash flow hedges
Derivative liability – Foreign exchange contracts – cash flow hedges
76
CONSOLIDATED
2022
US$’000
2021
US$’000
3,020
1,163
4,183
1,473
1,082
2,555
CONSOLIDATED
2022
US$’000
2021
US$’000
-
162
(156)
6
1,413
-
-
1,413
Horizon Oil Annual Report 2022
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 23(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 2022, the Group had 45,000 bbls of crude oil hedged through Brent oil price swaps and put options at a weighted
average price of US$109/bbl.
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 2022, the Group had no outstanding swap contracts recognised at fair value through profit and loss.
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 and AUD. As at 30 June 2022, the Group had
hedged NZD 1.8 million and AUD 1.8 million, through forward exchange contracts, hedging a portion of the New Zealand
operating costs and Corporate Head Office costs over the next 6 to 12 months.
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$4,468,988 (2021: net loss of US$6,096,126) was transferred to profit or loss.
Other assets & current tax receivable
Current tax receivable – New Zealand1
Current tax receivable – China2
Other assets - prepayments
CONSOLIDATED
2022
US$’000
2021
US$’000
490
273
763
420
420
1,005
-
1,005
564
564
1 The current tax receivable relates to payments made in excess of the current tax obligations in New Zealand. The balance can be applied against future
periods tax obligations and/or withdrawn in cash.
2 The current tax receivable relates to income tax refund received from the Chinese tax authorities.
77
Horizon Oil Annual Report 2022
Intangible assets
CURRENT ASSETS
FINANCIAL YEAR ENDED 30 JUNE 2021
Cost – 1 July 2020
Additions
Disposals - settlements
Closing value
FINANCIAL YEAR ENDED 30 JUNE 2022
Cost – 1 July 2021
Additions
Disposals – settlements2
Closing value
CONSOLIDATED
NEW ZEALAND
CARBON
CREDITS1
US$’000
TOTAL
US$’000
802
494
-
802
494
-
1,296
1,296
1,296
361
(455)
1,202
1,296
361
(455)
1,202
1 The Group acquires New Zealand Units ((NZUs) also referred to as carbon credits) to surrender to the New Zealand Government through the Environmental
Protection Authority, for its proportionate share of the Maari/Manaia fields direct greenhouse gas emissions for the calendar year. NZUs are tradable
instruments with transactions taking place on the New Zealand Emissions Trading Register, which is operated by the Environmental Protection Authority.
The NZUs are recorded at cost and are not amortised and are tested for impairment at each balance sheet date.
2 The Company’s obligation for the 2021 calendar year was settled in May 2022 whereby a portion of the NZU’s on hand were surrendered to the
Environmental Protection Authority.
Deferred tax assets
Recognised deferred tax assets are attributable to:
Tax losses
Development and production expenditure
Cash flow hedges
Provisions and other
Total deferred tax assets
Set off of deferred tax liabilities pursuant to set off provisions
Net deferred tax assets
CONSOLIDATED
2022
US$’000
2021
US$’000
-
6,472
45
1,164
7,681
(1,063)
6,618
358
8,298
-
166
8,822
(122)
8,700
78
Horizon Oil Annual Report 2022
2022
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 2021
(Charged)/credited
– to profit or loss
– to other comprehensive income
At 30 June 2022
358
8,298
(358)
-
-
(1,826)
-
6,472
-
-
45
45
166
8,822
998
-
1,164
(1,186)
45
7,681
2021
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 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
79
Horizon Oil Annual Report 2022
Property, plant and equipment
BUILDING(2)
US$’000
OTHER PLANT &
EQUIPMENT(2)
US$’000
LEASEHOLD
IMPROVEMENTS
US$’000
TOTAL
US$’000
As at 1 July 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 2020
Cost
Accumulated depreciation
Net book amount
FINANCIAL YEAR ENDED 30 JUNE 2022
Opening net book amount
Additions
Depreciation expense[1]
Closing net book amount
As at 30 June 2022
Cost
Accumulated depreciation
Net book amount
603
(173)
430
430
-
(6)
(197)
227
547
(320)
227
227
-
(182)
45
547
(502)
45
2,305
(2,216)
89
89
-
(8)
(47)
34
1,720
(1,686)
34
34
-
(31)
3
1,720
(1,717)
3
1,263
(913)
350
350
16
(38)
(88)
240
1,103
(863)
240
240
3
(229)
14
1,106
(1,092)
14
4,171
(3,302)
869
869
16
(52)
(332)
501
3,370
(2,869)
501
501
3
(442)
62
3,373
(3,311)
62
[1] Depreciation expense in relation to the right of use assets is US$189,875.
