Horizon Global
Annual Report 2024

Plain-text annual report

ACN 51 009 799 455 ANNUAL REPORT horizonoil.com.au FY2024 INVESTMENT HIGHLIGHTS Financial Year 2024 was transformative for the Company with the successful acquisition of Mereenie. This third production asset has diversified our production base, significantly increased the Group’s reserves, and provides a production base beyond the expiry of existing licences. FY24 Total Shareholder Return (TSR) of 54% adding approximately AUD 120 million of shareholder value Successful completion of Block 22/12 drilling programs, with progress towards Maari life extension Completed the acquisition of a 25% non- operated participating interest in the OL4 and OL5 development licences, Northern Territory, Australia, which contain the producing Mereenie conventional oil and gas field Recognising the continued strong results for the financial year, the Company announces a final unfranked (conduit foreign income) dividend of AUD 1.5 cents per share. Together with the interim dividend of AUD 1.5 cents per share paid in April 2024, the interim and final dividend distributions total AUD 3.0 cents per share. STATUTORY PROFIT BEFORE TAX US$39.2m NET CASH US$26.2m SALES REVENUE US$111.5m FINAL FY24 DIVIDEND (~US$16M) AUD 1.51 cps SALES VOLUME 1,301,155boe EBITDAX US$71.5m 1 Final dividend to be paid following the interim dividend of AUD 1.5 cents per share paid in April 2024 HORIZON OIL ANNUAL REPORT 2024 CHINA Block 22/12 Production 26.95% AUSTRALIA OL4/OL5 Production 25% AREAS OF OPERATION CONTENTS 2024 Highlights 01 Reserves and Resources Statement 05 Shareholder Information 104 Chairman’s Message 02 Activities Review 11 Glossary 107 CEO’s Message 03 Annual Financial Report 15 Corporate Directory 109 1 Net of hedge settlements 2 FY20 and FY21 excludes profit and loss from discontinued operations NEW ZEALAND PMP 38160 (Maari/Manaia) Production 26% Oil & gas sales (MMboe) Maari Beibu Cost recovery entitlement Mereenie 20 21 22 23 24 Revenue1 (US$m) Maari Beibu Cost recovery entitlement Mereenie 46.8 38.1 74.3 0.1 152.1 84.0 63.6 108.1 116.6 35.5 37.1 25.5 33.8 20 21 22 23 24 EBITDAX2 (US$m) (Excl. cost recovery) Cost recovery 20 21 22 23 24 Statutory profit after tax2 (US$m) (Excl. cost recovery) Cost recovery 20 21 22 23 24 16.4 4.9 24.3 43.9 4.9 24.3 43.9 16.3 0.1 0.84 1.20 0.36 0.83 1.43 0.60 0.80 1.27 0.47 1.77 1.30 0.37 0.37 1.40 0.1 36.4 51.4 73.0 51.3 36.4 73.0 103.5 103.5 67.6 71.5 3.9 23.0 25.9 111.5 72.9 34.2 3.9 0.4 0.02 0.05 0.86 2.9 HORIZON OIL ANNUAL REPORT 2024 1 Mike Harding Chairman A MESSAGE FROM OUR CHAIRMAN 2024 saw the continuation of the strong cash generation and dividend declarations that have become a consistent theme for Horizon. For the 4th consecutive year, the Company has been able to return at least AUD 3.0 cents per share to shareholders, with the final FY24 dividend announced of AUD 1.5 cents per share, which followed the earlier interim dividend paid of AUD 1.5 cents per share. It is with mixed emotions that I recently announced my intended retirement from the Horizon Board at the upcoming AGM. Horizon is a Company I have grown very fond of, having taken on the role at a time when the Company was deeply indebted and facing strategic headwinds which had eroded shareholder value. Over my 6 years as Chairman, we significantly reduced the level of gearing and streamlined the business to become a lean, highly cash generative oil and gas company paying substantial distributions which now amount to over AUD 170 million. Having recently completed the acquisition of a third producing asset, and with a wellestablished management team with Richard at the helm, I feel that now is the right time for me to retire from the Board. I am delighted that Bruce Clement, having been a non-executive director for 4 years, will succeed me as Chairman as he brings a wealth of knowledge and experience to the role. In consideration of my impending retirement, the Company’s transition into a domestic gas producer, and with a well-established management team, the Board considers that now is an appropriate time for a Board refresh. With my planned retirement from the Board at the conclusion of the 2024 AGM, Bruce Clement has agreed to assume the role of Chair from the conclusion of the AGM. With nearly 4 years of experience on the Horizon Board, and with over 40 years’ oil and gas experience including leading ASX listed oil and gas companies, Beach Energy Limited, AWE Limited and Roc Oil Limited, Bruce is well qualified to lead Horizon into the future. Following a thorough search focused on identifying a technically strong Board member to replace me as a nonexecutive director, the Board has identified ex- Transfield CEO/MD, Dr Peter Goode. Dr Goode brings over 40 years’ experience in engineering, and oilfield services, and is currently Chairman and co-founder of the leading US Onshore completions provider, GR Energy Services. It is intended that Dr Goode be appointed to the Board effective 1 September 2024, and in accordance with ASX listing rules he will stand for election by shareholders at the 2024 AGM. As also recently announced, non-executive director Sandra Birkensleigh plans to retire from the Board in 2025 after over 8 years of service. I would like to thank Sandra for her time and contribution to the Board, particularly as audit committee Chair. Whilst Sandra will seek re-election at the upcoming AGM, she will assist in finding a replacement for her during her next term. Finally, I would like to say thank you for having me as Chairman and I wish all those associated with Horizon all the best for the future. HORIZON OIL ANNUAL REPORT 2024 2 A MESSAGE FROM OUR CEO Building on the success we’ve had in recent years, Financial Year 2024 was a pivotal year for the Company following the successful completion of the Mereenie acquisition. In adding a third production asset to the portfolio, we have diversified the production base, materially added to the Group’s reserves, and added an asset which can provide a production base beyond the expiry of our existing assets. The subsequent signing of a long-term strategic gas supply agreement with the NT government so soon after completing the acquisition was a tremendous outcome and underscores the strategic merit of the acquisition and Mereenie’s importance to domestic gas supply. Whilst the Mereenie acquisition was the headline announcement during the year, our legacy assets of Block 22/12 and Maari continued to provide the reliable, high margin financial horsepower to which we have grown accustomed. Once again, the Block 22/12 joint venture was able to successfully execute an infill drilling campaign which restored production back above the field long term average of 10,000 bopd (gross). The ability of the joint venture to efficiently convert contingent resources to developed reserves continues to unlock value for Horizon shareholders, and planning is underway for a potential CY25 infill drilling campaign. The infill wells executed at the WZ12-8E field during the year have increased the production base from this field providing further confidence that WZ12-8E production will extend out further to towards the end of the decade. This led to a material reserves upgrade at Block 22/12. Maari also made a material financial contribution during the year with an 18% increase in production combined with strong premiums achieved on Maari sales adding meaningful additional free cashflow. The prospect of licence extension at Maari out to the end of the decade and potentially beyond continues to look promising, with a key milestone achieved during the year with critical infrastructure recertified for a further 5 years. In addition, a licence extension application is nearing completion with regulatory lodgement expected shortly. If granted, an extension to the licence would add material value to the Company and provide a continued pathway for distributions. Financially, the Company remains in a position of strength with net cash of over US$26 million, following both the Mereenie acquisition and the dividend payments totalling approximately US$37 million. Cash generation from our assets remains exceptional allowing the continuation of the Company’s strategy to prioritise distributions to shareholders. In addition to the AUD 1.5 cent per share interim dividend paid in April 2024, we have approved a further AUD 1.5 cent per share final dividend to be paid in October 2024. These distributions combined represent over a 15% dividend yield for the year. With approximately AUD 170 million returned to shareholders over the past 3 to 4 years and with a further AUD 24 million to be returned over the coming months, we have continued to sustain a top tier dividend yield which has become a hallmark of Horizon’s success and stood us apart from many of our peers. Given our continued robust cashflow generation, our desire is for distributions to continue to be a recurring feature in the years ahead. On the ESG front, safety continued to remain a priority at all our assets, with the Group Total Reportable Injury Frequency Rate and Lost Time Injury Frequency Rate both well below the NOPSEMA industry average. This is a testament to the quality and diligence of the operators of our assets – CNOOC, OMV and Central Petroleum. HORIZON OIL ANNUAL REPORT 2024 3 Richard Beament Chief Executive Officer Specifically on climate change, we were pleased to see material progress being made during the year at our Flinders Biochar Project through our investment in Re-Vi (formerly known as Nobrac). A key milestone was the production of the first biochar during the year, with certification of the Carbon Removal Credits underway. We also see our investment into domestic gas as an integral part of supporting the energy transition, with Mereenie signing a strategic gas sales agreement with rare earther miner, Arafura Rare Earth’s Limited. Gas from Mereenie will allow Arafura to process critical rare earth minerals which are essential for the production of magnets used for motors in wind turbines and EVs. The Federal Government support to Arafura demonstrates the strategic importance of their Nolans Project which will initially rely on gas being supplied from the Mereenie field. Regarding Mike’s recently announced retirement and the upcoming Board changes, I would like to extend our gratitude, on behalf of the Board and the entire Horizon team, for his exceptional contributions and support over the past six years. Throughout this time, Mike collaborated with the Board and shareholders to navigate numerous challenges, ultimately guiding the company to realign its strategy. Today, thanks to his leadership, Horizon stands out as a leading player in the junior energy sector. I also look forward to welcoming Peter Goode to the Board and want to extend my gratitude to Sandra Birkensleigh for her 8 years of invaluable service to the Company. Over the year, our team has put in an enormous effort to accomplish our strategic goals. I consider myself very lucky to have the support of such a talented team of professionals. I thank each of them for their dedication and hard work, and congratulate them for the results we’ve been able to achieve. Looking to the future, we remain steadfast in our strategy: • 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 Block 22/12, Maari and Mereenie, whilst keeping an eye out for exceptional new business opportunities – our focus is on bringing into production our pipeline of contingent and prospective resources. Despite the ongoing challenges faced by our business and sector, our capable team have the skills and expertise to navigate the obstacles and continue to create value for shareholders. HORIZON OIL ANNUAL REPORT 2024 4 2024 HIGHLIGHTS • Horizon booked net 2P gas Reserves of 32 PJ (5.5 MMboe) following the acquisition of a 25% interest in the Mereenie producing oil and gas field with an effective date of 1 April 2023. The acquisition is expected to meaningfully increase net operating cash flow over the next 5+ years and provide a production base beyond the expiry of our existing assets. • Horizon net Proved + Probable (2P) Reserves doubled from 4.9 MMboe (all crude) at 30 June 2023 to 9.9 MMboe (44% crude and condensate) at 30 June 2024 as a consequence of the Mereenie acquisition and transfers from Contingent Resources to Reserves offset in part by production. • A very strong year of production including a material contribution from the new Mereenie project with Horizon’s total net economic interest share of production of 1.9 MMboe compared with 1.8 MMboe last year. China and New Zealand contributed a total of 1.4 MMbbl of oil production while Mereenie contributed 2.7 PJ sales gas (0.5 MMboe) for the 15 month period from the1 April 2023 effective date. • Horizon net 2P crude and condensate Reserves declined by 0.5 MMbbl from 4.9 to 4.4 MMbbl with production of 1.4 MMbbl offset in particular by transfers from Contingent Resources to Reserves in China (+0.6 MMbbl) and the addition of 0.3 MMbbl associated with the Mereenie acquisition. The China contribution is a continuation of the Beibu joint venture strategy of actively working to bring new projects into production including four new wells drill in 2024. • 2C Contingent Resources increased from 6.9 MMboe to 13.3 MMboe primarily due to 45.6 PJ (7.8 MMboe) of gas associated with the Stairway and Pacoota reservoirs in the Mereenie asset. China Contingent Resources also remain strong at 2.6 MMbbl with up to eleven possible future projects, mostly infill wells. HORIZON OIL LIMITED 2024 RESERVES AND RESOURCES STATEMENT AS AT 30 JUNE 2024 RESERVES AND CONTINGENT RESOURCES (HORIZON SHARE AT 30 JUNE 2024) 2024 2023 % Change 1P - Proved Reserves MMboe 6.0 2.8 113% 2P - Proved and Probable Reserves MMboe 9.9 4.9 101% 2C - Contingent Resource MMboe 13.3 6.9 93% RESERVES AND CONTINGENT RESOURCES BY PRODUCT (HORIZON SHARE AT 30 JUNE 2024) GAS PJ CRUDE AND CONDENSATE MMBBL TOTAL MMBOE 1P - Proved Reserves 20.4 2.5 6.0 2P - Proved and Probable Reserves 32.0 4.4 9.9 2C - Contingent Resource 45.6 5.5 13.3 5 HORIZON OIL ANNUAL REPORT 2024 5 2024 RESERVES AND RESOURCES STATEMENT PROVED (1P) AND PROVED + PROBABLE (2P) RESERVES 1P - PROVED RESERVES (HORIZON NET) ALL PRODUCTS MMboe GAS PJ CRUDE & CONDENSATE MMbbl DEVELOPED UNDEVELOPED TOTAL China Block 22/12: Beibu 0.0 1.4 1.4 0.0 1.4 New Zealand PMP 38160: Maari; Manaia 0.0 0.9 0.9 0.0 0.9 Australia OL4&OL5: Mereenie 20.4 0.2 3.8 0.0 3.8 Closing Balance 30 June 2024 (arith sum) 20.4 2.5 6.0 0.0 6.0 2P - PROVED PLUS PROBABLE RESERVES (HORIZON NET) ALL PRODUCTS MMboe GAS PJ CRUDE & CONDENSATE MMbbl DEVELOPED UNDEVELOPED TOTAL China Block 22/12: Beibu 0.0 2.6 2.6 0.0 2.6 New Zealand PMP 38160: Maari; Manaia 0.0 1.5 1.5 0.0 1.5 Australia OL4&OL5: Mereenie 32.0 0.3 5.8 0.0 5.8 Closing Balance 30 June 2024 (arith sum) 32.0 4.4 9.9 0.0 9.9 RESERVES RECONCILIATION 30 JUNE 2023 PRODUCTION1 REVISIONS TRANSFERS, EXTENSIONS & DISCOVERIES ACQUISITIONS1, DIVESTMENTS & RELINQUISHMENTS 30 JUNE 2024 1P - PROVED RESERVES RECONCILIATION (HORIZON NET) Crude and Condensate (MMboe) 2.8 -1.4 0.5 0.3 0.3 2.5 Sales Gas (PJ) 0.0 -2.7 0.0 0.0 23.1 20.4 Total 1P MMboe 2.8 -1.9 0.5 0.3 4.3 6.0 2P - PROVED AND PROBABLE RESERVES RECONCILIATION (HORIZON NET) Crude and Condensate (MMboe) 4.9 -1.4 -0.1 0.6 0.4 4.4 Sales Gas (PJ) 0.0 -2.7 0.0 0.0 34.7 32.0 Total 1P MMboe 4.9 -1.9 -0.1 0.6 6.3 9.9 1. Acquisition volumes are from Mereenie as at the effective date of 1 April 2023 of the transaction. Production volumes includes 0.6PJ and 0.03 MMbbl from 1 April 2023 to 30 June 2023 from Mereenie as reported in 11 June 2024 ASX announcement. * All volumes quoted in text and table are Horizon net. Refer also note 12. HORIZON OIL ANNUAL REPORT 2024 6 HORIZON OIL ANNUAL REPORT 2024 6 2C - CONTINGENT RESOURCES 2C - CONTINGENT RESOURCES (HORIZON NET) GAS PJ CRUDE & CONDENSATE MMbbl TOTAL EQUIVALENT MMboe China Block 22/12: Beibu 0.0 2.6 2.6 New Zealand PMP 38160: Maari; Manaia 0.0 2.8 2.8 Australia OL4&OL5: Mereenie 45.6 0.1 7.9 Closing Balance 30 June 2024 (arithmetic sum) 45.6 5.5 13.3 2C - CONTINGENT RESOURCES RECONCILIATION 30 JUNE 2023 REVISIONS TRANSFERS, EXTENSIONS & DISCOVERIES ACQUISITIONS, DIVESTMENTS & RELINQUISHMENTS 30 JUNE 2024 2C CONTINGENT RESOURCES (HORIZON NET) Crude and Condensate (MMboe) 6.9 -1.1 -0.4 0.1 5.5 Sales Gas (PJ) 0.0 0.0 0.0 45.6 45.6 Total MMboe 6.9 -1.1 -0.4 7.9 13.3 * All volumes quoted in text and table are Horizon net. Refer also to note 12. 2U - PROSPECTIVE RESOURCES 2U - PROSPECTIVE RESOURCES (HORIZON NET) GAS PJ CRUDE & CONDENSATE MMbbl TOTAL EQUIVALENT MMboe China Block 22/12: Beibu 0.0 2.6 2.6 New Zealand PMP 38160: Maari; Manaia 0.0 0.0 0.0 Australia OL4&OL5: Mereenie 0.0 0.0 0.0 Closing Balance 30 June 2024 (arithmetic sum) 0.0 2.6 2.6 2U - PROSPECTIVE RESOURCES RECONCILIATION 30 JUNE 2023 REVISIONS TRANSFERS, DISCOVERIES & EXTENSIONS ACQUISITIONS / DIVESTMENTS 30 JUNE 2024 Crude and Condensate (MMboe) 2.6 2.6 Sales Gas (PJ) 0 0 Total MMboe 2.6 2.6 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. The 2U Prospective Resources in the above table are unrisked volumes. * All volumes quoted in text and table are Horizon net. Refer also to note 12. HORIZON OIL ANNUAL REPORT 2024 7 HORIZON OIL ANNUAL REPORT 2024 7 2024 RESERVES AND RESOURCES STATEMENT PERMITS, LICENCES AND INTERESTS HELD PERMIT OR LICENSE OPERATOR MATERIAL PROJECTS NET WORKING INTEREST (%) 30 JUNE 2024 30 JUNE 2023 China Block 22/12 CNOOC WZ6-12S,M,N; WZ12-8W,M,E 26.95% 26.95% New Zealand PMP 38160 OMV Maari, Manaia 26.00% 26.00% Australia OL4 and OL5 Central Petroleum Mereenie 25.00% 0.00% HORIZON OIL ANNUAL REPORT 2024 8 Notes 1 All estimates are prepared in accordance with the Society of Petroleum Engineers (SPE) Petroleum Resources Management System (PRMS) revised 2018. 2 Relevant terms used in this statement, capitalised or otherwise, have the same meaning given to 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. 7 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. Gas reserves have been converted to oil equivalent using 5.816PJ equals one million barrels of oil equivalent. 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. 10 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. 11 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. 12 Estimates are reported according to Horizon Oil’s net economic interest, this being Horizon Oil’s net working interest 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. Reference points for Horizon’s petroleum Reserves and Contingent Resources and production are defined points where normal operations cease, and petroleum products are measured under defined conditions prior to custody transfer. For China, Horizon’s net economic interest ranges from 24.32% to 26.95%. For New Zealand and Australia, Horizon’s net economic interest is equal to Horizon’s net working interest of 26.00% and 25.00% respectively. 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. 14 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 2024 9 10 10 Horizon Oil Annual Report 2024 HORIZON OIL ANNUAL REPORT 2024 REVIEW ACTIVITIES HORIZON OIL LIMITED HORIZON OIL ANNUAL REPORT 2024 11 HORIZON INTEREST % PRODUCTION 26.95 Block 22/12, Beibu Gulf, Offshore China A successful four well infill well drilling campaign was largely completed during the fourth quarter of the financial year, ahead of schedule and under budget, which contributed incremental production rates of 2,300 bopd gross (620 bopd net). The drilling program restored production back above the long-term field average with Block 22/12 production on 30 June 2024 of 10,360 bopd gross (2,792 bopd net). These rated do not include the contribution from the last 12-8E infill well that came online on 13 July and flowed at approximately 400 bopd gross (Horizon net 108 bopd) following cleanup. The four well program is forecast to recover an incremental 1.3 mmbbl gross (Horizon net 0.35 mmbbl) to the end of the contract period. The Joint Venture has also matured a significant water handling capacity upgrade project which is expected to be online from early 2026. Recovery from this project was previously carried as contingent resources but has been reclassified as reserves in Horizon’s 30 June 2024 reserves report. The project is forecast to recover an incremental 1.2 mmbbl gross (Horizon net 0.3 mmbbl) to the end of the contract period. Horizon will pay the Operator an additional Opex processing tariff for its proportionate share of additional water handling once the project is online. The Block 22/12 Joint Venture continues to evaluate and mature further infill drilling targets with a view to executing a drilling program during calendar year 2025, subject to rig availability and joint venture approvals. 1 Cost recovery oil entitlement is a right under the Block 22/12 Petroleum Contract to additional oil production to compensate Horizon for historical exploration expenditure incurred in the Block. The current entitlement is associated with historical WZ12-8E exploration costs. During the financial year, the Group’s working interest share of production from the Beibu Gulf fields was 945,236 barrels of oil, with production declining as expected back towards the long term field average following the successful WZ12- 8E development drilling during the prior year. Average gross production over the financial year was over 9,600 bopd, of which the Group’s share was 2,590 bopd. Crude oil sales for the financial year were 911,280 barrels at an average price of US$84/bbl exclusive of executed hedging. Oil sales and revenue benefited from an incremental cost recovery oil entitlement resulting in an additional ~US$3.9 million of revenue recorded for the financial year. Cash operating costs for the year were US$19.40/bbl (produced), excluding the costs of well workovers mentioned below. A three well workover campaign was completed in the second half of the financial year comprising activities to restore production from two currently inactive wells, and preparatory work on a third inactive well to enable side-tracking during the subsequent Q4 drilling program. HORIZON OIL ANNUAL REPORT 2024 12 HORIZON INTEREST % PRODUCTION 26 Towards the end of the second quarter, the Maari JV commenced a workover on the shut-in MR6A well with the aim of reinstating oil production from the Maari Mangahewa and to exploit a previously unproduced Matapo Sandstone behind pipe opportunity. Unexpected workover unit repairs in December resulted in the temporary suspension of the workover. With those repairs completed during the financial year, and following the successful MR8A and MR10 ESP changeouts (see below), the workover re-commenced subsequent to year end. Production was impacted during the fourth quarter by ESP failures in the MR8A and MR10 production wells, noting that both pumps materially exceeded their expected operational lifespans. Following completion of the workover unit repairs, the pumps were replaced and both wells were successfully brought back online. The Operator received the FPSO class extension certificate from the certifying authority ABS which allows the facility to continue to operate for a further five years through to April 2028, subject to meeting ongoing continuous survey requirements. This, together with the continued favourable production trends at Maari provides the joint venture with the confidence to pursue life extension beyond the current 2027 permit expiry, including the preparation of licence extension documentation which is planned to be lodged with the regulator later this calendar year. During the financial year, the Group’s working interest share of production from the Maari and Manaia fields increased 18% on the prior year to 463,309 barrels of oil owing largely to the successful restoration of production from the shut- in Manaia-1 well. Average gross production over the year was 4,868 bopd, of which the Group’s share was 1,266 bopd. Crude oil sales were 373,358 barrels, generating revenue of US$34.5 million at an average realised price of US$92.40/bbl exclusive of executed hedging. Maari crude oil continued to attract significant premiums to dated Brent which enhanced cashflow generation from the asset during the period. Cash operating costs for the year were US$24.70/bbl (produced). Crude oil inventory at 30 June 2024 was 116,501 bbls with a lifting of over 127,000 bbls (net to HZN) deferred to July 2024 which generated revenue in excess of US$10 million. The Maari Joint Venture completed the conversion of the MR2a well to a permanent water injector in September 2023. Following the workover, MR2a is now providing pressure and displacement support to the producing wells. HORIZON OIL ANNUAL REPORT 2024 13 HORIZON INTEREST % PRODUCTION 25 led to varied gas production, influenced by decreased buyer nominations. In April 2024, a Gas Supply Agreement (GSA) was announced with Power and Water Company (PWC) to supply gas to the NT on an as-available basis throughout 2024, substantially offsetting the impact of the NGP shutdown. Subsequent to the end of the year, and in response to an expression of interest to buyers for gas supply during the 2025-2030 period, the Mereenie JV entered into a long-term strategic gas sales agreement (GSA) with the Northern Territory Government (NTG). The new GSA covers the firm supply of gas for the 6 year period from 1 January 2025 through until 31 December 2030 to underpin the domestic supply of gas to the Northern Territory. Together with an amended existing gas supply agreement with Arafura Rare Earths Limited (ARU), the Mereenie joint venture has now substantially contracted the forecast Mereenie Proved Developed Producing (PDP) gas production on a firm take or pay basis until the end of 2030 at current market prices, subject to the ARU GSA becoming unconditional. These gas sales agreements reduce the market dependency on the Northern Gas Pipeline (NGP) with the NTG GSA also including contingent offtake arrangements for firm gas nominations in 2025 if the NGP is offline. The NTG GSA also supports the drilling of two proposed infill wells at Mereenie with contingent offtake arrangements for firm gas nominations following successful drilling. The JV continues to focus on additional 2024/25 work program activities, including helium recovery initiatives and further infill drilling opportunities with the proposed two well infill drilling program being endorsed by the JV subsequent to the end of the financial year. The infill well program is targeting incremental gas production at Mereenie with drilling activities expected to commence around the middle of FY25. On 11 June 2024, the Company advised that its acquisition of a 25% non-operated interest in the producing Mereenie oil and gas field completed. The effective date of the transaction was 1 April 2023, with revenues earned and costs incurred during the period from the effective date to completion adjusted against the initial cash consideration of A$42.5 million (~US$27.6 million). Horizon’s share of production volumes during the approximate 14 month period between effective date and completion were 2.6 PJs of gas and 0.05 mmbbls of oil. Funding for the initial cash consideration was from a new A$42.5 million senior debt facility which was executed with Macquarie Bank. Financial close and drawdown of the facility occurred on 11 June 2024 to enable completion of the acquisition. Subsequent to the period end, the Company paid the first contingent milestone payment for the acquisition amounting to A$5 million (~US$3.3 million) following certain commercial milestones being achieved. The acquisition was executed together with Echelon Resources Limited (ASX: ECH) (formerly known as New Zealand Oil & Gas Limited), an incumbent Mereenie joint venture partner, who acquired a further 25% participating interest in OL4 and OL5 from Macquarie on identical terms. Central Petroleum remains as operator of the Mereenie joint venture and manages the gas sales function on behalf of Horizon, ECH and Cue under a joint marketing agreement. Gross production for the 3 weeks since completion of the transaction was 0.4PJ (Horizon net 25%: 0.1PJ) of gas and 5,740 bbls (Horizon net 25%: 1,435 bbls) of oil. Cash receipts from Mereenie over recent months have been impacted by the shutdown of the Northern Gas Pipeline (NGP) which has HORIZON OIL ANNUAL REPORT 2024 14 Financial Report HORIZON OIL LIMITED For the financial year ended 30 June 2023 This annual financial report covers the consolidated financial statements for the Group, consisting of Horizon Oil Limited (the ‘Company’) and its subsidiaries. The annual financial report is presented in United States dollars. Horizon Oil Limited is a public company limited by shares and is listed on the ASX. It is incorporated and domiciled in Australia. Its registered office and principal place of business is: Level 4 360 Kent Street Sydney NSW 2011 The annual financial report was authorised for issue by the Board of Directors on 24 August 2023. 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 2024 Reserves and Resources Statement dated 24 August 2023. REPORT FINANCIAL HORIZON OIL LIMITED For the financial year ended 30 June 2024 15 HORIZON OIL ANNUAL REPORT 2024 This annual financial report covers the consolidated financial statements for the Group, consisting of Horizon Oil Limited (the ‘Company’) and its subsidiaries. The annual financial report is presented in United States dollars. Horizon Oil Limited is a public company limited by shares and is listed on the ASX. It is incorporated and domiciled in Australia. Its registered office and principal place of business is: Level 4 360 Kent Street Sydney NSW 2000 The annual financial report was authorised for issue by the Board of Directors on 28 August 2024. 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 2024 Reserves and Resources Statement dated 28 August 2024. HORIZON OIL ANNUAL REPORT 2024 15 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 2024. 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 S Birkensleigh G Bittar B Clement N Burgess Review of operations Principal activities During the financial year, the principal activities of the Group continued to be directed towards petroleum production, development and exploration. A detailed review of the operations of the Group during the financial year is set out in the Activities Review on pages 11 to 14 of this annual financial report. Group Financial Performance Consolidated Statement of Profit or Loss and Other Comprehensive Income 2024 Profit Drivers The Group reported a statutory profit after tax of US$25.9 million for the financial year (2023: US$43.9 million) with non-cash items impacting on the financial year result including US$30.1 million (2023: US$38.5 million) in amortisation of production phase assets and US$1.2 million (2023: US$1.4 million) of non-cash expense related to the value of performance rights and share appreciation rights granted to Horizon employees. EBITDAX was US$71.5 million (2023: US$103.5 million) and EBIT was US$40.3 million (2023: US$59.8 million). Cashflows from operating activities of US$64.2 million (2023: US$72.0 million) enabled the Group to return ~US$37 million to shareholders whilst also meeting its capital expenditure commitments and repaying a further US$7.9 million in debt during the financial year. EBITDAX and EBIT 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, HORIZON OIL ANNUAL REPORT 2024 16 and exploration expenditure (including non-cash impairments). The directors consider EBITDAX and EBIT to be useful measures of performance as they are widely used by the oil and gas industry. EBITDAX and EBIT information has not been audited. However, they have been extracted from the audited annual financial reports for the financial years ended 30 June 2024 and 30 June 2023. Basic earnings per share for the financial year was 1.60 US cents based on a weighted average number of fully and partly paid ordinary shares on issue of 1,617,370,026 shares. Sales and Production The Group’s producing assets performed well despite the overall decline in Horizon’s net working interest share of production to 1,426,687 boe for the financial year (2023: 1,915,886 bbls). Production from Maari was particularly strong, increasing 18% from the prior period following the restoration of production from the MN1 well and the conversion of MR2a to a permanent water injector. As anticipated, production from Block 22/12 declined naturally during the period following the successful WZ12-8E infill drilling during the prior year, with production levels restored back above 10,000 bopd towards the end of the year following the four well drilling campaign completed in July 2024. The drilling campaign is forecast to recover an incremental 1.3 million barrels gross (0.35 million barrels, HZN net working interest) to the end of the contract period. Sales volumes for the financial year declined in line with production to 1,301,155 boe (2023: 1,774,437 bbls) with 119,564 bbls of crude oil inventory on hand as at 30 June 2024 following the deferral of a Maari lifting from June to July 2024. Sales revenue for the financial year was US$111.5 million (2023: US$152.1 million), with a net realised oil price of US$85.7/bbl (2023: US$85.71/bbl), inclusive of hedge settlements. The deferred Maari lifting occurred in July 2024, generating further revenue of over US$10 million. Production and sales volumes above exclude Horizon’s economic entitlement to Mereenie pre-completion production of 2.6 PJs (~0.5 mmboe) of gas and 0.05 mmbbls of oil back to the transaction effective date of 1 April 2023. For accounting purposes, the pre-completion cashflows are set off against the acquisition price in the balance sheet and not booked through the income statement during the year. On an economic interest basis, Horizon’s total share of production for the financial year inclusive of Mereenie pre-completion production was approximately 1.9 mmboe, broadly consistent with the prior year. Operating costs for the period were US$62.9 million (2023: US$81.2 million). The reduced costs were mainly the result of lower production levels at Block 22/12 reducing amortisation charges and the deferred Maari lifting which significantly increased the crude oil inventory held on the balance sheet at the end of the financial year. The lower production volumes also resulted in reduced special oil levies from Block 22/12. General and Administrative Expenses General and administrative expenses reduced by US$1.0 million during the financial year to US$2.8 million (2023: US$3.8 million). The reduction was driven by a reduction in headcount coupled with a reduction in non-cash share-based payment expenses. General and administrative expenses comprised net employee benefits expense of US$1.7 million (including non- cash share-based payment expense of US$1.2 million), corporate office expense of US$0.8 million, and depreciation of US$0.2 million. Insurance Expense Insurance expense of US$2.1 million (2023: US$2.0 million) was in line with the prior financial period. Exploration and Development Expenses Exploration and development expenses were US$0.8 million (2023: US$4.6 million) and was focused on appraisal and exploration opportunities in and around Block 22/12 in China and the evaluation of inorganic growth opportunities including the Mereenie acquisition. Finance Costs/Income The Group’s net borrowing costs of US$1.1 million were US$1.7 million lower during the period following the full repayment of the Group’s Cash Advance Facility in July 2023 coupled with a higher average balance of cash held in interest bearing accounts/term deposit. Income and Royalty Tax The net income and royalty tax expense of US$13.3 million (2023: US$13.1 million) incurred during the financial year included a current tax expense of US$12.4 million, a deferred income tax benefit of US$2.1 million and a royalty related tax expense of US$3.0 million. The net income tax expense was driven by cash taxes of US$9.8 million in China and US$2.6 million in New Zealand. Royalty tax expense of US$2.9 million reflected cash and deferred royalty tax associated with the Maari/Manaia field. HORIZON OIL ANNUAL REPORT 2024 17 Consolidated Statement of Financial Position At 30 June 2024, total assets were US$205.3 million (2023: US$183.5 million) and total liabilities were US$122.0 million (2023: US$87.7 million), resulting in net assets of US$83.2 million (2023: net assets of US$95.8 million). The initial purchase consideration for the Mereenie acquisition was fully debt funded, accordingly the acquisition did not have a material