[2] Included in the net book amount of buildings, and other plant and equipment are right-of-use assets as follows:
30 JUN 2022
US$’000
30 JUN 2021
US$’000
45
2
47
228
9
237
Office premises
Photocopier and IT equipment
Total
80
Horizon Oil Annual Report 2022
Oil and gas assets
DEVELOPMENT AND PRODUCTION PHASE EXPENDITURE
Producing oil and gas property acquisition, deferred geological, seismic and drilling, production
and distribution facilities and other development expenditure
547,102
522,870
CONSOLIDATED
2022
US$’000
2021
US$’000
Transfer from exploration phase
Reassessment of rehabilitation asset
Disposal of oil and gas assets (Note 27)
Carried forward accumulated impairment losses
Less accumulated amortisation
-
2,751
-
5,037
2,795
(2,408)
(116,598)
(116,598)
(326,376)
(299,358)
106,879
112,338
The reconciliation of development and production phase expenditure carried forward above is as follows:
CONSOLIDATED
DEVELOPMENT PHASE
EXPENDITURE
US$’000
PRODUCTION PHASE
EXPENDITURE
US$’000
Balance at 1 July 2020
Amortisation incurred
Increase in restoration asset
Transfer from exploration phase
Disposal of oil and gas assets (Note 27)
2,408
-
-
5,037
(2,408)
Development and production costs incurred during financial year
4,569
BALANCE AT 30 JUNE 2021
Amortisation incurred
Increase in restoration asset
9,606
-
-
Development and production costs incurred during financial year
17,624
Transfer to production phase/(from development phase)
Balance at 30 June 2022
(27,230)
-
114,294
(23,861)
2,795
-
-
9,504
102,732
(27,018)
2,751
1,184
27,230
106,879
TOTAL
US$’000
116,702
(23,861)
2,795
5,037
(2,408)
14,073
112,338
(27,018)
2,751
18,808
-
106,879
81
Horizon Oil Annual Report 2022
Payables
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
2022
US$’000
2021
US$’000
622
19,754
217
49
5,708
26,350
-
111
111
2,988
10,703
227
223
2,264
16,405
59
122
181
1
The ETS liability represents Horizon Oil International Limited’s obligation to the New Zealand Government for the company’s
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 2022 were as follows:
MINIMUM LEASE PAYMENTS DUE
Within one year
US$’000
One to five years
US$’000
After five years
US$’000
Total
US$’000
30 June 2022
Lease payments (current contract)
Finance charges
Lease payments (FY23 commencement)3
Net present values
49
(0)
170
219
-
-
360
360
-
-
-
-
49
(0)
530
579
3 Subsequent to period end, the Group entered into a new lease agreement for an office in Sydney. The new lease commences on 1
August 2022, and therefore minimal lease payments reflect the nominal value of the rental under the agreement. No lease liability
associated with the new lease has been recognised at 30 June 2022.
Current tax payable
Current tax payable – China
Current tax payable – New Zealand
Current royalty tax payable – New Zealand
82
CONSOLIDATED
2022
US$’000
3,629
2,649
2,809
9,087
2021
US$’000
1,085
-
689
1,774
Horizon Oil Annual Report 2022
Borrowings
CURRENT:
Bank loans1 (b)
NON-CURRENT:
Bank loans1 (b)
Total Borrowings
CONSOLIDATED
2022
US$’000
2021
US$’000
1,177
1,177
-
-
1,177
10,939
10,939
1,196
1,196
12,135
1
Bank loans are shown net of associated transaction costs.
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
2022
US$’000
44,086
(1,237)
-
42,849
44,086
(1,237)
42,849
2021
US$’000
44,436
(11,500)
(1,240)
31,696
44,436
(12,740)
31,696
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 2021
DRAWDOWN
REPAYMENTS
AMORTISATION OF
TRANSACTION
COSTS
CLOSING
30 JUNE 2022
Syndicated Revolving Cash
Advance Facility
Total liabilities from financing
activities
12,135
12,135
-
-
(11,503)
(11,503)
545
545
1,177
1,177
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
83
Horizon Oil Annual Report 2022 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 2022, total debt drawn under the facility was US$1.24 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.
Subsequent to period end, the Group executed and reached financial close on a 12-month extension of the senior debt facility
with ANZ, Westpac and Industrial and Commercial Bank of China (ICBC) with a revised facility limit of US$20 million. The
extended facility matures on 31 July 2023 and retains the key existing terms including interest rate at a LIBOR equivalent
+2.75%.
Provisions
Restoration (current)
Restoration (non-current)
The reconciliation of the movement in the total of the restoration provisions is as follows:
Balance at beginning of financial year
Additional provision during financial year
Unwinding of discount
Unwinding of discount for discontinued operations
Disposal of PNG restoration liability (Note 27)
Effect of change in inflation/discount rate
Balance at end of financial year
CONSOLIDATED
2022
US$’000
2021
US$’000
-
33,317
33,317
31,212
4,818
475
-
-
(3,188)
33,317
-
31,212
31,212
33,947
-
230
71
(5,831)
2,795
31,212
84
Horizon Oil Annual Report 2022 Non-current liabilities – Deferred tax liabilities
RECOGNISED DEFERRED TAX LIABILITIES ARE ATTRIBUTABLE TO:
Development and production expenditure
Accounting profits royalty
Cash flow hedges
Other
Total deferred tax liabilities
Set off of deferred tax assets pursuant to set off provisions
Net deferred tax liabilities
CONSOLIDATED
2022
US$’000
2021
US$’000
12,641
1,221
44
195
14,101
(1,063)
13,038
12,202
1,972
-
756
14,930
(122)
14,808
DEVELOPMENT
AND
PRODUCTION
EXPENDITURE
US$’000
ACCOUNTING
PROFITS ROYALTY
CASH FLOW
HEDGES
OTHER
TOTAL
US$’000
US$’000
US$’000
US$’000
12,202
1,972
-
-
44
44
756
14,930
(561)
(873)
-
195
44
14,101
DEVELOPMENT
AND
PRODUCTION
EXPENDITURE
US$’000
ACCOUNTING
PROFITS ROYALTY
CASH FLOW
HEDGES
OTHER
TOTAL
US$’000
US$’000
US$’000
US$’000
2022
AT 1 JULY 2021
(Charged] / credited
-
-
To profit or loss
439
To other comprehensive income
-
At 30 June 2022
12,641
(751)
-
1,221
2021
AT 1 JULY 2020
(Charged] / credited
-
-
To profit or loss
To other comprehensive income
11,919
283
2,227
(255)
At 30 June 2021
12,202
1,972
4
(4)
-
1,239
(483)
15,389
(455)
(4)
756
14,930
85
Horizon Oil Annual Report 2022
Contributed equity
Issued share capital
Ordinary shares
Fully paid
Partly paid to A$0.01
Movements in ordinary share capital
[[ii]]
Ordinary shares (fully paid)
CONSOLIDATED
NUMBER OF SHARES
CONSOLIDATED
2022
‘000
2021
‘000
2022
US$‘000
2021
US$‘000
1,578,943
1,578,943
158,884
193,655
1,500
1,500
459
459
1,580,443
1,580,443
159,343
194,114
Date
Details
Number of shares
30/06/2021
23/08/2021
30/06/2022
Balance as at 30 June 2021
1,578,942,962
Capital Return (3 cents AUD per share)
-
Balance as at 30 June 2022
1,578,942,962
US$'000
193,655
(34,771)
158,884
[[iiii]] Ordinary shares (partly paid to A$0.01):
Date
Details
Number of shares
US$'000
30/06/2022
30/06/2021
Balance as at 30 June 2022
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 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 31.