impact on the net asset position of the Group as at 30 June 2024. At 30 June 2024, the Group reported a net cash position of US$26.2 million. Net cash of US$26.2 million comprised of cash and cash equivalents held of US$52.6 million (2023: US$43.6 million) offset by borrowings of US$26.4 million (2023: US$7.9 million). At financial year end, borrowings consisted of US$26.4 million principal outstanding on the Group’s debt Facility. Consolidated Statement of Cash Flows 2024 Cash Drivers Net cash generated from operating activities for the financial year was US$64.2 million (2023: US$72.0 million) which when coupled with the disciplined spending and significantly lower capital costs incurred during the period, resulted in the continued build in cash reserves notwithstanding the significant shareholder distributions and debt repayments made during the period. The build in cash reserves was further aided by the full debt funding of the initial purchase consideration for the Mereenie Acquisition. Corporate Group liquidity At 30 June 2024, the Group’s net cash position was US$26.2 million (30 June 2023: US$35.7 million) following ~US$37 million in dividends paid to shareholders during the financial year and the US$26.4 draw down on a new 5 year debt facility used to fund the Mereenie Acquisition. Net cash comprises cash and cash equivalent assets held of US$52.6 million (30 June 2023: US$43.6 million) offset by the nominal value of borrowings drawn down of US$26.4 million (30 June 2023: US$7.9 million) on the Group’s debt facility. Details of the Group’s debt facilities are set out in Note 19. Dividends The Board has declared a final dividend of AUD 1.5 cents per Ordinary share totalling approximately AUD 24.3 million. This dividend was declared as a Conduit Foreign Income (CFI) unfranked dividend and will be paid on 25 October 2024. During the financial year, the Board also declared an interim dividend of AUD 1.5 cents per Ordinary share totalling approximately AUD 24.3 million. This dividend was declared as a Conduit Foreign Income (CFI) unfranked dividend and was paid on 26 April 2024. Oil Price Hedging The Company maintains leverage to the oil price with a minimal hedge position. At the date of this report, hedges were in place for 77,500 bbls of oil covering the period to November 2024, with a weighted average fixed price of US$82.64/bbl. 43.6 64.2 17.7 (36.9) (9.7) (26.3) 52.6 Opening cash and cash equivalents at 30 June 2023 Net cash inflows from operating activities Debt proceeds, repayments, and others Dividends Investment in oil and gas and other assets Mereenie acquisition Closing cash and cash equivalents at 30 June 2024 HORIZON OIL ANNUAL REPORT 2024 18 Group business strategies and prospects for future financial years The Company’s exploration, development and production activities are focused in China and Australasia. The robust cash flows from the Company’s interests in Block 22/12, offshore China; Maari/Manaia fields, offshore New Zealand and Mereenie, onshore Australia, will be applied to fund the Company’s future capital and growth program, and to repay debt, 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, New Zealand and Australia, whilst keeping an eye on potential other value accretive growth opportunities. The Company has a targeted and selective exploration and development strategy 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 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 In the near term, continued strong operating cashflow generation is forecast with the Group’s overall production enhanced and diversified with the addition of the Mereenie asset. Production levels and cashflows from each field are forecast to be impacted by natural reservoir decline in the near-term before further infill drilling and other production enhancing initiatives are progressed. These cashflows are expected to enable continued returns to shareholders and funding for further production growth opportunities. The Group’s short-term focus is on: – Continued optimisation of production performance from the Block 22/12, Maari/Manaia and Mereenie fields; – Maturing further infill drilling opportunities, particularly at Block 22/12 and Mereenie; – Pursuing life extension at Maari; and – Continued evaluation of organic and inorganic opportunities. Matters subsequent to the end of the financial year Other than the matters noted above and disclosed in the review of operations, there has not been any matter or circumstance which has arisen since 30 June 2024 that has significantly affected, or may significantly affect: [1] - the Group’s operations in future financial years; or [2] - the results of those operations in future financial years; or [3] - the Group’s state of affairs in future financial years. Environmental regulation The Group is subject to significant environmental regulation in respect of exploration, development and production activities in all countries in which it operates – China, New Zealand and Australia. 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. HORIZON OIL ANNUAL REPORT 2024 19 Business risks The achievement of Horizon’s business strategy and future financial performance is subject to various risks. Horizon undertakes steps to identify, assess and manage these risks and operates under a Board-approved Group-wide Risk Management Framework. Risk management is addressed in the Company’s Sustainability Report, for the year ended 30 June 2024, which may be accessed from the Company’s website at www.horizonoil.com.au. The material business risks faced by the Group that may have an impact on the operating and financial prospects of the Group as at 30 June 2024 are: Risk Description / Potential Impacts Mitigating factors 1 Adverse impact to production A loss of production event causes a reduction in cashflow. Group has in place Loss of Production insurance over the assets in New Zealand, China and Australia. Recent completion of the Mereenie, Australia transaction on 11 June 2024 diversifies the production base. 2 Major safety and/or environmental event Major safety/environmental incidents leading to reputational damage, potential facilities shutdown imposed by regulators and a loss of business value. Oversight of operations with regular site visits and monitoring regulatory audit reports and timely implementation of corrective actions. 3 Market volatility Market driven forces reduce the value of Horizon’s assets and/or reduce the revenue derived from its operations. The Group has access to commodity hedge lines and continually monitors market conditions and cashflow forecasts to asses the need for hedging. Review of corporate and joint venture budgets and cost-reduction initiatives. 4 Decommissioning costs exceed estimates Decommissioning costs exceed estimates adverselt impacting Group liquidity. Group has in place adequate liquidity (including working capital) to cover potential financial security requirements. 5 Political/Regulatory risk Risk that governments enact onerous legislative changes which has a material impact on the business Recent completion of the Mereenie, Australia transaction on 11 June 2024 diversifies the geographies in which the Company operates. HORIZON OIL ANNUAL REPORT 2024 20 Information on Directors & Officers The following persons held office as Directors or Officers of Horizon Oil Limited at the date of this Directors’ Report: Chairman, Independent Non-Executive Director Mike Harding Responsibilities: 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. Experience: Mr Harding has held management positions around the world with British Petroleum (BP), including President and General Manager of BP Exploration Australia. Directorships: Mr Harding is a former Director of Cleanaway Waste Management Limited, 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 Richard Beament Responsibilities: Mr Beament has been Managing Director and Chief Executive Officer of Horizon since July 2022. He was formerly Horizon’s Chief Financial Officer from July 2018 to June 2022 and was Company Secretary from September 2021 to June 2022. 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. Experience: Mr Beament is a Chartered Accountant with over 25 years’ experience in accounting and finance across a range of sectors, including over 13 years in managerial positions in the oil and gas sector. Prior to joining Horizon in 2010, he held senior positions with PricewaterhouseCoopers in Sydney and London. Directorships: Nil Qualifications: Mr Beament holds a Bachelor of Commerce degree and is a member of the Chartered Accountants Australia and New Zealand (CAANZ). Independent Non-Executive Director Sandra Birkensleigh Responsibilities: 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. Experience: Ms Birkensleigh has 26 years’ experience in financial services, risk management, compliance and corporate governance with PricewaterhouseCoopers including as Global Lead for Governance Risk & Compliance, National Lead for Partner Risk and Controls Solutions and a Service Team Leader for Performance Improvement. Sandra has been a professional non-executive director at a range of entities for the past 11 years. Directorships: Ms Birkensleigh is Chairman of Auswide Bank Limited, Non-Executive Director of 7-11 Holdings and its subsidiaries, National Disability Insurance Agency and Adore Beauty Limited, Deputy Chancellor and a Council Member of the University of the Sunshine Coast and Chair of its Audit and Risk Committee. She is an Independent Member of the Audit Committee of the Reserve Bank of Australia and Chair of the Tasmania Finance Corporation. Ms Birkensleigh is a former director of MLC Limited. Qualifications: 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. HORIZON OIL ANNUAL REPORT 2024 21 Non-executive Director Gregory Bittar Responsibilities: 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. Experience: 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. Directorships: Mr Bittar was a former Chairman of Brightstar Resources Limited, Trek Metals Limited and Millennium Minerals Limited. Qualifications: Mr Bittar holds a Master of Finance from London Business School, a Bachelor of Economics and a Bachelor of Laws (Hons). Alternate Director for Gregory Bittar Bruno Lorenzon Responsibilities: Mr Lorenzon has been an Alternate Director for Greg Bittar since March 2017. Experience: Mr Lorenzon has worked for the IMC Pan Asia Alliance Group for the past 15 years and has extensive experience in investments, strategy and corporate finance in the resources sector both in Australia and overseas. Mr Lorenzon previously worked for Vale in Brazil and Rio Tinto in Australia in roles encompassing strategic planning, mergers and acquisitions and business development. Qualifications: Mr Lorenzon is a Chartered Financial Analyst and holds a Master of Business Administration and Bachelor of Civil Engineering. Independent Non-Executive Director Bruce Clement Responsibilities: Mr Clement was appointed as an independent non-executive director on 1 September 2020. He is Chairman of Horizon’s Risk Management Committee. Experience: 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. Mr Clement 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). Directorships: Mr Clement is a non-executive director and former interim Chief Executive officer of Beach Energy Limited (ASX:BPT) and former director of Norwest Energy Limited, Roc Oil and AWE Limited. Qualifications 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. Non-Executive Director Nigel Burgess Responsibilities: Mr Burgess was appointed as a non-executive director on 1 July 2021. Mr Burgess 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 Member of Horizon’s Audit Committee. Experience: Mr Burgess has 30 years of commercial experience in funds management with Samuel Terry, Hunter Hall, GIO of Australia and Friends Provident in Australia, and a family office in Europe. He has experience in a variety of commercial transactions and corporate restructurings across a range of industries and jurisdictions. Directorship: He is a former director of Spicers Limited (ASX: SRS; de-listed 2019) and Yellow Holdings Limited (New Zealand). Qualifications: Mr Burgess holds a Bachelor of Economics degree and Masters of Accounting degree from the University of New South Wales. HORIZON OIL ANNUAL REPORT 2024 22 Directors’ Interests in the Company’s Securities As at the date of this Directors’ Report, the Directors held the following number of fully paid ordinary shares: DIRECTOR ORDINARY SHARES DIRECT INDIRECT TOTAL M Harding 500,000 - 500,000 R Beament 6,016,724 5,936,000 11,952,724 S Birkensleigh - - - G Bittar 1,000,000 - 1,000,000 B Clement - - - N Burgess1 - 314,212,423 314,212,423 B Lorenzon (as alternate) - - - 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. Chief Financial Officer / Assistant Company Secretary Kyle Keen Responsibilities: Mr Keen has been Horizon’s Chief Financial Officer since 1 July 2022. Mr Keen has been Horizon’s Assistant Company Secretary since November 2018. Experience: Mr Keen is a Chartered Accountant with expertise in financial risk management and financial reporting across a range of sectors, in particular, oil and gas. He has 13 years’ experience including working in top tier accounting practices including EY in the United Kingdom and KPMG in South Africa. Qualifications 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: Mr Margiankakos has been Horizon’s Group Tax Manager since October 2017. Experience: 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. Group Chief Operating Officer Gavin Douglas Responsibilities: Mr Douglas has been Horizon’s Group General Manager – Production & Exploration until his appointment as Chief Operating Officer on 1 July 2022. Experience: Mr Douglas is a geologist with over 25 years’ experience of exploration, development and production of oil and gas, and has 15 years’ experience in technical managerial positions, including leading multidiscipline technical teams in Australia, and throughout Southeast Asia and the Middle East. Prior to joining Horizon, Gavin was the Well Delivery Manager with Oil Search and Subsurface Manager with Eaglewood Energy. Qualifications Mr Douglas holds an Honours Degree in Geology and a Masters in Reservoir Evaluation & Management. He is a member of the American Association of Petroleum Geologists (AAPG) and a member of the Society of Petroleum Engineers (SPE). HORIZON OIL ANNUAL REPORT 2024 23 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: 7 2 2 2 1 Number of meetings attended by: M Harding1, 3 63 2 2 1 1 R Beament 7 2 2 2 1 S Birkensleigh 7 2 2 2 G Bittar1 7 2 2 2 B Clement2, 3 7 2 2 1 N Burgess1 7 2 2 B Lorenzon (as alternate for G Bittar) 0 1 Mr Harding, Mr Bittar and Mr Burgess attended the risk management committee meetings in their capacity as Non-Executive Directors of Horizon Oil Limited and are not members of the risk management committee. 2 Mr Clement attended audit committee meetings in his capacity as a Non-Executive Director of Horizon Oil Limited and is not a member of the audit committee. Mr Clement attended RNC meeting on behalf of Mr Harding. 3 Mr Clement attended a Board meeting in the capacity as chairman on behalf of Mr Harding. HORIZON OIL ANNUAL REPORT 2024 24 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 28 August 2024. The Company’s Corporate Governance Statement for the year ended 30 June 2024 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 Horizon’s Environmental Social and Governance (ESG) Action Plan. Summarised below for each of Horizon’s ESG priority areas is an update on the progress made for the year ended 30 June 2024. The Company’s Sustainability Report for the year ended 30 June 2024 may be accessed from the Company’s website at www.horizonoil.com.au. The Australian Federal Government is proposing amendments to the Corporation Act. The Government’s objective is to improve transparency and comparability of information available to investors regarding Australian entities exposure to climate-related financial risks, opportunities, and their plans and strategies in response to these exposures. If the amendments are enacted, Australian entities will be required to adopt new standards developed by the Australian Accounting Standards Board (AASB). The standards will be largely based on the International Sustainability Standards Board’s (ISSB) International Financial Reporting Standards (IFRS) S1 and S2. The disclosure requirements will be gradually phased in, depending on entity’s consolidated gross assets, revenue and number of employees. We are closely monitoring the evolving disclosure requirements and will assess the need for changes in ESG reporting expected to be effective for the financial year commencing 1 July 2026 to ensure ongoing compliance and reporting accuracy. The ESG metrics discussed below, exclude Mereenie data, given that the completion of Horizon’s asset acquisition was close to the end of FY24 (11 June 2024). Going forward, Mereenie ESG performance metrics will be included with Horizon’s other operations, based on Horizon’s percentage equity position. Horizon’s materiality review will be reconducted in FY25, with the Mereenie asset most like having some bearing on the company’s ESG focus areas. Health, safety & environment (HSE) Both Block 22/12 and Maari have continued their strong safety performance, despite significant drilling, workover and production activities. As at the financial year ended 30 June 2024, Horizon achieved a Total Recordable Injury Frequency Rate (TRIFR) of 3.30, and a Lost Time Injury Frequency Rate (LTIFR) of zero, both less than the National Offshore Energy Regulator (NOPSEMA) industry averages in Australia. There were zero fatalities and zero material environmental incidents for FY24. Our Operators continue to run safety awareness campaigns with the objective of continuous improvement. 