86
Horizon Oil Annual Report 2022
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$13.0 cents per share)
Issue of treasury shares as settlement of exercised options
Capital return
Balance at end of financial year
Total reserves
Accumulated losses
Accumulated losses at beginning of financial year
Net profit for financial year
Accumulated losses at end of financial year
Profit reserve
Profit reserve at the beginning of the financial year
Net profit for financial year
Profit reserve at the end of the financial year
Nature and purpose of reserves
CONSOLIDATED
2022
US$’000
2021
US$’000
13,609
370
(1,063)
12,916
-
7
-
(1)
6
(912)
(706)
430
359
(829)
12,093
13,581
364
(336)
13,609
(982)
-
1,330
(348)
-
-
(998)
86
-
(912)
12,697
CONSOLIDATED
2021
US$’000
(104,545)
8,009
(96,536)
CONSOLIDATED
2021
US$’000
-
-
-
2022
US$’000
(96,536)
-
(96,536)
2022
US$’000
-
24,326
24,326
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.
87
Horizon Oil Annual Report 2022
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 31 for further
information. Shares issued to employees are recognised on a weighted average basis.
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 2022 and 30 June 2021:
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
Market risk
[i] Foreign exchange risk
CONSOLIDATED
30 JUNE 2022
US$’000
30 JUNE 2021
US$’000
44,086
18,087
162
62,335
26,350
9,087
111
1,177
156
36,881
44,436
13,982
1,413
59,831
16,405
1,774
181
12,135
-
30,495
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.
88
Horizon Oil Annual Report 2022
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
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 2022, the Group had a derivative liability of US$162,000 (30 June 2021: US$Nil) with NZD 1.8 million hedged
through forward contracts at an average USD rate of 0.6776 and AUD 1.8 million at hedged through forward contracts at an
average USD rate of 0.7204. Both hedges are designed to cover a portion of the group’s future operating costs in New Zealand
and future corporate costs at head office in Australia.
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 2022
US$’000
30 JUNE 2021
US$’000
FOREIGN CURRENCY FORWARDS (USD/NZD)
Carrying amount – (liability)
Notional amount
Maturity date
Hedge ratio1
Change in discounted spot value of outstanding hedging instruments since
30 June 2021
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 –(liability)
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
(101)
1,220
11 July 2022 – 12 December
2022
1:1
(101)
-
US$1: NZD0.6776
(55)
1,297
11 July 2022 – 12 December
2022
1:1
(55)
-
Weighted average hedged rate for the year
US$1: AUD0.7204
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
The foreign currency swaps and foreign currency forward contracts are denominated in the same currencies as the highly probable future operating
and corporate overhead expenditures (NZD operating and AUD corporate expenditures), therefore the hedge ratio is 1:1.
89
Horizon Oil Annual Report 2022
Exposure to foreign exchange risk
The Group’s exposure to foreign exchange risk at the end of each reporting period was as follows:
GROUP
30 JUNE 2022
30 JUNE 2021
AUD
US$’000
NZD
US$’000
RMB
US$’000
AUD
US$’000
NZD
US$’000
RMB
US$’000
Cash and cash
equivalents
Receivables
Current tax payable
Current payables
Non-current payables
2,227
88
-
1,587
111
1,732
190
5,572
20
-
-
273
3,629
3,892
-
15,082
1,021
76
-
1,988
179
249
689
492
-
-
-
1,085
264
-
For the financial year ended and as at 30 June 2022, if the currencies set out in the table below had strengthened or
weakened against the US dollar by the percentage shown, with all other variables held constant, the net result for the
financial year would increase / (decrease) and net assets would increase / (decrease) by:
GROUP
NET RESULT
NET ASSETS
NET RESULT
NET ASSETS
Change in currency1
Australian dollar impact
New Zealand dollar impact
Chinese Renminbi impact
2022
US$’000
+10%
2021
US$’000
+10%
289
361
-
340
50
-
2022
US$’000
+10%
43
(264)
(544)
2021
US$’000
+10%
909
136
(101)
2022
US$’000
-10%
(289)
(361)
-
2021
US$’000
-10%
(340)
(50)
-
2022
US$’000
-10%
2021
US$’000
-10%
(43)
264
544
(909)
(136)
101
1
This has been based on the change in the exchange rate against the US dollar in the financial years ended 30 June 2022 and 30 June 2021. 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 2022, the Group had a derivative asset of US$162,000 (30 June 2021: US$Nil) as there were 45,000 bbls (30 June
2021: Nil) hedged at a weighted average price of US$109/bbl, protecting revenue generation.
90
Horizon Oil Annual Report 2022 Effects of hedge accounting
The effects of the oil price swaps on the group’s financial position and performance are as follows:
OIL PRICE SWAPS
Carrying amount – asset
Notional amount
Maturity date
Hedge ratio1
Change in fair value of outstanding hedging instruments since 30 June 2021
Change in value of hedged item used to determine hedge ineffectiveness
Weighted average hedged rate for the year
CONSOLIDATED
30 JUNE 2022
US$’000
30 JUNE 2021
US$’000
162
7,865
1 July 2022 – 30
September 2022
1:1
162
-
US$109/bbl
-
-
-
-
-
-
-
1
The oil price swaps were executed in the same oil price benchmark as the highly probable future oil sales, therefore the hedge ratio is 1:1.