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. Governance Governance continues to be a core focus for the Group. The Board continues to have oversight of ESG strategy and performance, including climate change, with support from the Sustainability Steering Committee. During the period Horizon conducted its annual assessments on its value and supply chain for risks and incidences of modern slavery. The Modern Slavery Statement, for FY2023, was published in line with the requirements of the Australian Modern Slavery Act 2018. The work on 2024 Modern Slavery Statement is currently underway to be submitted in December 2024. This statement may be accessed from the Company’s website at www.horizonoil.com.au. During the year, Horizon has conducted further checks around Cyber Security with improvement actions being implemented. Climate change Climate change continues to be of importance to the Group, and the recent investment into domestic gas is an important step in supporting the energy transition. The Mereenie oil and gas field provides gas for both domestic consumption and for the mining and processing of minerals critical to the energy transition. The Group’s investment in Re-Vi (formerly Nobrac) continues to progress, with its biochar project achieving first production with certification of carbon removal credits underway. Horizon continues to support our Operators in emission reduction initiatives. Scope 1 absolute emissions for FY24 HORIZON OIL ANNUAL REPORT 2024 25 is approximately 22% lower than FY23, with most of the reduction attributable to production decline. FY24 has seen the implementation of some emission reduction initiatives. Refer to the Group’s Sustainability Report for more details. Horizon continues to acquire and surrender carbon credits in New Zealand Units (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. People – Employees & Community The Company continues to focus on its employees and provides workplace flexibility and initiatives to enhance productivity and staff morale. Horizon continues to work with our Operators and partners to identify and participate in relevant and meaningful community-based projects. HORIZON OIL ANNUAL REPORT 2024 26 Remuneration Report This Remuneration Report (Report) outlines the remuneration arrangements for the Key Management Personnel (KMP) of the Company for the financial year ended 30 June 2024. The Remuneration Report for 30 June 2023 received a 98% approval at the 2023 Annual General Meeting held on 22 November 2023. 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] - Contractual arrangements for executives [4] - Performance and financial year remuneration outcomes [5] - Non-executive Director remuneration [6] - Statutory and share-based reporting [1] - 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) Full financial year Richard Beament Managing Director / Chief Executive Officer Full financial year Sandra Birkensleigh Director (non-executive) Full financial year Greg Bittar Director (non-executive) Full financial year Bruce Clement Director (non-executive) Full financial year Nigel Burgess Director (non-executive) Full financial year Bruno Lorenzon Alternate Director (non-executive) Full financial year OTHER KMP (EXECUTIVES) Gavin Douglas Chief Operating Officer Full financial year Kyle Keen Chief Financial Officer / Assistant Company Secretary Full financial year [2] - 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. HORIZON OIL ANNUAL REPORT 2024 27 – 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. LTI’s were issued to the below executives during the financial period following their appointments to drive long term value creation. LTI’s are not planned to be awarded annually. The graph below sets out the mix of total annual fixed remuneration and the maximum variable remuneration in the form of STI’s. Annual incentives have been established to drive performance without encouraging undue risk taking. The mix of Total fixed remuneration and Short-term incentives for the financial year is shown in the table below with percentages rounded to the nearest whole number. Chief Executive Officer Richard Beament Total Fixed Remuneration (TFR) 57% Maximum STI 43% Chief Operating Officer Gavin Douglas Total Fixed Remuneration (TFR) 62% Maximum STI 38% Chief Financial Officer / Assistant Company Secretary Kyle Keen Total Fixed Remuneration (TFR) 67% Maximum STI 33% [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. Performance-based HORIZON OIL ANNUAL REPORT 2024 28 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 50% of the total STI awarded with the residual paid in cash. The STI award is determined by the Board following the end of the financial year having regard to Group performance over the financial year. How is the STI linked to performance? The STI is designed to motivate and reward Executives for contributing to the delivery of annual business performance. Key Performance Indicators (KPIs) are determined each financial year and approved by the Board. The Company’s performance against these KPIs is reviewed annually. How is performance measured for the STI? Awards are made annually with performance measured over the twelve months to 30 June and are aligned to the attainment of the Company’s Board approved KPIs for the relevant year. Awards under the plan are determined and paid in 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. Actual performance against financial, non-financial and individual measures is assessed at the end of the financial year. In assessing the achievement of measures, the Remuneration and Nomination Committee may exercise its discretion to adjust outcomes for significant factors outside the control of management that contribute positively or negatively to results. STI opportunity Up to 75% of the Chief Executive Officer’s TFR, up to 60% of the Chief Operating Officer’s TFR and up to 50% of the Chief Financial Officer’s TFR. A proportion of each executive’s STI award will be granted in the form of deferred equity rights with the residual STI paid in cash. The proportions of the STI award paid in cash and received in deferred equity rights will depend on the executive’s position in the Company and ranges between 25% - 50% of the total STI awarded. 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? 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. Distribution and capital reorganisation 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). HORIZON OIL ANNUAL REPORT 2024 29 LTI PLAN (PERFORMANCE RIGHTS) How is the LTI linked to performance? The LTI Plan for Performance Rights applies to LTI’s issued on and after 1 July 2022. The objective of the Performance Rights granted pursuant to the LTIP is to create a stronger link between eligible employees’ performance and reward, increasing shareholder value via the proposed LTIP. The 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 (Share), 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, issue 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 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 any “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. 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). HORIZON OIL ANNUAL REPORT 2024 30 Key Terms of the Share Rights issued onwards from 1 July 2022 The tables below set out the material terms of Share Rights issued under the New LTIP. 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 grant date upon satisfaction of all 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. HORIZON OIL ANNUAL REPORT 2024 31 LTI PLAN (SARS) LTI PLAN (SARS) The LTI plan for SARs applied to LTIs awarded prior to 1 July 2022. It will not apply to the award of LTIs after 1 July 2022. Objective The LTI plan aimed to align Executive remuneration with the creation of shareholder value. How is the LTI linked to performance? LTI vesting is linked to absolute Horizon share performance, and Horizon share performance relative to the S&P ASX 200 Energy Index. Form of LTI grant? LTIs are awarded as performance rights, known as share appreciation rights (SARs). SARs vest over a three-to-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. What are the performance measures applied to the LTI? The Board considered 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 was the LTI opportunity? The former CEO had an LTI opportunity equal to 50% of TFR, and other Executives at that time had an LTI opportunity equal to 21.4% of TFR. The LTI opportunity is prescribed by the Executives’ employment contracts. 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. Treatment of incentives on cessation of employment 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. When do SARs lapse? 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. HORIZON OIL ANNUAL REPORT 2024 32 [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. [3] - 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 R Beament 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 or deferred STI 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 SARs, Performance Rights and Deferred STI Rights. 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 COO - 6 months CFO - 3 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 the executives performance and period of employment during that STI year. Entitlement to any previously granted LTIP or deferred STI 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 SARs, Performance Rights and Deferred STI Rights. HORIZON OIL ANNUAL REPORT 2024 33 [4] - Group Performance and Financial Year Remuneration Outcomes [4.1] - 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. Vesting of Performance Rights are based on the performance criteria as outlined in section 2.3. Horizon share price performance for the current and previous four financial years is displayed in the chart below. During the 2024 Financial Year, the Horizon share price increased 29%, which when combined with the 25% distribution yield (aggregate of AUD 3.5 cents per share), results in a TSR of 54% for the financial year or approximately A$120 million dollars of value for shareholders. Horizon’s share price closed at AUD 0.18 per ordinary share on 30 June 2024. The table below sets out information regarding the Group’s performance over the last five years as required by the Corporations Act. FY24 FY23 FY22 FY211 FY201 Profit before tax (US$’000) 39,185 56,989 42,739 5,178 27,300 EBITDAX (US$’000) 71,451 103,525 73,008 36,391 51,392 Net cash/(debt) (US$’000) 26,166 35,652 42,849 31,696 489 Capital Return (A$ cents per share)2 - - 1.35 3 - Dividend (A$ cents per share)2 3.0 3.5 1.65 - - 1 The profit before tax and EBITDAX information for the 2021 and 2022 financial years excludes profit and loss from discontinued operations as reported in the consolidated statement of profit and loss. 2 Capital Returns and Dividends are declared and approved for the respective financial year shown and may be paid during the subsequent financial year. HORIZON OIL ANNUAL REPORT 2024 34 [4.2] - 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 STATUS FINANCIAL Financial Metrics & Profitability Achievement of budgeted revenue, operating costs and cashflow across the Block 22/12 and Maari/Manaia fields Maintain average Group operating costs and maintain low corporate general and administrative expenditure Maintain and enhance operating income streams Maximise profitability and cashflow Effective cost control Exceed Exceed Exceed OPERATIONAL Production Optimisation Achieve budgeted production Maximise profitability and cashflow Exceed BUSINESS DEVELOPMENT Organic growth and an opportunistic approach to inorganic growth Focus on organic growth opportunities resulting in reserve additions Ensure sustainability of the business and cashflow whilst creating value for shareholders Exceed SAFETY HSSE Achievement of TRIFR below NOPSEMA industry average across Horizon’s assets Promote safe operations with a safe workplace for employees Exceed PEOPLE, CULTURE & SUSTAINABILITY People & Culture Sustainability 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 Company has the necessary resources to achieve strategic objectives Sustainability awareness; make the right kind of impact Exceed Exceed 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 100% of their total STI opportunity due to the outstanding company performance during the year. The table below shows the STIs awarded during the financial year: EXECUTIVE TOTAL OPPORTUNITY US$1 % OF FIXED REMUNERATION % AWARDED % FORFEITED R Beament 281,686 75% 95% 5% G Douglas 187,989 60% 95% 5% K Keen 98,035 50% 95% 5% 1 The STI opportunity is calculated by translating the Executives Australian Dollar denominated TFR to United States Dollars at the prevailing spot rate on 30 June 2024. STI’s awarded are settled in a combination of cash and deferred STI rights, refer to section 2.3. [4.3] - 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 4.1 of this Report. LTI awarded in respect of FY24 During the period, 1,752,233 Performance Rights were issued to K Keen. Refer to section 6.3 for further details. Awards vesting in FY24 All Performance Rights and SARs vested and were exercised during the period. Refer to section 6.3 for further details. HORIZON OIL ANNUAL REPORT 2024 35 [5] - 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 ten years. Note that the remuneration table set out on page 37 shows remuneration in US$ in line with the Group’s functional currency. The table below shows the levels for NEDs (exclusive of superannuation) for FY24. FEES DESCRIPTION PER ANNUM Board Fees Chair A$160,905 Other Non-executive Directors A$80,453 There were no additional fees paid to NEDs during the financial year for being members of the Board committees. The NEDs are reimbursed for expenses reasonably incurred in attending to the affairs of the Company. There are no retirement allowances in place for NEDs. [6] - Statutory and share based reporting [6.1] - Director remuneration for the financial year The following table sets out the statutory disclosures required under the Corporations Act 2001 (Cth) and in accordance with Australian Accounting Standards remuneration for Directors for the years ended 30 June 2024 and 30 June 2023. FINANCIAL YEAR ENDED 30 JUNE 2024 AND 2023 NON-EXECUTIVE DIRECTOR SHORT-TERM BENEFITS CASH SALARY / BOARD FEES US$ POST-EMPLOYMENT BENEFITS SUPERANNUATION2 US$ TOTAL3 US$ M Harding 2024 104,395 11,484 115,879 2023 108,998 11,445 120,443 S Birkensleigh 2024 52,198 5,742 57,940 2023 54,499 5,722 60,221 G Bittar1 2024 52,198 5,742 57,940 2023 54,499 5,722 60,221 B Clement 2024 52,198 5,742 57,940 2023 54,499 5,722 60,221 N Burgess 2024 57,940 - 57,940 2023 60,221 - 60,221 Total Non-Executive Director remuneration 2024 318,929 28,710 347,639 2023 332,716 28,611 361,328 Total Non-Executive Director remuneration (A$) 2024 491,568 44,249 535,817 2023 493,388 42,429 535,817 1 Mr Lorenzon, as alternate Director to Mr Bittar, received no fees during the current and prior financial periods. 2 Superannuation includes both compulsory superannuation payments and salary sacrifice payments made on election by Directors. 3 Remuneration is paid in Australian dollars and converted to US dollars at the foreign exchange rate prevailing on the date of the transaction. HORIZON OIL ANNUAL REPORT 2024 36 [6.2] - Statutory details of other key management personnel remuneration for the financial year The table below outlines the remuneration of other key management personnel for the years ended 30 June 2024 and 30 June 2023. FINANCIAL YEAR ENDED 30 JUNE 2024 AND 2023 SHORT-TERM BENEFITS POST- EMPLOYMENT BENEFITS TOTAL CASH OR IN-KIND BENEFIT LONG-TERM BENEFITS SHARE BASED PAYMENTS TOTAL OTHER KEY MANAGEMENT PERSONNEL CASH SALARY & FEES1 CASH STIs ANNUAL LEAVE ACCRUAL4 NON- MONETARY2 SUPER ANNUATION3 LONG SERVICE LEAVE ACCRUAL4 LONG TERM INCENTIVES5 R Beament Chief Executive Officer 2024 352,954 133,801 11,096 12,743 18,002 528,596 (25,081) 492,782 996,297 2023 336,017 131,150 2,633 11,319 18,481 499,599 (3,744) 898,234 1,394,089 G Douglas Chief Operating Officer 2024 291,604 89,295 3,369 4,923 17,936 407,127 9,166 251,423 667,716 2023 278,697 87,516 (8,050) 4,601 16,997 379,762 10,275 287,936 677,972 K Keen Chief Financial Officer/Assistant Co Sec 2024 175,771 69,850 4,761 3,081 17,812 271,275 4,734 329,228 605,237 2023 167,812 54,698 1,922 2,876 16,997 244,305 17,652 54,324 316,281 Total KMP remuneration 2024 820,329 292,946 19,226 20,747 53,750 1,206,998 (11,181) 1,073,433 2,269,250 2023 782,526 273,363 (3,495) 18,796 52,476 1,123,665 24,183 1,240,495 2,388,342 Total KMP remuneration (A$)6 2024 1,253,551 442,249 29,025 31,692 82,119 1,838,636 (17,080) 1,604,118 3,425,674 2023 1,164,415 412,313 (5,272) 27,969 78,085 1,677,510 35,985 1,826,722 3,540,216 1 Cash Salary and Fees for the prior period have been restated to separately disclose the annual leave accrual movement, noting that the total cash or in- kind benefits did not change. 2 Non-monetary benefits include the value of car parking, insurances, accommodation and other expenses inclusive of Fringe Benefits Tax (“FBT”). 3 Superannuation includes both compulsory superannuation payments and salary sacrifice payments made on election by Directors and KMPs. 4 Reflects the movement in the annual and long service accruals between respective reporting dates. 5 Reflects the current period expense of the grant date value (converted to US dollars at the foreign exchange rate prevailing at that date) of Performance Rights and SARs. 6 Remuneration is paid in Australian dollars and converted to US dollars at the foreign exchange rate prevailing on the date of the transaction. HORIZON OIL ANNUAL REPORT 2024 37 [6.3] - 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 2024: KMP OPENING BALANCE 1 JULY 2023 ACQUIRED DURING FY24 DISPOSED DURING FY24 RECEIVED DURING FY24 ON THE EXERCISE OF RIGHTS CLOSING BALANCE 30 JUNE 2024 DIRECTORS M Harding 500,000 - - - 500,000 R Beament 764,488 - - 11,188,236 11,952,724 S Birkensleigh - - - - - G Bittar 1,000,000 - - - 1,000,000 B Clement - - - - - N Burgess1 314,212,423 - - - 314,212,423 KMP OPENING BALANCE 1 JULY 2023 ACQUIRED DURING FY24 DISPOSED DURING FY24 RECEIVED DURING FY24 ON THE EXERCISE OF RIGHTS CLOSING BALANCE 30 JUNE 2024 OTHER KMP G Douglas 120,000 - - 5,734,604 5,854,604 K Keen 65,652 - - 4,736,314 4,801,966 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 The following tables detail the number of Share Appreciation Rights, Performance Rights and Deferred STI Rights held by KMP, either directly or indirectly or beneficially during the reporting period ended 30 June 2024: KMP BALANCE AT START OF FINANCIAL YEAR GRANTED AS REMUNERATION DURING FINANCIAL YEAR DISTRIBUTION ADJUSTMENT1 EXERCISED DURING FINANCIAL YEAR3,4 LAPSED DURING FINANCIAL YEAR BALANCE AT END OF FINANCIAL YEAR VESTED AND EXERCISABLE AT END OF FINANCIAL YEAR UNVESTED SHARE APPRECIATION RIGHTS R Beament 5,556,681 - - (5,556,681) - - - - G Douglas 1,550,400 - - (1,550,400) - - - - PERFORMANCE RIGHTS R Beament 19,600,000 - - (19,600,000) - - - - G Douglas 9,800,000 - - (9,800,000) - - - - K Keen 7,000,000 1,752,233 - (8,752,233) - - - - DEFERRED STI RIGHTS R Beament 1,509,881 1,447,056 370,496 (1,509,881) - 1,817,552 1,817,552 - G Douglas 1,020,008 965,618 247,231 (1,020,008) - 1,212,849 1,212,849 - K Keen 184,210 201,170 51,506 (184,210) - 252,676 252,676 - 1 In accordance with the plan, the number of 2023 deferred STI rights held by each KMP were adjusted during the financial year for the dividend distributions paid of AUD 2.0 and AUD 1.5 cents per share. 