For the financial year ended and as at 30 June 2022, if the crude oil price rose or fell by the percentage shown, with all other
variables held constant, the result for the financial year would increase / (decrease) and net assets would increase /
(decrease) by:
GROUP
NET RESULT
NET ASSETS
NET RESULT
NET ASSETS
2022
US$’000
+10%
2,612
2021
US$’000
+10%
1,994
2022
US$’000
+10%
2,612
2021
US$’000
+10%
1,994
2022
US$’000
-10%
(3,517)
2021
US$’000
-10%
(1,994)
2022
US$’000
-10%
(3,517)
2021
US$’000
-10%
(1,994)
Change in crude oil price
Impact
[iii] Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes
in market interest rates.
The Group has no interest-bearing assets considered to materially expose the Group’s core income and/or operating cash
flows to changes in market interest rates.
As at 30 June 2022 and 30 June 2021, the Group’s interest rate risk arises from long term borrowings, issued at variable rates,
exposing the Group to cash flow interest rate risk. Group policy is to manage material interest rate exposure. Regular
sensitivity analysis is conducted to evaluate the potential impact of unfavourable interest rate movements on the Group’s
future financial position. The results of this evaluation are used to determine the most appropriate risk mitigation tool to be
used. During the current and prior financial year, the Group did not enter into any interest rate swap contracts.
The Group manages its cash flow interest rate risk by using floating to fixed interest rate swaps. Such interest rate swaps
have the economic effect of converting borrowings from floating to fixed rates. Under the interest rate swaps, the Group
agrees with other parties to exchange, at specific intervals, the difference between fixed contract rates and floating-rate
interest amounts calculated by reference to the agreed notional principal amounts.
91
Horizon Oil Annual Report 2022
The Group’s exposure to interest rate risk for financial instruments is set out below:
FLOATING
INTEREST
RATE
US$’000
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$’000
AS AT 30 JUNE 2022
FINANCIAL ASSETS
Cash and cash equivalents
Receivables
Derivative financial instruments
Weighted average interest rate p.a.
FINANCIAL LIABILITIES
Trade and other payables
Current tax payable
Non-current payables
Derivative financial instruments
Borrowings
Weighted average interest rate p.a.
Net financial assets/(liabilities)
348
-
-
348
0.10%
-
-
-
-
1,237
1,237
3.11%
(889)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
43,738
18,087
162
61,987
26,350
9,087
111
156
-
35,704
44,086
18,087
162
62,335
26,350
9,087
111
156
1,237
36,941
26,283
25,394
NON-
INTEREST
BEARING
CARRYING
AMOUNT
FIXED INTEREST RATE MATURING IN:
1 YEAR OR
LESS
US$’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
FLOATING
INTEREST
RATE
US$’000
262
-
-
262
0.10%
-
-
-
12,740
12,740
3.05%
(12,478)
AS AT 30 JUNE 2021
FINANCIAL ASSETS
Cash and cash equivalents
Receivables
Derivative financial instruments
Weighted average interest rate p.a.
FINANCIAL LIABILITIES
Trade and other payables
Current tax payable
Non-current payables
Borrowings
Weighted average interest rate p.a.
Net financial assets/(liabilities)
92
Horizon Oil Annual Report 2022
As at 30 June 2022 and 30 June 2021, the Group had the following variable rate borrowings outstanding:
External loans
Net exposure to cash flow interest rate risk
30 JUNE 2022
30 JUNE 2021
WEIGHTED AVERAGE
INTEREST RATE
% P.A.
3.11%
BALANCE
US$’000
1,237
1,237
WEIGHTED AVERAGE
INTEREST RATE
% P.A.
3.05%
BALANCE
US$’000
12,740
12,740
At 30 June 2022 and 30 June 2021, if the interest rates had been 1.0% p.a. higher or lower and all other variables held
constant, the net result for the financial year would increase/(decrease) and net assets as at 30 June 2022 and 30 June 2021
would increase/(decrease) by:
GROUP
NET RESULT
NET ASSETS
NET RESULT
NET ASSETS
2022
US$’000
2021
US$’000
2022
US$’000
2021
US$’000
2022
US$’000
2021
US$’000
2022
US$’000
2021
US$’000
CHANGE IN INTEREST
RATE p.a.
Impact of Assets
Impact of Liabilities
Impact of Net Assets
+1%
2
73
(71)
Credit risk
+1%
16
167
(151)
+1%
2
73
(71)
+1%
16
167
(151)
-1%
-
(73)
73
-1%
(2)
(167)
165
-1%
-
(73)
73
-1%
(2)
(167)
165
Credit risk is managed on a Group basis. Credit risk refers to the risk that a counterparty will default on its contractual
obligations resulting in financial loss to the Group. Credit risk arises from cash and cash equivalents, derivative financial
instruments, as well as credit exposures to customers, including outstanding receivables.
It is acknowledged that the Group’s sales of crude oil are currently concentrated with two counterparties. However, the
Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit
history, and that the Group has the ability to sell crude to other parties if desired.
Derivative counterparties and cash transactions are limited to high credit quality financial institutions. Where commercially
practical the Group seeks to limit the amount of credit exposure to any one financial institution.
The maximum exposure to credit risk at the end of each reporting period is the carrying amount of the financial assets as
summarised in this note.
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit
ratings (if available) or to historical information about counterparty default rates.
93
Horizon Oil Annual Report 2022
CASH AND CASH EQUIVALENTS
Counterparties with external credit rating (Standard & Poors)
AA-
Counterparties without external credit rating
Share of joint operations cash balances
Total cash and cash equivalents
RECEIVABLES
Counterparties with external credit rating (Standard & Poors / Fitch)
AAA
A+
A-
Counterparties without external credit rating
Share of joint operation receivables balances
Total receivables
CONSOLIDATED
2022
US$’000
2021
US$’000
42,114
42,114
1,972
1,972
44,086
278
17,682
-
17,960
127
127
18,087
43,597
43,597
839
839
44,436
325
4,675
8,842
13,842
140
140
13,982
The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. The expected loss rates are based on the payment profiles of sales over a period of 36
months before 30 June 2022 and the corresponding historical credit losses experienced within this period. The historical
rates are adjusted to reflect current and forward-looking information on key factors affecting the ability of the customers to
settle the receivables. Management has assessed the collectability of these amounts based on the customer relationships
and historical payment behaviour and believe that the amounts are still collectable in full.