2 Subsequent to the end of the financial year, 2,090,773 deferred STI rights were issued to KMP in relation to their 2024 STI award. 3 During the period, R Beament exercised all vested SARs, Performance Rights and Deferred STI Rights resulting in the receipt of 11,188,236 HZN shares, cash of US$596,480 paid/payable and an upward variation to his PAYG amounting to US$931,250. G Douglas exercised all vested SARs, Performance Rights and Deferred STI Rights resulting in the receipt of 5,734,604 HZN shares, cash of US$210,960 paid/payable and an upward variation to his PAYG amounting to US$465,265. K Keen exercised all vested Performance Rights and Deferred STI Rights resulting in the receipt of 4,736,314 HZN shares, cash payment of US$8,753 and an upward variation to his PAYG amounting to US$466,575. 4 100% of SAR’s and Performance Rights on hand were exercised during the financial year. 100% of deferred STI rights on hand at the commencement of the financial year were exercised during the financial year. HORIZON OIL ANNUAL REPORT 2024 38 Option holdings Other than as noted above, 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. [6.4] - 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. [6.5] - 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. [6.6] - Additional statutory information Terms and conditions of the share-based arrangements The terms and conditions of each grant of SARs that affected remuneration for Executive KMP in the previous and current reporting periods are as follows: GRANT DATE ESTIMATED EXPIRY DATE EXERCISE PRICE3 STRIKE PRICE1 VALUE PER SAR AT EFFECTIVE ALLOCATION DATE2 DATE EXERCISED 01/07/2020 01/07/2025 Nil A$0.0195 A$0.0264 31/08/2023 01/07/2021 01/07/2026 Nil A$0.0295 A$0.0535 30/06/2024 1 In accordance with the plan, the strike price of SARs held by each KMP were adjusted during the financial year for the dividend distributions paid of AUD 2.0 and AUD 1.5 cents per share. 2 The value per SAR at grant date under AASB2 which has been determined by an independent expert. 3 No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a SAR. 4 SARs will become exercisable subject to meeting vesting or performance conditions. See summary in section 2. HORIZON OIL ANNUAL REPORT 2024 39 The terms and conditions of each grant of Performance Rights that affected or will affect remuneration for Executive KMP in the previous, current or future reporting periods are as follows: TRANCHE NUMBER OF RIGHTS SHARE PRICE HURDLE (A$)1 VALUE PER PERFORMANCE RIGHT AT GRANT DATE2 DATE EXERCISED CEO Performance Rights Tranche A Rights 7,000,000 0.085 A$0.094 25/08/2023 Tranche B Rights 5,600,000 0.115 $0.077 25/08/2023 Tranche C Rights 4,200,000 0.135 A$0.065 25/08/2023 Tranche D Rights 2,800,000 0.155 A$0.046 25/08/2023 COO Performance Rights Tranche A Rights 3,500,000 0.085 A$0.065 25/08/2023 Tranche B Rights 2,800,000 0.115 A$0.045 25/08/2023 Tranche C Rights 2,100,000 0.135 A$0.038 25/08/2023 Tranche D Rights 1,400,000 0.155 A$0.033 25/08/2023 CFO Performance Rights Tranche E Rights 3,500,000 0.135 A$0.086 03/05/2024 Tranche F Rights 2,800,000 0.145 A$0.077 03/05/2024 Tranche G Rights 907,406 0.135 A$0.125 03/05/2024 Tranche H Rights 844,827 0.145 A$0.121 03/05/2024 1 In accordance with the plan, the Share Price Hurdles were adjusted to account for distributions to shareholders during the 2024 financial year. Share price hurdles were only adjusted for distributions made prior to the Performance Rights being exercised. 2 The value per Performance Right at grant date is determined by an independent expert. 3 No price was payable by a participant in the Long-Term Incentive Plan on the exercise of a Performance Right. The amounts disclosed for the remuneration of Directors and other KMP include the assessed fair values of Performance Rights granted during the financial year, at the grant date expensed over the relevant vesting period. Fair values have been assessed by an independent expert using a Monte Carlo simulation. Factors taken into account by this model include the exercise price, time to maturity, the current share price and expected price volatility of the underlying Horizon shares, the expected dividend yield and the risk-free interest rate. The value attributable to Performance Rights is allocated to particular periods in accordance with AASB 2 ‘Share-based Payment’. The model inputs for each grant of Performance Rights included: CEO COO CFO - 2023 CF0 - 2024 Effective allocation date 1 July 2022 1 July 2022 1 May 2023 1 May 2023 Expiry date 30 June 2027 30 June 2027 30 April 2028 30 April 2028 Grant date 16 November 2022 8 August 2022 1 May 2023 21 February 2024 Exercise price Nil1 Nil1 Nil1 Nil1 Expected price volatility 60% p.a. 60% p.a. 60% p.a. 55% p.a. Risk free rate 3.04% p.a. 3.42% p.a. 3.08% p.a. 3.80% p.a. Expected dividend yield 20.00% p.a. 20.00% p.a. 20.00% p.a. 20.00% p.a. 1 No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a Performance Right. The respective hurdles prices are disclosed in section 2.3. HORIZON OIL ANNUAL REPORT 2024 40 Details of remuneration For each grant of Performance Rights and Deferred STI Rights issued 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. Performance Rights are expensed over the expected vesting period. The expected vesting date and expected vesting period are determined at the date of grant and may differ from the date the Performance Rights actually vest and become exercisable. Based on the performance conditions being met, all Performance Rights on issue vested and were exercised prior to the expected vesting date. As the vesting was based on market related conditions, the rights continue to be expensed over the expected vesting period. No Performance Rights and Deferred STI will vest if the performance conditions are not fulfilled, therefore the minimum value yet to vest is US$Nil. The maximum value of the SARs, Performance Rights and Deferred STI yet to vest has been determined as the amount of the fair value at the grant date that is yet to be expensed. The below values have been converted to dollars at the exchange rate prevailing on the date of the grant. Dividends The Board has declared a final dividend of AUD 1.5 cents per Ordinary share totalling approximately AUD 24.3 million. This dividend was declared as a Conduit Foreign Income (CFI) unfranked dividend and will be paid on 25 October 2024. During the financial year, the Board also declared an interim dividend of AUD 1.5 cents per Ordinary share totalling approximately AUD 24.3 million. This dividend was declared as a Conduit Foreign Income (CFI) unfranked dividend and was paid on 26 April 2024. 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. PERFORMANCE RIGHTS NAME FINANCIAL YEAR GRANTED VESTED % FORFEITED % FINANCIAL YEAR IN WHICH PERFORMANCE RIGHTS MAY VEST MAXIMUM TOTAL VALUE OF GRANT YET TO VEST US$ R Beament 2023 100% - Vested and exercised 7,798 G Douglas 2023 100% - Vested and exercised 7,943 K Keen 2023 100% - Vested and exercised 99,393 2024 100% - Vested and exercised 74,305 DEFERRED STI RIGHTS NAME FINANCIAL YEAR GRANTED VESTED % FORFEITED % FINANCIAL YEAR IN WHICH DEFERRED STIs MAY VEST MAXIMUM TOTAL VALUE OF GRANT YET TO VEST US$ R Beament 2023 100% - - - 2024 - - 30/06/2025 66,900 G Douglas 2023 100% - - - 2024 - - 30/06/2025 44,647 K Keen 2023 100% - - - 2024 - - 30/06/2025 11,642 HORIZON OIL ANNUAL REPORT 2024 41 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 CONSOLIDATED 2024 US$ 2023 US$ 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: PWC AUSTRALIA Audit and other assurance services Audit and review of financial reports 231,304 212,371 Other assurance services 13,417 12,649 Total auditors’ remuneration 244,721 225,020 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 43. 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 R Beament Chairman Chief Executive Officer Sydney 28 August 2024 HORIZON OIL ANNUAL REPORT 2024 42 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. Auditor’s Independence Declaration As lead auditor for the audit of Horizon Oil Limited for the year ended 30 June 2024, 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. Marc Upcroft Sydney Partner PricewaterhouseCoopers 28 August 2024 HORIZON OIL ANNUAL REPORT 2024 43 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. 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 2024 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 financial report comprises: • the consolidated statement of financial position as at 30 June 2024 • the consolidated statement of profit or loss and other comprehensive income for the year then ended • the consolidated statement of changes in equity for the year then ended • the consolidated statement of cash flows for the year then ended • the notes to the consolidated financial statements, including material accounting policy information and other explanatory information • the consolidated entity disclosure statement as at 30 June 2024 • 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. HORIZON OIL ANNUAL REPORT 2024 44 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. Audit scope Key audit matters • Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. • Amongst other relevant topics, we communicated the following key audit matters to the Audit and Risk Committee: − Restoration provision − Acquisition of Mereenie • These are further described in the Key audit matters section of our report. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context. Key audit matter How our audit addressed the key audit matter Restoration provision (Refer to note 20) The estimation of restoration provisions by the Group involves significant judgement in selecting methodologies and assumptions, the methodology for estimating cost and discount rates used to estimate the present value of these cash flows. The restoration provision was a key audit matter due to the significance of the balance and the required judgement, effort and subjectivity in performing procedures and evaluating the Group’s methodology, significant assumptions and estimates. We performed the following procedures, amongst others: • developed an understanding of how the Group identified the relevant methods, assumptions and sources of data that are appropriate for developing the closure plans and associated cost estimates. • developed an understanding of the relevant control activities associated with developing the closure plans and associated cost estimates. • assessed the appropriateness of the Group’s significant assumptions used, including the reliability and relevance of the Group’s key data used in the closure plans and associated cost estimates. • tested the mathematical accuracy of the provision calculations and assessed whether they were in accordance with the method. HORIZON OIL ANNUAL REPORT 2024 45 Key audit matter How our audit addressed the key audit matter • assessed the reasonableness of the note disclosures in the financial statements for the year ended 30 June 2024 in light of the requirements of Australian Accounting Standards. Acquisition of Mereenie (Refer to note 26) During the year, the Group acquired a 25% interest in Mereenie oil and gas fields (“Mereenie”) for a total consideration of US$31.96 million. The acquisition of Mereenie has been accounted for as a business combination and involved consideration as to the acquisition date, and the recognition and measurement of identifiable assets acquired and liabilities assumed as at that date. The acquisition was a key audit matter because it had a significant financial impact on the Group. We performed the following procedures, amongst others: • obtained an understanding of the acquisition by examining key documents including the Sale/Purchase Agreement, Completion Statement, and Debt facility letter. • evaluated the appropriateness of the accounting treatment of this acquisition against the requirements of AASB 3. • tested the purchase consideration, including contingent payments and net working capital cash flows adjustment by agreeing them to supporting documentation. • assessed the reasonableness of the note disclosures in the financial statements for the year ended 30 June 2024 in light of the requirements of 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 2024, 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 through our opinion on the financial report. We have issued a separate opinion on the remuneration report. 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. HORIZON OIL ANNUAL REPORT 2024 46 Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report in accordance with Australian Accounting Standards and the Corporations Act 2001, including giving a true and fair view and for such internal control as the directors determine is necessary to enable the preparation of the financial report that 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. HORIZON OIL ANNUAL REPORT 2024 47 Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in the directors’ report for the year ended 30 June 2024. In our opinion, the remuneration report of Horizon Oil Limited for the year ended 30 June 2024 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. PricewaterhouseCoopers Marc Upcroft Sydney Partner 28 August 2024 HORIZON OIL ANNUAL REPORT 2024 48 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 2024 and of its performance for the financial year ended on that date; (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: and (C) the consolidated entity disclosure statement on page 54 is true and correct. 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 R Beament Chairman Chief Executive Officer Sydney 28 August 2024 HORIZON OIL ANNUAL REPORT 2024 49 HORIZON OIL LIMITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 JUNE 2024 CONSOLIDATED NOTE 2024 US$’000 2023 US$’000 REVENUE 4 111,465 152,121 Cost of sales 5 (62,909) (81,178) Gross profit 48,556 70,943 Other income 4 1,820 956 General and administrative expenses 5 (2,801) (3,790) Insurance expense 5 (2,098) (2,000) Exploration and development expenses written off 5 (837) (4,549) Impairment of intangible asset 5 - (412) Finance costs – interest, transaction costs, other 5 (2,934) (3,816) Other expenses - acquisition related transaction costs 5 (1,962) - Other expenses 5 (559) (343) Profit before income tax 39,185 56,989 NZ royalty tax expense 6a (2,977) (2,553) Income tax expense 6b (10,308) (10,584) Profit for the financial year 25,900 43,852 OTHER COMPREHENSIVE INCOME - ITEMS THAT MAY BE RECLASSIFIED TO PROFIT AND LOSS Changes in the fair value of cash flow hedges (92) 10 Currency translation reserve 7 - Total comprehensive income for the financial year 25,815 43,862 Profit attributable to: Security holders of Horizon 25,900 43,852 Profit for the financial year 25,900 43,852 Total comprehensive income attributable to: Security holders of Horizon 25,815 43,862 Total comprehensive income for the financial year 25,815 43,862 Earnings per share for profit attributable to ordinary equity holders of Horizon: US cents US cents Basic earnings per ordinary share 39a 1.60 2.74 Diluted earnings per ordinary share 39b 1.58 2.66 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. HORIZON OIL ANNUAL REPORT 2024 50 HORIZON OIL LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2024 CONSOLIDATED NOTE 2024 US$’000 2023 US$’000 CURRENT ASSETS Cash and cash equivalents 7 52,570 43,591 Receivables 8 7,399 18,351 Inventories 9 9,531 2,953 Derivative financial instruments 10 - 24 Other assets 11 538 547 Intangible assets 12 843 1,028 Total current assets 70,881 66,494 NON-CURRENT ASSETS Investments 13 1,351 1,351 Deferred tax assets 14 13,107 10,591 Plant and equipment 15 190 355 Oil and gas assets 16 119,747 104,707 Total non-current assets 134,395 117,004 Total assets 205,276 183,498 CURRENT LIABILITIES Payables 17 23,849 13,405 Current tax payable 18 3,952 7,058 Borrowings 19 2,703 7,912 Derivative financial instruments 10 105 - Total current liabilities 30,609 28,375 NON-CURRENT LIABILITIES Payables 17 2,560 424 Deferred tax liabilities 21 4,253 5,044 Borrowings 19 23,152 - Provisions 20 61,459 53,879 Total non-current liabilities 91,424 59,347 Total liabilities 122,033 87,722 Net assets 83,243 95,776 EQUITY Contributed equity 22 150,095 147,792 Reserves 23a 7,241 11,122 Accumulated losses 23b (146,859) (123,595) Profit reserve 23c 72,766 60,457 TOTAL EQUITY 83,243 95,776 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. HORIZON OIL ANNUAL REPORT 2024 51 HORIZON OIL LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2024 ATTRIBUTABLE TO MEMBERS OF HORIZON CONTRIBUTED EQUITY RESERVES ACCUMULATED LOSSES PROFIT RESERVE1 TOTAL EQUITY NOTE US$’000 US$’000 US$’000 US$’000 US$000 BALANCE AS AT 1 JULY 2022 159,343 12,093 (96,536) 24,326 99,226 Profit/(loss) for the financial year - - (27,059) 70,911 43,852 Changes in the fair value of cash flow hedges - 10 - - 10 Total comprehensive income for the financial year - 10 (27,059) 70,911 43,862 Transactions with owners in their capacity as equity holders: Employee share-based payments expense 23a - 1,369 - - 1,369 Settlement of exercised options 23a - (3,148) - - (3,148) Ordinary shares issued, net of cost 2,296 - - - 2,296 Acquisition of treasury shares 23a - (2,387) - - (2,387) Issue of treasury shares 23a - 3,174 - - 3,174 Capital return (13,847) 3 - - (13,844) Dividends - 8 - (34,780) (34,772) Balance as at 30 June 2023 147,792 11,122 (123,595) 60,457 95,776 BALANCE AS AT 1 JULY 2023 147,792 11,122 (123,595) 