On that basis, the loss allowance as at 30 June 2022 was determined as follows for trade receivables:
AS AT 30 JUNE 2022
CURRENT
MORE THAN 30 DAYS
DUE PAST
MORE THAN 60 DAYS
DUE PAST
TOTAL
Expected loss rate
Gross carrying amount
Loss Allowance
0%
18,087
-
0%
-
-
0%
-
-
18,087
-
As at 30 June 2022, there were no financial assets that are past due (30 June 2021: US$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.
94
Horizon Oil Annual Report 2022
Financing arrangements
As at 30 June 2022 and 30 June 2021, the Group had no undrawn borrowing facilities.
Maturities of financial liabilities
An analysis of the Group’s financial liability maturities for the current and prior financial year is set out below:
AS AT 30 JUNE 2022
Less than 6 months
6 – 12 months
Between 1 and 2 years
NON-INTEREST BEARING
US$’000
VARIABLE RATE1
US$’000
FIXED RATE
US$’000
35,593
-
111
1,242
-
-
1,242
-
-
-
-
Total contractual cash flows
35,704
1
Includes principal repayments and future interest payments.
AS AT 30 JUNE 2021
Less than 6 months
6 – 12 months
Between 1 and 2 years
Total contractual cash flows
NON-INTEREST BEARING
US$’000
VARIABLE RATE1
US$’000
FIXED RATE
US$’000
18,091
-
180
18,271
3,993
7,716
1,240
12,949
-
-
-
-
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).
[[ii]] Fair value measurements
The following table presents the Group’s assets and liabilities measured and recognised at fair value as at 30 June 2022 and
30 June 2021:
AS AT 30 JUNE 2022
ASSETS
Derivatives used for hedging
Total Assets
LIABILITIES
Derivatives used for hedging
Total liabilities
LEVEL 1
US$’000
LEVEL 2
US$’000
LEVEL 3
US$’000
TOTAL
US$’000
-
-
-
-
162
162
156
156
-
-
-
-
162
162
156
156
95
Horizon Oil Annual Report 2022
AS AT 30 JUNE 2021
ASSETS
Derivatives used for hedging
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
There were no transfers between levels 1, 2 or 3 for recurring fair value measurements during the year.
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 2022.
[[iiii]] 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.
[[iiiiii]] Other fair value measurements
The carrying value of receivables and payables are assumed to approximate their fair values due to their short-term nature.
96
Horizon Oil Annual Report 2022
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 2022, 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 2022 would
increase/(decrease) by:
GROUP
NET RESULT
NET ASSETS
NET RESULT
NET ASSETS
2022
US$’000
2021
US$’000
2022
US$’000
2021
US$’000
2022
US$’000
2021
US$’000
2022
US$’000
2021
US$’000
Change in NZU price
Impact
+10%
32
+10%
38
+10%
98
+10%
146
-10%
(32)
-10%
(38)
-10%
(98)
-10%
(146)
New Zealand Imputation Credits
Imputation credits available for subsequent financial years1
CONSOLIDATED
2022
US$’000
2,957
2021
US$’000
3,289
1
The franking credits available for subsequent financial years are only available to New Zealand resident shareholders under the Trans-Tasman
imputation legislation.
97
Horizon Oil Annual Report 2022
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
BVI
BVI
BVI
Horizon Oil Employee Incentive Trust
Australia
2022
%
100
100
100
100
100
1001
2021
%
100
100
100
100
100
1001
New Zealand
New Zealand
BVI
China
BVI
Australia
1 During the previous 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).
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:
98
Horizon Oil Annual Report 2022
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Total current assets
NON-CURRENT ASSETS
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 34.
CONSOLIDATED
2022
US$’000
2021
US$’000
1,972
127
4,183
6,282
106,879
106,879
113,161
19,754
19,754
-
-
19,754
93,407
839
140
2,555
3,534
112,338
112,338
115,872
10,703
10,703
-
-
10,703
105,169
Exploration and development expenditure commitments in respect of joint operations are detailed in Note 37.
The Group had an interest in the following joint operations:
PERMIT OR LICENCE
PRINCIPAL ACTIVITIES
INTEREST (%)
30 JUNE 2022
INTEREST (%)
30 JUNE 2021
NEW ZEALAND
PMP 38160 (Maari/Manaia)
CHINA
Block 22/12
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
1
China National Offshore Oil Corporation (‘CNOOC’) is entitled to participate at up to a 51% equity level in any commercial development within Block 22/12.
During 2011 CNOOC exercised its right to participate in the development of WZ6-12 and WZ 12-8W within Block 22/12 at 51%.
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$264,225 received upon the finalisation of customary working capital
adjustments. Following the completion of the sale, the Group does not have any operations in Papua New Guinea and no
longer holds an interest in Horizon Oil (PNG Holdings) Limited, Horizon Oil (Papua) Limited, Horizon Oil (Ubuntu) Limited and
Horizon Oil (Ketu) Limited.
99
Horizon Oil Annual Report 2022
(b) Financial performance and cash flow information
The financial performance and cash flow information presented for the prior financial year ended 30 June 2021 reflects the
discontinued PNG operations for the 5 months ended 2 December 2020.