60,457 95,776 Profit/(loss) for the financial year - - (23,264) 49,164 25,900 Changes in the fair value of cash flow hedges - (92) - - (92) Movement in currency translation reserve - 7 - - 7 Total comprehensive income for the financial year - (85) (23,264) 49,164 25,815 Transactions with owners in their capacity as equity holders: Employee share-based payments expense 23a - 1,203 - 1,203 Settlement of performance rights & SAR’s 23a - (4,999) - (4,999) Ordinary shares issued, net of cost 2,303 - - 2,303 Dividends - - - (36,855) (36,855) Balance as at 30 June 2024 150,095 7,241 (146,859) 72,766 83,243 1 The profit reserve balance reflects the Parent entity’s retained earnings, with the residual Group profit/loss reflected in the accumulated losses reserve. The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. HORIZON OIL ANNUAL REPORT 2024 52 HORIZON OIL LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2024 CONSOLIDATED NOTE 2024 US$’000 2023 US$’000 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 123,821 151,903 Payments to suppliers and employees (38,242) (52,099) 85,579 99,804 Interest received 1,782 888 Interest paid (576) (1,978) Income and royalty taxes paid (20,682) (26,754) Acquisition related transaction costs (1,886) - Net cash inflow from operating activities 38 64,217 71,960 CASH FLOWS FROM INVESTING ACTIVITIES Payments for exploration phase expenditure - (4,618) Payments for oil and gas assets (9,684) (26,318) Payment for acquisition of 25% interest in Mereenie OL4 & OL5 assets (26,317) - Payments for plant and equipment (12) - Payments for financial asset through other comprehensive income - (1,351) Net cash outflow from investing activities (36,013) (32,287) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 26,317 20,000 Transaction costs incurred on borrowings (553) (235) Repayment of borrowings (7,939) (13,298) Payments under leasing arrangements (183) (214) Proceeds from new share issue (net of costs) 2,302 2,296 Payments for shares acquired by the Trust (2,313) (2,304) Return of capital to shareholders - (13,679) Dividends paid to shareholders (36,855) (32,892) Net cash outflow from financing activities (19,224) (40,326) NET INCREASE IN CASH AND CASH EQUIVALENTS 8,980 (653) Cash and cash equivalents at the beginning of the financial year 43,591 44,086 Effects of exchange rate changes on cash and cash equivalents held in foreign currencies (1) 158 Cash and cash equivalents at the end of the financial year 7 52,570 43,591 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. HORIZON OIL ANNUAL REPORT 2024 53 HORIZON OIL LIMITED CONSOLIDATED ENTITY DISCLOSURE STATEMENT AS AT 30 JUNE 2024 NAME OF ENTITY TYPE OF ENTITY TRUSTEE, PARTNER OR JV PARTICIPANT % OF SHARE CAPITAL COUNTRY OF INCORPORATION AUSTRALIAN RESIDENT OR FOREIGN RESIDENT FOREIGN JURISDICTION Horizon Oil Limited Body Corporate N/A N/A Australia Australian N/A Horizon Oil International Limited Body Corporate JV Participant1 100 New Zealand Foreign New Zealand Horizon Oil International Holdings Limited Body Corporate N/A 100 BVI Foreign BVI Horizon Oil (Beibu) Limited Body Corporate JV Participant2 100 BVI Foreign China Horizon Oil (China Holdings) Limited Body Corporate N/A 100 BVI Foreign BVI Horizon Oil Employee Incentive Trust Trust N/A N/A N/A N/A Horizon Australia Investments Pty Limited Body Corporate N/A 100 Australia Australian N/A Horizon Australia Energy Pty Limited Body Corporate JV Participant3 100 Australia Australian N/A 1 2 3 JV participant in oil license offshore New Zealand. JV Participant in oil license offshore China. JV Participant in oil and gas licenses in Australia. N/A HORIZON OIL ANNUAL REPORT 2024 54 Notes to the consolidated Financial Statements Note 1 Summary of Material Accounting Policies A summary of the material 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. A. 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’). B. 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 2024 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 2024. 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 2024. 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 2024, except as disclosed in Note 2. C. 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 2024 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 HORIZON OIL ANNUAL REPORT 2024 55 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(M)). 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 the respective parent entity. These investments may have subsequently been written down to their recoverable amount determined by reference to the net assets of the subsidiaries as at 30 June each financial year where this is less than cost. Joint operations A joint operation is a joint arrangement whereby the participants that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. The Group recognises assets, liabilities, revenues and expenses according to its share in the assets, liabilities, revenues and expenses of a joint operation or similar as determined and specified in contractual arrangements (Joint Operating Agreements). Details of major joint operation interests and the sum of the Group’s interests in joint operation assets, liabilities, revenue and expenses are set out in Note 28. Where part of a joint operation interest is farmed out in consideration of the farmee undertaking to incur further expenditure on behalf of both the farmee and the entity in the joint operation area of interest, exploration expenditure incurred and carried forward prior to farm-out continues to be carried forward without adjustment, unless the terms of the farm-out are excessive based on the diluted interest retained. An impairment provision is then made to reduce exploration expenditure to its estimated recoverable amount. Any cash received in consideration for farming out part of a joint operation interest is recognised in the profit or loss. D. 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. E. 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. F. Foreign currency translation [i] Functional and presentation currency Items included in the financial statements of each of the Group’s subsidiaries are measured using the currency of the primary economic environment in which the subsidiary operates (the ‘functional currency’). The consolidated financial statements are presented in United States dollars, which is Horizon’s presentation currency. Horizon has selected United States dollars as its presentation currency for the following reasons: (a) a significant portion of Horizon’s activity is denominated in United States dollars; and (b) it is widely understood by Australian and international investors and analysts. [ii] Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year end exchange rates of monetary assets and liabilities denominated in foreign currencies are HORIZON OIL ANNUAL REPORT 2024 56 generally recognised in the profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. [iii] Group companies All Group subsidiaries, except for Horizon Australia Energy Pty Ltd have a functional currency of United States dollars. Horizon Australia Energy Pty Ltd has a functional currency of Australian dollars (AUD). The results and financial position of this entity has a functional currency different from the presentation currency and is translated into the presentation currency as follows: – assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; – income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and – all resulting exchange differences are recognised in other comprehensive income. G. Revenue recognition Revenue arises from the sale of crude oil and gas. To determine whether to recognise revenue, the Group follows a 5-step process: [1] - Identifying the contract with a customer; [2] - Identifying the performance obligations; [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 two products. 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. Revenue from Mereenie, Australia, is derived at a point in time based on volumes sold under contracts with customers. Performance obligations are met when the product, either gas or oil is delivered to a specified measurement point (gas) or the point of load-out from third party storage facilities (liquids/oil). Upon completion 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. H. Taxation [i] Income tax The income tax expense or revenue for the reporting period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantially enacted at the end of the reporting period in the countries where the Company’s subsidiaries operate and generate taxable income. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. HORIZON OIL ANNUAL REPORT 2024 57 Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised, or deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. [ii] Government royalties Government royalties are treated as taxation arrangements when they are imposed under Government authority and when the calculation of the amount payable is derived from a measure of profit that falls within the definition of ‘taxable profit’ for the purposes of AASB 112 Income Taxes. Current and deferred tax is then provided on the same basis as described in (i) above. Royalty arrangements that do not meet the criteria for treatment as a tax are recognised on an accruals basis. I. Leases The Group leases an office 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 terms, security and conditions. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities is 4.5%. 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. J. 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 pre-tax cash flows are discounted to their present value using an pre-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(N). HORIZON OIL ANNUAL REPORT 2024 58 K. 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. L. 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 2024 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. M. Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities assumed, equity interests issued by the Group, fair value of any asset or liability resulting from a contingent consideration arrangement, and fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. Acquisition related costs are expensed as incurred. For purchase combinations which do not constitute the acquisition of a business, the Group identifies and recognises the individual identifiable assets acquired and liabilities assumed. The consideration paid is allocated to the individual identifiable assets and liabilities on the basis of their relative fair values at the date of purchase. Acquisition related costs are capitalised. N. 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. HORIZON OIL ANNUAL REPORT 2024 59 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. O. Oil and gas assets [i] Development expenditure Development expenditure is stated at cost less any accumulated impairment losses. Development expenditure incurred by or on behalf of the Group is accumulated separately for fields in which proven and probable hydrocarbon reserves have been identified to the satisfaction of directors. Such expenditure comprises direct costs and overhead expenditure incurred which can be directly attributable to the development phase or is acquired through the acquisition of a permit. Once a development decision has been taken on an oil or gas field, the carrying amount of the relevant exploration and evaluation expenditure in respect of the relevant area of interest is aggregated with the relevant development expenditure. 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(J). [ii] Production assets When further development costs are incurred in respect of a production asset after the commencement of production, such expenditure is carried forward as part of the production asset when it is probable that additional future economic benefits associated with the expenditure will flow to the Group. Otherwise such expenditure is classified as production expense in income statements when incurred. Production assets are stated at cost less accumulated amortisation and any accumulated impairment losses. Once commercial levels of production commence, amortisation is charged using the unit-of-production method. The unit- of-production method results in an amortisation expense proportional to the depletion of proven and probable hydrocarbon reserves for the field. Production assets are amortised by area of interest in the proportion of actual production for the financial period to the proven and probable hydrocarbon reserves of the field. The cost element of the unit-of-production calculation is the capitalised costs incurred to date for the field together with the estimated / anticipated future development costs (stated at current financial period-end using 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(J). [iii] Restoration provision The estimated costs of decommissioning and removing an asset and restoring the site are included in the cost of the asset as at the date the obligation first arises and to the extent that it is first recognised as a provision. This asset is subsequently amortised on a unit-of-production basis. The corresponding provision 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 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. HORIZON OIL ANNUAL REPORT 2024 60 [iv] 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 25 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. P. Investments and other financial assets Subsidiaries are accounted for in the consolidated financial statements as set out in Note 1(C). Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the end of the reporting period which are classified as non-current assets. Loans and receivables are included in receivables in the statement of financial position. The Group classifies other financial assets in the following measurement categories: – - those to be measured subsequently at fair value (either through OCI or profit or loss), and – - those to be measured at amortised cost For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. Equity instruments At initial recognition, Group’s management has elected to measure its equity instruments at fair value through other comprehensive income (FVOCI). The group subsequently measures all equity investments as fair value. Where the group’s management has elected to present fair value gains and losses on equity instruments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Q. 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 3 – 4 years – Furniture, fittings and equipment 3 – 10 years 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. R. Intangible assets [i] New Zealand carbon credits New Zealand carbon credits, also referred to as New Zealand Units (NZUs) are acquired through the Environmental Protection Authority and surrendered to the New Zealand Government for the Group’s proportionate share of the Maari/Manaia fields direct greenhouse gas emissions for the calendar year. The NZUs are valued at cost and do not expire. NZUs are not amortised but are tested for impairment in accordance with the accounting policy set out in Note 1(J). S. 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 HORIZON OIL ANNUAL REPORT 2024 61 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. T. Derivatives Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either; (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or (2) hedges of the cash flows of recognised assets and liabilities and highly probable forecast transactions (cash flow hedges). The Group currently does not have any derivatives designated as fair value hedges. The Group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items. The fair values of derivative financial instruments used for hedging purposes are disclosed in Note 10. Movements in the hedging reserve in equity are shown in Note 23(A). [i] Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss within other income or other expenses. Amounts accumulated in equity are recycled to profit or loss in the periods when the hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognised in profit or loss within “finance costs”. The gain or loss relating to the effective portion of forward foreign exchange contracts and commodity price contracts hedging export sales is recognised in profit or loss within ‘sales’. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset or liability. When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the profit or loss. [ii] Derivatives that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in profit or loss and are included in other income or other expenses. U. 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. V. 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. No borrowing costs (2023: US$Nil) were capitalised during the current financial year and the amount of borrowing costs amortised to the income statement were US$709,199 (2023: US$1,001,234). HORIZON OIL ANNUAL REPORT 2024 62 W. Employee benefits [i] Wages and salaries and annual leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and related on-costs expected to be settled within 12 months of the end of the reporting period are recognised in other payables in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are recognised in other payables. [ii] Long service leave The liability for long service leave is recognised as a provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. [iii] Share-based payments Share-based payment compensation benefits are provided to employees and consultants via the Horizon Long-Term Incentive Plan, the Horizon Employee Option Scheme, and the General Option Plan. Information relating to these schemes is set out in Note 32. The fair value of performance rights 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 performance rights 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 performance rights and SARs that are expected to vest. The fair value is measured at grant 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 performance rights 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 grant 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 performance right or SAR. The Company has elected to retain any amounts originally recognised in the share-based payments reserve, regardless of whether the associated performance rights are cancelled or lapse unexercised. The Horizon Oil Employee Incentive Trust administers 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 performance rights 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. X. 