30 JUNE 2022
US$’000
30 JUNE 2021
US$’000
-
-
-
-
-
-
-
-
-
-
-
-
(380)
-
(380)
-
(380)
3,527
3,147
(74)
3,493
3,419
30 JUNE 2022
US$’000
30 JUNE 2021
US$’000
-
-
-
-
-
-
-
-
-
-
-
-
3,500
264
3,764
246
171
52
3,352
2,408
(161)
(5,831)
237
3,527
FINANCIAL PERFORMANCE
Revenue
Expenses
Impairment expense
Loss before income tax
Income tax expense
Loss after tax of discontinued operation
Gain on sale of subsidiary after tax (refer to Note 29 (c) below)
Profit/(Loss) from discontinued operation
Net cash outflow from operating activities
Net cash inflow / (outflow) from investing activities (includes proceeds from sale)
Net increase / (decrease) in cash generated by subsidiaries
(c) Details of the sale of the subsidiaries
GAIN ON SALE OF SUBSIDIARIES
Cash
Cash for working capital
Total disposal consideration
Cash
Accounts receivable
Fixed assets
Exploration assets
Development assets
Accounts payable
Restoration liabilities
Less: Carrying value of net assets sold
Gain on sale of subsidiaries
100
Horizon Oil Annual Report 2022
Remuneration of external auditors
During the financial year, the following fees were paid or payable for services provided by the external auditor of the parent entity
and its related practices:
CONSOLIDATED
2022
US$
2021
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
161,925
159,509
24,186
11,822
186,111
171,331
-
-
-
-
9,819
9,819
10,567
10,567
Total auditors’ remuneration
186,111
191,717
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)
2022
US$
2021
US$
1,476,608
1,720,215
68,311
(21,379)
204,308
69,941
(922)
177,908
Total key management personnel remuneration
1,727,848
1,967,142
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.
101
Horizon Oil Annual Report 2022
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 31.
Subsidiaries
Interests in subsidiaries are set out in Note 25. Details in respect of guarantees provided to subsidiaries are set out in
Note 40([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 2022 and 30 June 2021 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:
2022
US$
2021
US$
RELATED PARTIES TRANSACTIONS
Payments to Horizon Oil Limited under financial guarantee contract arrangements from wholly
owned subsidiary
315,351
510,900
Dividends from Horizon Oil International Limited to Horizon Oil Limited
Dividends from Horizon Oil (Beibu) Limited to Horizon Oil Limited
14,000,000
7,500,000
-
-
Debt capitalised for issuance of equity from Horizon Oil International Limited to Horizon Oil Limited
-
12,400,000
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
102
2022
US$
2021
US$
70,193,085
185,605,193
29,459,342
37,488,407
(30,288,059)
(48,847,617)
625,143
939,021
-
(104,991,919)
69,989,511
70,193,085
Horizon Oil Annual Report 2022
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 4.53%).
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 2022
SHARE APPRECIATION RIGHTS ISSUED
01/07/2016
01/07/2021
A$0.061
16,617,522
01/07/2016
01/07/2021
A$0.021
12,186,198
01/07/2017
01/07/2022
A$0.021
45,191,714
01/07/2018
01/07/2023
A$0.111
8,680,899
01/07/2019
01/07/2024
A$0.081
11,002,656
01/07/2020
01/07/2025
A$0.031
10,004,499
-
-
-
-
-
-
(16,617,522)
(12,186,198)
(6,000,000)
-
-
-
-
-
-
-
39,191,714
39,191,714
-
(2,227,122)
6,453,777
6,453,777
(2,822,778)
(6,283,818)
-
-
8,179,878
3,720,681
9,194,811
-
-
-
01/07/2021
01/07/2026
A$0.071
-
9,194,811
-
TOTAL
103,683,488
9,194,811
(43,910,316)
(2,227,122)
66,740,861
45,645,491
Weighted average exercise price
A$0.07
A$0.07
A$0.04
A$0.11
A$0.04
A$0.03
1
No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a SAR. Following shareholder approval of a A$ 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.
103
Horizon Oil Annual Report 2022
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$0.142
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.
The weighted average remaining contractual life of share options outstanding at the end of the period was 1.06 years (2021:
2.31 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. This plan applied for the financial years up to and including 2022. As
noted in the remuneration report, following a review of the current long term incentive plan award of Share Appreciation
Rights), the Board approved a revised LTI Plan which involves the award of performance rights in place of share appreciation
rights. The rationale for the new LTI plan is to create a stronger link between performance and reward and to align the
interests of Senior Executives more strongly with those of the shareholders of Horizon.
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
104
Horizon Oil Annual Report 2022
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
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 22(C) for details.
Share appreciation rights issued
9,194,811 share appreciation rights were issued under the Long-Term Incentive Plan. The weighted average exercise price of
these SARs is A$0.073 with performance hurdles to be achieved prior to exercise. Following shareholder approval of a A$ 3
cent capital return, at an extraordinary general meeting on 10 August 2021, the strike prices of these SARs were reduced by
A$ 3 cents to A$0.073. The independently assessed weighted average fair value at effective allocation date of these share
appreciation rights was A$0.0535 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.
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
105
Horizon Oil Annual Report 2022 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 2022 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 2021
1 July 2026
N/A
A$0.103
55% p.a.
0.72% p.a.
0.00% p.a.
No options were issued under the Employee Option Scheme during the year.
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the financial year as part of employee
benefits expense in profit or loss were as follows:
SHARE APPRECIATION RIGHTS ISSUED UNDER:
Long Term Incentive Plan
Total employee share-based payments expense
CONSOLIDATED
2022
US$’000
2021
US$’000
369
369
364
364
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 43,910,316 SARs were exercised and settled with cash payments of US$971,084.67 and 7,734,460
Ordinary shares transferred from the Horizon Employee Incentive Trust.
Options/SARs lapsing or cancelled during the financial year
During the financial year 2,227,122 SARs lapsed.
Deferred STI rights issued subsequent to 30 June 2022
Subsequent to year end and in accordance with the STI plan, 2,371,092 deferred STI rights were issued to Horizon employees.
1,111,380 deferred STI rights issued to R Beament may be subject to shareholder approval at the 2022 Annual General Meeting
if the shares are not to be acquired by the Company on market.
Performance rights issued subsequent to 30 June 2022
Subsequent to year end and in accordance with contract entitlement, 29,400,000 performance rights were offered and
accepted by Horizon employees. 19,600,000 performance rights offered and accepted by R Beament remain subject to
shareholder approval at the 2022 Annual General Meeting.
Subsequent to financial year end, 5,557,004 SARs have been exercised and are due to be settled in cash and/or shares in
early September 2022.
Options/SARs lapsed subsequent to 30 June 2022
No options or SARs have lapsed subsequent to financial year end.
106
Horizon Oil Annual Report 2022
Employee entitlements
EMPLOYEE ENTITLEMENT LIABILITIES ARE INCLUDED WITHIN:
Current – other creditors
Non-current - other creditors (Note 16)
CONSOLIDATED
2022
US$’000
2021
US$’000
343
111
NUMBER
2022
427
122
NUMBER
2021
EMPLOYEE NUMBERS
Average number of employees during financial year
12
16
Contingent asset
The Group had no contingent assets as at 30 June 2022.
Contingent liabilities
The Group had contingent liabilities as at 30 June 2022 and 30 June 2021 that may become payable in respect of:
In accordance with normal oil and gas industry practice, the Group has entered into joint operations and farm-out
agreements with other parties for the purpose of exploring and developing its petroleum interests. If a participant to a joint
operation defaults and fails to contribute its share of joint operation obligations, then the remaining joint operation
participants are jointly and severally liable to meet the obligations of the defaulting participant. In this event, the interest in
the permit or licence held by the defaulting participant may be redistributed to the remaining participants. In the event of a
default, a contingent liability exists in respect of expenditure commitments due to be met by the Group in respect of
defaulting joint operation participants.
The Group occasionally receives claims arising from its operations in the normal course of business. In the opinion of the
directors, all such matters are either covered by insurance or, if not covered, are without merit or are of such a nature the
amounts involved would not have a material impact on the results.
No material losses are anticipated in respect of any of the above contingent liabilities.
Events after balance sheet date
Other than the matters disclosed in this report, there has not been any matter or circumstance which has arisen since
30 June 2022 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.
The financial statements were authorised for issue by the Board of Directors on 25 August 2022. 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
107
Horizon Oil Annual Report 2022
payments in relation to non-cancellable operating leases as at 30 June 2022 and 30 June 2021 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.
2022
NEW ZEALAND
DEVELOPMENT
CHINA EXPLORATION
& DEVELOPMENT
Within one financial year
2,832
Later than one financial year but not later than 5 financial years
-
20,436
3,530
Total
2021
2,832
23,966
NEW ZEALAND
DEVELOPMENT
CHINA EXPLORATION
& DEVELOPMENT
Within one financial year
684
Later than one financial year but not later than 5 financial years
482
Total
1,166
3,332
14,230
17,562
TOTAL
23,268
3,530
26,798
TOTAL
4,016
14,712
18,728
The above commitments may be deferred or modified with the agreement of the host government, by variations to the terms
of individual petroleum interests, or extensions to the terms thereof. Another factor likely to delay timing of these
commitments is the potential lack of availability of suitable drilling rigs in the area of interest.
The commitments may also be reduced by the Group entering into farm-out agreements or working interest trades, both of
which are typical of the normal operating activities of the Group.
In addition to the above commitments, the Group has invested funds in other petroleum exploration interests, but is not
exposed to a contingent liability in respect of these, as it may choose to exit such interests at any time at no cost penalty
other than the loss of the interests.
108
Horizon Oil Annual Report 2022
Reconciliation of profit after income tax to net cash flows from operating activities
PROFIT / (LOSS) FOR FINANCIAL YEAR
Exploration and development expenditure written off/expensed
Depreciation expense
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
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
(Increase) / Decrease in inventory
Increase / (Decrease) in net deferred tax liabilities
Increase / (Decrease) in tax payable
Increase / (Decrease) in trade creditors
Increase / (Decrease) in other creditors
NET CASH INFLOW FROM OPERATING ACTIVITIES
CONSOLIDATED
2021
US$’000
8,009
-
332
(263)
364
23,861
511
301
(3,147)
(1,413)
2,930
(6,215)
(317)
955
(1,255)
(2,173)
2,205
(1,524)
23,161
2022
US$’000
24,326
810
442
(13)
370
27,018
574
475
-
(977)
-
(4,165)
298
(1,627)
4,097
7,308
(2,121)
111
56,926
109
Horizon Oil Annual Report 2022
Earnings per share
CONSOLIDATED
2022
US CENTS
2021
US CENTS
(a) Basic earnings per share attributable to the ordinary equity holders of the Company
(b) Diluted earnings per share attributable to the ordinary equity holders of the Company
(c) Basic earnings per share from continuing operations attributable to the ordinary equity
holders of the Company
(d) Diluted earnings per share from continuing operations attributable to the ordinary
equity holders of the Company
1.54
1.48
1.54
1.48
0.61
0.49
0.37
0.30
2022
NUMBER
2021
NUMBER
WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE DENOMINATOR
Weighted average number of ordinary shares used as the denominator in calculating basic
earnings per share
1,580,442,962
1,322,129,812
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share
1,636,917,307
1,634,485,232
Weighted average number of ordinary shares used as the denominator in calculating basic
earnings per share from continuing operations
1,580,442,962
1,322,129,812
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share from continuing operations
1,636,917,307
1,634,485,232
2022
US$’000
2021
US$’000
RECONCILIATION OF EARNINGS USED IN CALCULATING EARNINGS PER SHARE
Profit attributable to the ordinary equity holders of the company used in calculating basic
and diluted earnings per share
Profit from discontinued operations
24,326
-
Profit from continuing operations attributable to the ordinary equity holders of the company
used in calculating basic and diluted earnings per share
24,326
8,009
(3,147)
4,862
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 21.