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 HORIZON OIL ANNUAL REPORT 2024 63 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. Y. Earnings per share [i] Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. [ii] Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Potential ordinary shares are considered dilutive only when their conversion to ordinary shares would decrease earnings per share, or increase loss per share, from continuing operations. Z. 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. AA. 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. [i] Investments in subsidiaries, associates and joint venture entities Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of Horizon Oil Limited. Dividends received from associates are recognised in the parent entity’s profit or loss, rather than being deducted from the carrying amount of these investments. [ii] Financial guarantees Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation, the fair values of these guarantees are accounted for as contributions and recognised as part of the cost of the investment. Note 2 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. A. Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The most significant estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities relate to: [i] Exploration and evaluation assets The Group’s policy for exploration and evaluation expenditure is discussed in Note 1(N). The application of this policy requires management to make certain estimates and assumptions as to future events and circumstances. These estimates and HORIZON OIL ANNUAL REPORT 2024 64 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. [ii] Reserve estimates The estimated quantities of proven and probable hydrocarbons reported by the Group are integral to the calculation of amortisation expense (depletion), assessments of impairment of assets, provision for restoration and the recognition of deferred tax assets due to changes in expected future cash flows. Reserve estimates require interpretation of complex and judgemental geological and geophysical models in order to make an assessment of the size, shape, depth and quality of reservoir, and their anticipated recoveries. The economic, geological and technical factors used to estimate reserves may change from period to period. Reserve estimates are prepared in accordance with guidelines prepared by the Society of Petroleum Engineers. [iii] Provisions for restoration The Group estimates the future removal and restoration costs of petroleum production facilities, wells, pipelines and related assets at the time of installation of the assets and reviews these assessments periodically. In most instances the removal of these assets will occur well into the future. The estimate of future removal costs therefore requires management to make judgements around the timing of the required restoration, rehabilitation and decommissioning activities, as well as the discount rate. The carrying amount of the provision for restoration is disclosed in Note 20. New Zealand, Maari Restoration During the financial year the Group revised the discount, inflation and foreign exchange rates used in quantifying the New Zealand restoration provision. The resultant effect is decrease in the restoration provision and rehabilitation asset of US$1.3 million. Australia, Mereenie Restoration During the financial year, following the acquisition of 25% interest in the Mereenie oil and gas fields, the Group recognised US$7.0 million future costs of restoring the operating sites at Mereenie. [iv] Impairment of oil and gas assets The Group assesses whether its oil and gas assets are impaired on a semi-annual basis when an indicator of impairment is present. This includes 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, reserves, and production rates. [v] 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 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 32. [vi] Recoverability of deferred tax assets The recoverability of deferred tax assets is based on the probability that future taxable amounts will be available to utilise those temporary differences and losses. The Group has not recognised deferred tax assets in respect of some tax losses and temporary tax differences at this point in time. Whilst the recently acquired Mereenie gas field is expected to generate future Australian taxable income for the Australian tax consolidated group, the recognition of these tax losses as deferred tax assets will be reassessed once longer-term income and expenditure information from the acquisition is available to the Company. 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 HORIZON OIL ANNUAL REPORT 2024 65 tax differences becomes probable, this could result in significant changes to deferred tax assets recognised, which would in turn impact future financial results. B. 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. Note 3 Segment information A. 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: – China 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; – New Zealand development – the Group is currently involved in developing and producing crude oil from the Maari/Manaia oil field development; and – Australia development – the Group is currently involved in developing and producing oil and gas from the Mereenie OL4 and OL5 oil and gas fields. B. Segment information provided to the chief operating decision maker 2024 CHINA DEVELOPMENT US$’000 NEW ZEALAND DEVELOPMENT US$’000 AUSTRALIA DEVELOPMENT US$’000 UNALLOCATED US$’000 TOTAL US$’000 SEGMENT INFORMATION: Revenue from external customers 76,832 34,243 390 - 111,465 Profit/(loss) before tax 32,434 8,041 (2,226)1 936 39,185 Depreciation and amortisation (16,120) (13,899) (120) (177) (30,316) Total segment assets as at 30 June 2024 49,682 71,958 43,584 40,052 205,276 Additions to non-current assets other than financial assets and deferred tax during the financial year ended: Production phase expenditure (including purchase price of Mereenie) 5,815 2,538 31,109 - 39,462 Plant and equipment - - - 12 12 Total segment liabilities as at 30 June 2024 18,764 61,242 40,013 2,014 122,033 1 Inclusive of acquisition related expenses of US$1.9 million. HORIZON OIL ANNUAL REPORT 2024 66 2023 CHINA EXPLORATION & DEVELOPMENT US$’000 NEW ZEALAND EXPLORATION & DEVELOPMENT US$’000 UNALLOCATED US$’000 TOTAL US$’000 SEGMENT INFORMATION: Revenue from external customers 116,657 35,464 - 152,121 Profit/(loss) before tax 52,820 5,434 (1,265) 56,989 Depreciation and amortisation (28,428) (10,072) (215) (38,715) Total segment assets as at 30 June 2023 69,048 84,754 29,696 183,498 Additions to non-current assets other than financial assets and deferred tax during the financial year ended: Exploration, development and production phase expenditure 17,724 3,744 - 21,468 Plant and equipment - - 522 522 Total segment liabilities as at 30 June 2023 26,177 60,092 1,453 87,722 C. Other segment information [i] Segment revenue The Group’s revenue is derived from the sale of crude oil produced in China, New Zealand and Australia and the sale of gas produced in Australia. The Group sells to external customers through sales agreements with the respective joint venture operators in China and New Zealand (CNOOC and OMV) who market and on-sell crude oil to external customers, for which the Group is charged a marketing fee stipulated by the sales agreements. In Australia, the Group sells to external domestic customers through individual sales contracts. Reportable segment revenues are equal to consolidated revenue. [ii] Segment profit before tax The chief operating decision maker assesses the performance of operating segments based on a measure of profit before tax. Segment profit before tax is equal to consolidated profit before tax. [iii] Segment assets The amounts provided to the chief operating decision maker with respect to total assets are measured in a manner consistent with that of the financial statements. Reportable segment assets are equal to consolidated total assets. [iv] Segment liabilities The amounts provided to the chief operating decision maker with respect to total liabilities are measured in a manner consistent with that of the financial statements. Reportable segment liabilities are equal to consolidated total liabilities. HORIZON OIL ANNUAL REPORT 2024 67 Note 4 Revenue CONSOLIDATED 2024 US$’000 2023 US$’000 FROM CONTINUING OPERATIONS Crude oil sales 111,214 150,565 Gas sales 390 - Net realised gain/(loss) on oil hedging derivatives (139) 1,556 111,465 152,121 OTHER INCOME Interest received from unrelated entities 1,820 956 1,820 956 Revenue for the financial year ended 30 June 2024 relates to contracts executed for the sale of crude oil and gas, and all performance obligations have been met within the period. There is no variable consideration requiring estimation for the year ended 30 June 2024. The Group did not have contracts that were executed in a prior period, whereby the performance obligations were partially met at the beginning of the period. There are no existing contracts that are unsatisfied or partially unsatisfied as at 30 June 2024. The Group’s revenue disaggregated by primary geographical markets is reported in Note 3 – Segment information. The Group’s revenue disaggregated by pattern of revenue recognition is as follows: CONSOLIDATED 2024 US$’000 2023 US$’000 CRUDE OIL SALES Goods transferred at a point in time 77,222 35,464 Goods transferred over a period of time 34,243 116,657 111,465 152,121 HORIZON OIL ANNUAL REPORT 2024 68 Note 5 Expenses CONSOLIDATED 2024 US$’000 2023 US$’000 COST OF SALES Direct production costs 31,113 32,656 Inventory adjustments1 (4,842) 888 Amortisation expense 30,139 38,500 Royalties and other levies 6,499 9,134 62,909 81,178 1 Adjustment for the cost of inventory produced which is on hand as at the end of the financial period. GENERAL AND ADMINISTRATIVE EXPENSES Employee benefits expense 533 1,346 Employee share options expense 1,203 1,369 Corporate office expense 883 847 Depreciation expense 177 215 Rental expense relating to operating leases 5 13 2,801 3,790 INSURANCE EXPENSE Insurance expense (including Loss of Production Income insurance) 2,098 2,000 2,098 2,000 EXPLORATION AND DEVELOPMENT EXPENSES Exploration and development expenditure written off 837 4,549 837 4,549 IMPAIRMENT EXPENSE Impairment of carbon credits2 - 412 - 412 2 During the previous period, the Company assessed the recoverability of the New Zealand carbon units and recorded an impairment expense. FINANCING COSTS Interest and finance charges 719 2,034 Discount unwinding on provision for restoration 2,182 1,542 Amortisation of prepaid financing costs 33 240 2,934 3,816 OTHER EXPENSES Net foreign exchange loss 556 338 Other expenses 3 5 Non-recurring acquisition related expenses 1,962 - 2,521 343 HORIZON OIL ANNUAL REPORT 2024 69 Note 6 Income tax expense CONSOLIDATED 2024 US$’000 2023 US$’000 (a) Royalty tax expense (benefit) Royalty paid / payable in New Zealand – current tax expense 4,165 3,984 Tax benefit related to movements in deferred tax balances (1,188) (1,431) Total royalty tax expense 2,977 2,553 (b) Income tax expense Current tax expense 12,664 20,264 Tax benefit related to movements in deferred tax balances (2,090) (10,536) Adjustments for current tax of prior periods (266) 856 Total income tax expense 10,308 10,584 Deferred income tax benefit included in income tax expense comprises: (Increase) in deferred tax assets (878) (4,608) (Decrease) in deferred tax liabilities (1,212) (5,928) Total deferred income tax (benefit) (2,090) (10,536) CONSOLIDATED 2024 US$’000 2023 US$’000 (c) Numerical reconciliation between profit before tax and tax expense / (benefit) Profit from continuing operations before income tax 39,185 56,989 Less: Royalty paid / payable (4,165) (3,984) 35,020 53,005 Tax at the Australian tax rate of 30% (2023: 30%) 10,506 15,902 Tax effect of amounts which are not deductible / (taxable) in calculating taxable income: Expenditure not allowed for income tax purposes 108 1,816 Other deductible items - (5,531) Other assessable items 1,247 - 11,861 12,187 Effect of overseas tax rates (1,708) (2,539) Deferred tax asset not brought to account 430 77 Tax paid on non-resident insurance premiums - 3 Adjustments for current tax of prior periods (275) 856 Income tax expense 10,308 10,584 Royalty tax expense 2,977 2,553 Total tax expense recognised in statement of profit or loss 13,285 13,137 HORIZON OIL ANNUAL REPORT 2024 70 (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 (36) 11 Total tax expense / (benefit) recognised in other comprehensive income (36) 11 (e) Tax losses Unused tax losses (and applicable tax rate) for which no deferred tax asset has been recognised: Horizon Oil Limited – 30% (2023: 30%) 4,767 2,742 Potential tax benefit at applicable tax rates 4,767 2,742 The Company also did not recognise further deferred income tax assets of US$432,996 (2023: US$291,107) in respect of other timing differences amounting to US$1,443,320 (2023: US$1,059,688). The Company had formed an Australian Tax Consolidated Group with its Australian subsidiaries, Horizon Australia Investments Pty Limited and Horizon Australia Energy Pty Limited and is subject to the Australian tax consolidation regime. Note 7 Cash and cash equivalents CONSOLIDATED 2024 US$’000 2023 US$’000 Cash at bank and on hand 18,384 4,311 Restricted cash1 - 12,552 Deposits2 34,186 26,728 52,570 43,591 1 Under the terms of Horizon’s previous Cash Advance Facility, certain cash balances were available to the Group after certain conditions of the relevant facility agreement were satisfied. As this previous facility has been repaid on 31 July 2023, the conditions no longer apply. 2 Includes on-call and short-term cash deposits with maturities less than 3-months. Note 8 Receivables CONSOLIDATED 2024 US$’000 2023 US$’000 Trade and other receivables1 7,399 18,351 7,399 18,351 1 Of this balance US$Nil (2023: US$Nil) related to amounts receivable from related parties. Refer to Note 31 for further details. Information about the Company’s exposure to credit and market risks, and collectability of overdue amounts, is included in Note 24(B). HORIZON OIL ANNUAL REPORT 2024 71 Note 9 Inventories CONSOLIDATED 2024 US$’000 2023 US$’000 Crude oil, at cost 7,577 2,131 Drilling and workover spares inventory 1,954 822 9,531 2,953 Note 10 Derivative financial instruments CONSOLIDATED 2024 US$’000 2023 US$’000 CURRENT: Derivative asset – Foreign exchange contracts – cash flow hedges - 24 Derivative liability – Oil price swaps – cash flow hedges (105) - (105) 24 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 24a. Oil price swap contracts (cash flow hedges) During the financial year, oil price hedging was undertaken as a risk mitigation measure to mitigate the concentration of oil price exposure on Maari liftings whereby oil is produced over an approximate three month period, but sold subject to the average oil price in the month which it is lifted. At 30 June 2024, the Group had 50,000 bbls of crude oil hedged through Brent oil price swaps at a weighted average price of US$83.91/bbl. 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$139,000 (2023: net gain of US$1,556,180) was transferred to profit or loss. Note 11 Other assets CONSOLIDATED 2024 US$’000 2023 US$’000 Other assets - prepayments 538 547 538 547 HORIZON OIL ANNUAL REPORT 2024 72 Note 12 Intangible assets CONSOLIDATED CURRENT ASSETS NEW ZEALAND CARBON CREDITS1 US$’000 TOTAL US$’000 FINANCIAL YEAR ENDED 30 JUNE 2023 Cost – 1 July 2022 1,202 1,202 Additions 676 676 Disposals – settlements2 (438) (438) Impairment of carbon units (412) (412) Closing value 1,028 1,028 FINANCIAL YEAR ENDED 30 JUNE 2024 Cost – 1 July 2023 1,028 1,028 Additions 319 319 Disposals – settlements2 (504) (504) Closing value 843 843 1 The Group acquires New Zealand Units ((NZUs) also referred to as carbon credits) to surrender to the New Zealand Government through the Environmental Protection Authority, for its proportionate share of the Maari/Manaia fields direct greenhouse gas emissions for the calendar year. NZUs are tradable instruments with transactions taking place on the New Zealand Emissions Trading Register, which is operated by the Environmental Protection Authority. The NZUs are recorded at cost and are not amortised and are tested for impairment at each balance sheet date. 2 The Company’s obligation for the 2023 calendar year was settled in May 2024 whereby a portion of the NZU’s on hand were surrendered to the Environmental Protection Authority. Note 13 Investments CONSOLIDATED NON-CURRENT ASSETS 2024 US$’000 2023 US$’000 Fair value of investment in unlisted shares 1,351 1,351 1,351 1,351 During the previous financial year Horizon made a seed capital investment to acquire an approximate 3.5% interest in Re-Vi (formerly known as Nobrac Limited), a subsidiary of ASX listed company, Kiland Limited (KIL). This investment is accounted for as an equity instrument at fair value through other comprehensive income (FVOCI). As at 30 June 2024, the fair value of the equity instrument reflect the consideration paid to acquire these shares. Refer to Note 24(d) for details of the valuation techniques used. HORIZON OIL ANNUAL REPORT 2024 73 Note 14 Deferred tax assets CONSOLIDATED 2024 US$’000 2023 US$’000 Recognised deferred tax assets are attributable to: Tax losses - - Development and production expenditure 14,853 11,553 Cash flow hedges 29 - Provisions and other 328 608 Total deferred tax assets 15,210 12,161 Set off of deferred tax liabilities pursuant to set off provisions (2,103) (1,570) Net deferred tax assets 13,107 10,591 2024 MOVEMENTS TAX LOSSES US$’000 DEVELOPMENT & PRODUCTION EXPENDITURE $US’000 CASH FLOW HEDGES US$’000 PROVISIONS & OTHER US$’000 TOTAL $US’000 AT 1 JULY 2023 - 11,553 - 608 12,161 (Charged)/credited – to profit or loss - 3,300 - (280) 3,020 – to other comprehensive income - - 29 - 29 At 30 June 2024 - 14,853 29 328 15,210 2023 MOVEMENTS TAX LOSSES US$’000 DEVELOPMENT & PRODUCTION EXPENDITURE $US’000 CASH FLOW HEDGES US$’000 PROVISIONS