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 31.
110
Horizon Oil Annual Report 2022
Parent Entity financial information
[[ii]] 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
Profit/(loss) for the financial year
Total comprehensive profit/(loss) for the financial year
[[iiii]] Guarantees entered into by the parent entity
PARENT ENTITY
2022
US$’000
2021
US$’000
23,708
24,041
109,367
109,993
133,075
134,034
1,644
111
1,755
131,320
159,343
12,048
2,011
180
2,191
131,843
194,114
12,697
(40,071)
(74,968)
131,320
131,843
34,897
34,897
(5,375)
(5,375)
The parent entity has provided guarantees in respect of bank loans and hedge derivatives of its subsidiaries amounting to
US$1,393,706 (2021: US$12,740,000) and has also provided customary joint venture guarantees.
No liability has been recognised for guarantees provided. After factoring in the likelihood that the parent entity would be
required to perform under the guarantees the fair value of the liability was not considered material.
[[iiiiii]] Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2022 or 30 June 2021. For information about guarantees
given by the parent entity, see above.
[[iivv]] Contractual commitment for the acquisition of property, plant or equipment
As at 30 June 2022, the parent entity had no contractual commitments for the acquisition of property, plant or equipment
(30 June 2021 – US$Nil).
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Horizon Oil Annual Report 2022
HORIZON OIL LIMITED
SHAREHOLDER
INFORMATION
112
112
Horizon Oil Annual Report 2022
Horizon Oil Annual Report 2022
Horizon Oil Limited and Controlled Entities
Securities Exchange Information as at 15 August 2022
DISTRIBUTION OF EQUITY SECURITIES
The distribution of equity security holders ranked according to size at 15 August 2022 was as follows:
SHAREHOLDER INFORMATION
Size of holding
Shares
Unlisted options
Ordinary shares
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
297
166
685
1,930
771
3,549
-
-
-
-
-
Share
appreciation
rights
-
-
-
-
6
A total of 356 holders held less than a marketable parcel of 3,449 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
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
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
CPU Share Plans Pty Limited
Mr Geoffrey Victor Day & Mrs Anne Margaret Day
Global Mosaic Pty Limited
Mr Michael Francis Sheridan
Mr Leendert Hoeksema & Mrs Aaltje Hoeksema
Grizzley Holdings Pty Limited
Neweconomy Com Au Nominees Pty Limited
Mr John Bernard Porteous
National Nominees Limited
Mr Damiano M Cifonelli
Kaluki Pty Limited
Brides Pty Limited
CIDT Pty Limited
CS Fourth Nominees Pty Limited
Total
400,574,175
382,127,079
148,064,384
57,059,801
26,059,732
20,000,000
18,213,741
15,000,000
12,055,100
11,822,050
9,600,000
8,511,941
8,366,066
7,558,716
6,567,450
5,700,000
5,645,811
5,500,000
5,268,888
4,756,724
1,158,448,975
25.37
24.20
9.38
3.61
1.65
1.27
1.15
0.95
0.76
0.75
0.61
0.54
0.53
0.48
0.42
0.36
0.36
0.36
0.33
0.30
73.37
Horizon Oil Annual Report 2022
113
113
ISSUED SECURITIES
Issued securities as at 15 August 2022:
SHAREHOLDER INFORMATION
Security
Ordinary fully paid shares1
Ordinary partly paid shares
Unlisted share appreciation rights
Number on issue
1,578,942,962
1,500,000
66,740,861
Number of holders
3,850
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)
Samuel Terry Asset Management Pty Limited
Spheria Asset Management Pty Limited
400,574,175
314,232,423
122,134,457
25.37
19.90
7.73
Total
VOTING RIGHTS
a)
Ordinary shares – fully paid
836,941,055
53.00
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.
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Horizon Oil Annual Report 2022
A-IFRS
ASIC
ASX
bbl(s)
bcf
boe
boepd
bopd
CNOOC
EBITDAX
ESP
FID
FPSO
GST
JOA
km
LIBOR
LNG
Australian equivalents to International Financial Reporting Standards
GLOSSARY
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
Earnings before interest, tax, depreciation, depletion and amortisation, and
exploration expenses
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)
OTCQB
ODP
PEP
PMP
Million barrels of oil equivalent
Millions cubic feet barrels
National Development and Reform Commission
Natural gas liquid(s)
OTC Markets Group Venture Market
Overall Development Plan
Petroleum exploration permit
Petroleum mining permit
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Horizon Oil Annual Report 2022
GLOSSARY
Reserves
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
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Horizon Oil Annual Report 2022
Horizon Oil Limited
ABN 51 009 799 455
Board of Directors
DIRECTORY
Michael Harding (Chairman)
Richard Beament (Chief Executive Officer)
Sandra Birkensleigh
Gregory Bittar (Alternate: Bruno Lorenzon)
Bruce Clement
Nigel Burgess
Company Secretary
Vasilios Margiankakos
Assistant Company Secretary
Kyle Keen
Australian Registered Office
(Principal place of business)
Level 4, 360 Kent Street,
Sydney NSW 200
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) and the US OTC Markets Group (OTCQB:HZNFF)
Notice of annual general meeting
The Annual General Meeting of Horizon will be held at:-
Dexus Place, Level 5
1 Margaret Street, Sydney NEW SOUTH WALES 2000
Time:
Date:
10.00am
16 November 2022
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Horizon Oil Annual Report 2022
For more information or to see past
Annual Reports, please visit
horizonoil.com.au
Disclaimer: Statements contained in this report may be forward looking statements. Such statements relate to future events and expectations and as such
involve known and unknown risks and uncertainties. Actual results, actions and developments may differ materially from those expressed or implied by these
forward looking statements depending on a variety of factors. While every effort is made to provide accurate and complete information, Horizon accepts no
responsibility for any loss, damage, cost or expense incurred by you as a result of any error, omission or misrepresentation in information in this report.