AND OTHER US$’000 TOTAL $US’000 AT 1 JULY 2022 - 6,472 45 1,164 7,681 (Charged)/credited – to profit or loss - 5,081 - (556) 4,525 – to other comprehensive income - - (45) - (45) At 30 June 2023 - 11,553 - 608 12,161 HORIZON OIL ANNUAL REPORT 2024 74 Note 15 Property, plant and equipment BUILDING(2) US$’000 OTHER PLANT & EQUIPMENT(2) US$’000 LEASEHOLD IMPROVEMENTS US$’000 TOTAL US$’000 As at 1 July 2022 Cost 547 1,720 1,106 3,373 Accumulated depreciation (502) (1,717) (1,092) (3,311) Net book amount 45 3 14 62 FINANCIAL YEAR ENDED 30 JUNE 2023 Opening net book amount 45 3 14 62 Additions 486 36 - 522 Disposals - - (14) (14) Depreciation expense[1] (198) (17) - (215) Closing net book amount 333 22 - 355 As at 30 June 2023 Cost 1,033 1,756 - 2,789 Accumulated depreciation (700) (1,734) - (2,434) Net book amount 333 22 - 355 FINANCIAL YEAR ENDED 30 JUNE 2024 Opening net book amount 333 22 - 355 Additions - 12 - 12 Depreciation expense[1] (166) (11) - (177) Closing net book amount 167 23 - 190 As at 30 June 2024 Cost 1,033 1,768 - 2,801 Accumulated depreciation (866) (1,745) - (2,611) Net book amount 167 23 - 190 [1] Depreciation expense in relation to the right of use assets is US$170,200. [2] Included in the net book amount of buildings, and other plant and equipment are right-of-use assets as follows: 30 JUN 2024 US$’000 30 JUN 2023 US$’000 Office premises 167 333 Photocopier and IT equipment 5 8 Total 172 341 HORIZON OIL ANNUAL REPORT 2024 75 Note 16 Oil and gas assets CONSOLIDATED 2024 US$’000 2023 US$’000 DEVELOPMENT AND PRODUCTION PHASE EXPENDITURE Producing oil and gas property acquisition, deferred geological, seismic and drilling, production and distribution facilities and other development expenditure 594,534 571,322 Acquisition of oil & gas asset – Mereenie 38,143 - Expenditures written off during the period (1) (4,161) Reassessment of rehabilitation obligation - Maari (1,316) 19,020 Carried forward accumulated impairment losses (116,598) (116,598) Less accumulated amortisation (395,015) (364,876) 119,747 104,707 The reconciliation of development and production phase expenditure carried forward above is as follows: CONSOLIDATED DEVELOPMENT PHASE EXPENDITURE US$’000 PRODUCTION PHASE EXPENDITURE US$’000 TOTAL US$’000 BALANCE AT 1 JULY 2022 - 106,879 106,879 Amortisation incurred - (38,500) (38,500) Increase in restoration obligation - 19,020 19,020 Development and production costs incurred during financial year 10,049 11,420 21,469 Expenditures written off during the period - (4,161) (4,161) Transfer to production phase/(from development phase) (10,049) 10,049 - BALANCE AT 30 JUNE 2023 - 104,707 104,707 Amortisation incurred - (30,139) (30,139) Change in restoration obligation - (1,316) (1,316) Acquisition of oil and gas asset - 38,143 38,143 Development and production costs incurred during financial year - 8,353 8,353 Expenditures written off during the period - (1) (1) Balance at 30 June 2024 - 119,747 119,747 HORIZON OIL ANNUAL REPORT 2024 76 Note 17 Payables CONSOLIDATED 2024 US$’000 2023 US$’000 CURRENT LIABILITIES Trade creditors 1,033 337 Share of joint operation creditors and accruals 15,712 10,320 ETS obligation1 267 255 Lease liabilities4 157 131 Mereenie acquisition – deferred payment2 3,312 - Other creditors 3,368 2,362 23,849 13,405 NON-CURRENT LIABILITIES Mereenie acquisition – contingent payment3 2,352 - Lease liabilities4 16 191 Other creditors 192 233 2,560 424 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 12 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 A deferred payment of A$5 million was payable to Macquarie as purchase consideration for the acquisition of Mereenie oil and gas fields (refer Note 26). Full payment was made in July 2024. 3 A future payment of A$4 million is payable to Macquarie as purchase consideration for the acquisition of Mereenie oil and gas fields subject to certain conditions being met. 4 The Group has lease for an office in Sydney and various equipment. The lease liabilities are secured by the related underlying assets. Future minimum lease payments at 30 June 2024 were as follows: MINIMUM LEASE PAYMENTS DUE Within one year US$’000 One to five years US$’000 After five years US$’000 Total US$’000 30 June 2024 Lease payments 162 16 - 178 Finance charges (5) - - (5) Net present values 157 16 - 173 Note 18 Current tax payable CONSOLIDATED 2024 US$’000 2023 US$’000 Current tax payable – China 2,137 3,606 Current tax payable – New Zealand 1,588 1,540 Current royalty tax payable – New Zealand 227 1,912 3,952 7,058 HORIZON OIL ANNUAL REPORT 2024 77 Note 19 Borrowings CONSOLIDATED 2024 US$’000 2023 US$’000 CURRENT: Bank loans1 (B) 2,703 7,912 NON-CURRENT: Bank loans1 (B) 23,152 - Total Borrowings 25,855 7,912 1 Bank loans are shown net of associated transaction costs. A. Net debt reconciliation This section sets out an analysis of net debt and the movements in net debt for each of the periods presented. 2024 US$’000 2023 US$’000 Cash and cash equivalents 52,570 43,591 Borrowings2 – repayable within one year (including overdraft) (2,814) (7,939) Borrowings2 – repayable after one year and in five years (including overdraft) (23,590) - Lease liabilities (173) (322) Net cash 25,993 35,330 Cash and liquid investments 52,570 43,591 Gross debt2 – variable interest rates (26,404) (7,939) Lease liabilities (173) (322) Net cash 25,993 35,330 2 Borrowings and gross debt represent the nominal value of the Debt Facility drawn down. CASHFLOWS NON-CASH CHANGES OPENING 1 JULY 2023 DRAWDOWN3 REPAYMENTS FOREIGN EXCHANGE MOVEMENT AMORTISATION OF TRANSACTION COSTS CLOSING 30 JUNE 2024 Cash Advance Facility 7,912 - (7,939) - 27 - Debt Facility - 25,764 - 85 6 25,855 Total liabilities from financing activities 7,912 25,764 (7,939) 85 33 25,855 3 Funds drawn down are shown net of associated transaction costs incurred during the period. B. Bank loans – Debt Facility On 31 July 2023, the Cash Advance Facility with ANZ, Westpac and ICBC was repaid in full. On 4 June 2024, Horizon advised that it has executed a new AUD 42.5 million senior debt facility agreement with Macquarie Bank to fund the acquisition of the 25% non-operating interest in the OL4 and OL5 development licenses which contain the producing Mereenie conventional oil and gas field, Northern Territory, Australia. HORIZON OIL ANNUAL REPORT 2024 78 The new senior debt facility, is structured as a reserves base lending facility, has a term of 5 years with semi-annual repayments and attracts an interest rate of BBSW + 5%. Lender security is limited to first ranking general security over the interest in Mereenie, with a parent company guarantee which is customary for a reserves base lending facility. On 11 June 2024, the Group reached financial close and draw down took place to fund the Mereenie acquisition. Under the facility, the facility limit is determined by applying a minimum facility life coverage ratio to the net present value of estimated future cash flows from the Mereenie oil and gas field. Estimated future cash flows are dependent on, amongst other things, oil and gas prices, reserve estimates, operating and capital cost estimates. The facility is secured by a floating charge over the shares and assets of the borrower (Horizon Australia Energy Limited which is a wholly owned subsidiary of Horizon Oil Limited). Horizon Oil Limited has guaranteed the performance of Horizon Australia Energy Limited in relation to the loan facility from Macquarie Bank. The Group is subject to covenants which are common for a facility of this nature. At 30 June 2024, total debt drawn under the facility was US$26.4 million (A$39.9 million). Note 20 Provisions CONSOLIDATED 2024 US$’000 2023 US$’000 Restoration (current) - - Restoration (non-current) 61,459 53,879 61,459 53,879 The reconciliation of the movement in the total of the restoration provisions is as follows: Balance at beginning of financial year 53,879 33,317 Additional provision during financial year 7,034 27,750 Unwinding of discount 2,205 1,542 Payment of restoration cost (344) - Effect of change in inflation, discount and FX rates (1,315) (8,730) Balance at end of financial year 61,459 53,879 During the financial year, following the acquisition of 25% interest in Mereenie oil and gas fields, the Group recognised US$7.0 million future costs of restoring the operating sites at Mereenie. Note 21 Non-current liabilities – Deferred tax liabilities CONSOLIDATED 2024 US$’000 2023 US$’000 RECOGNISED DEFERRED TAX LIABILITIES ARE ATTRIBUTABLE TO: Development and production expenditure 4,584 6,115 Accounting profits royalty 391 58 Other 1,381 441 Total deferred tax liabilities 6,356 6,614 Set off of deferred tax assets pursuant to set off provisions (2,103) (1,570) Net deferred tax liabilities 4,253 5,044 HORIZON OIL ANNUAL REPORT 2024 79 2024 DEVELOPMENT AND PRODUCTION EXPENDITURE US$’000 ACCOUNTING PROFITS ROYALTY US$’000 CASH FLOW HEDGES US$’000 OTHER US$’000 TOTAL US$’000 AT 1 JULY 2023 6,115 58 441 6,614 (Charged] / credited - To profit or loss (1,531) 333 940 (258) - To other comprehensive income At 30 June 2024 4,584 391 1,381 6,356 2023 DEVELOPMENT AND PRODUCTION EXPENDITURE US$’000 ACCOUNTING PROFITS ROYALTY US$’000 CASH FLOW HEDGES US$’000 OTHER US$’000 TOTAL US$’000 AT 1 JULY 2022 12,641 1,221 44 195 14,101 (Charged] / credited - To profit or loss (6,526) (1,163) - 246 (7,443) - To other comprehensive income - - (44) - (44) At 30 June 2023 6,115 58 - 441 6,614 Note 22 Contributed equity CONSOLIDATED NUMBER OF SHARES CONSOLIDATED 2024 ‘000 2023 ‘000 2024 US$‘000 2023 US$‘000 A. Issued share capital Ordinary shares Fully paid 1,623,015 1,601,443 149,636 147,333 Partly paid to A$0.01 1,500 1,500 459 459 1,624,515 1,602,943 150,095 147,792 B. Movements in ordinary share capital [i] Ordinary shares (fully paid) Date Details Number of shares US$'000 30/06/2023 Balance as at 30 June 2023 1,601,442,962 147,333 28/08/2023 Issuance of new shares - settlement of SAR’s 16,933,000 1,786 17/06/2024 Issuance of new shares - settlement of Performance Rights 4,638,683 517 30/06/2024 Balance as at 30 June 2024 1,623,014,645 149,636 - - - - - - - - HORIZON OIL ANNUAL REPORT 2024 80 [ii] Ordinary shares (partly paid to A$0.01): Date Details Number of shares US$'000 30/06/2024 Balance as at 30 June 2024 1,500,000 459 30/06/2023 Balance as at 30 June 2023 1,500,000 459 C. 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. D. 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 32. HORIZON OIL ANNUAL REPORT 2024 81 Note 23 Reserves and retained profits CONSOLIDATED 2024 US$’000 2023 US$’000 A. Reserves SHARE-BASED PAYMENTS RESERVE Movements: Balance at beginning of financial year 11,137 12,916 Employee share-based payments expense 1,203 1,369 Settlement of SAR’s and Performance Rights (5,030) (3,148) Balance at end of financial year 7,310 11,137 HEDGE RESERVE Movements: Balance at beginning of financial year 16 6 Movement in net market value of hedge contracts (121) 17 Deferred tax 29 (7) Balance at end of financial year (76) 16 TREASURY SHARES Movements: Balance at beginning of financial year (31) (829) Acquisition of shares by the Employee Share Trust - (2,387) Settlement of SAR’s 31 3,174 Capital return & dividends - 11 Balance at end of financial year - (31) CURRENCY TRANSLATION RESERVE Movements: Balance at beginning of financial year - - Movement in currency translation 7 - Balance at end of financial year 7 - Total reserves 7,241 11,122 B. Accumulated losses CONSOLIDATED 2024 US$’000 2023 US$’000 Accumulated losses at beginning of financial year (123,595) (96,536) Net loss for financial year (23,264) (27,059) Accumulated losses at end of financial year (146,859) (123,595) C. Profit reserve CONSOLIDATED 2024 US$’000 2023 US$’000 Profit reserve at the beginning of the financial year 60,457 24,326 Parent company profit for financial year 49,164 70,911 Dividends paid (36,855) (34,780) Profit reserve at the end of the financial year 72,766 60,457 HORIZON OIL ANNUAL REPORT 2024 82 D. Nature and purpose of reserves Share-based payment reserve: The fair value of performance rights and share appreciation rights granted to employees results in an increase in equity upon recognition of the corresponding employee benefits expense, as described in the accounting policy set out in Note 1(W)([iii]). The fair value of general options granted also results in an increase in equity unless accounting standards require the options to be treated otherwise. The Company has elected to retain any amounts originally recognised in the share-based payments reserve, regardless of whether the associated options or share appreciation rights are cancelled or lapse unexercised. Hedge reserve: Changes in the market value of the effective portion of derivatives is reflected directly in equity until such time as the hedge is ineffective or expires, as described in the accounting policy set out in Note 1(T). 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 32 for further information. Shares issued to employees are recognised on a weighted average basis. Movement in treasury shares Date Details Number of shares US$'000 30/06/2023 Balance as at 30 June 2023 356,294 31 28/08/2023 Settlement of SARs (356,294) (31) 30/06/2024 Balance as at 30 June 2024 - - Currency translation reserve: Exchange differences arising on translation of Horizon Australia Energy Pty Ltd, from its functional currency of Australian dollars into the Group’s presentation currency of United States dollars, are recognised in other comprehensive income as described in the accounting policy set out in Note 1(F) and accumulated in a separate reserve within equity. Note 24 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 and the use of derivative financial instruments. The Group has no off-balance sheet financial assets or liabilities as at the end of the reporting period. HORIZON OIL ANNUAL REPORT 2024 83 The Group held the following financial instruments at 30 June 2024 and 30 June 2023: CONSOLIDATED 30 JUNE 2024 US$’000 30 JUNE 2023 US$’000 FINANCIAL ASSETS Cash and cash equivalents 52,570 43,591 Receivables 7,399 18,351 Derivative financial instruments - 24 59,969 61,966 FINANCIAL LIABILITIES Payables (current) 23,849 13,405 Current tax payable 3,952 7,058 Payables (non-current) 2,367 424 Borrowings (net of borrowing costs capitalised) 25,855 7,912 56,023 28,799 A. Market risk [i] Foreign exchange risk Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Foreign exchange risk arises when future commercial transactions and recognised financial assets and financial liabilities are denominated in a currency that is not the Group’s functional currency. The Group operates internationally and is exposed to foreign exchange risk arising predominately from Australian and New Zealand dollars and Chinese Renminbi. The Group manages foreign exchange risk by monitoring forecast cash flows in currencies other than US dollars and ensuring that adequate Australian dollar and New Zealand dollar 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 2024, the Group had no outstanding exchange rate hedges (30 June 2023: derivative asset of US$24,000). Effects of hedge accounting The effects of the foreign currency related hedging instruments on the Group’s financial position and performance are as follows: CONSOLIDATED 30 JUNE 2024 US$’000 30 JUNE 2023 US$’000 FOREIGN CURRENCY FORWARDS (USD/AUD) Carrying amount – asset / (liability) - 24 Notional amount - 2,808 Maturity date - 10 July 2023 - 11 December 2023 Hedge ratio1 - 1:1 Change in discounted spot value of outstanding instruments - 24 Weighted average hedged rate for the year - US$1: AUD0.6431 1 The foreign currency swaps and foreign currency forward contracts are denominated in the same currencies as the highly probable future operating and corporate overhead expenditures (AUD corporate expenditures) therefore the hedge ratio is 1:1. HORIZON OIL ANNUAL REPORT 2024 84 Exposure to foreign exchange risk The Group’s exposure to foreign exchange risk at the end of each reporting period was as follows: GROUP 30 JUNE 2024 30 JUNE 2023 AUD US$’000 NZD US$’000 RMB US$’000 AUD US$’000 NZD US$’000 RMB US$’000 Cash and cash equivalents 7,673 1,370 - 10,079 1,392 - Receivables 1,182 180 - 89 232 - Current tax payable - 3,089 2,137 - 3,518 3,606 Current payables 5,775 - 1,108 1,211 - 838 Non-current payables 2,544 - - 232 - - For the financial year ended and as at 30 June 2024, if the currencies set out in the table below had strengthened or weakened against the US dollar by the percentage shown, with all other variables held constant, the net result for the financial year would increase / (decrease) and net assets would increase / (decrease) by: GROUP NET RESULT NET ASSETS NET RESULT NET ASSETS 2024 US$’000 2023 US$’000 2024 US$’000 2023 US$’000 2024 US$’000 2023 US$’000 2024 US$’000 2023 US$’000 Change in currency1 +10% +10% +10% +10% -10% -10% -10% -10% Australian dollar impact 576 567 38 611 (576) (567) (38) (611) New Zealand dollar impact 507 881 (111) (136) (507) (881) 111 136 Chinese Renminbi impact - - (243) (333) - - 243 333 1 This has been based on the change in the exchange rate against the US dollar in the financial years ended 30 June 2024 and 30 June 2023. 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. At 30 June 2024, the Group had 50,000 bbls of crude oil hedged through Brent oil price swaps at a weighted average price of US$83.91/bbl. Effects of hedge accounting The effects of the oil price swaps on the group’s financial position and performance are as follows: CONSOLIDATED 30 JUNE 2024 US$’000 30 JUNE 2023 US$’000 OIL PRICE SWAPS Carrying amount – liability 105 - Notional amount 4,196 - Maturity date 31 July 2024 - Hedge ratio1 1:1 - Change in fair value of outstanding hedging instruments since 30 June 2023 (105) - Weighted average hedged rate for the year US$83.91/bbl - 1 The oil price swaps were executed in the same oil price benchmark as the highly probable future oil sales, therefore the hedge ratio is 1:1. HORIZON OIL ANNUAL REPORT 2024 85 For the financial year ended and as at 30 June 2024, if the crude oil price rose or fell by the percentage shown, with all other variables held constant, the result for the financial year would increase / (decrease) and net assets would increase / (decrease) by: GROUP NET RESULT NET ASSETS NET RESULT NET ASSETS 2024 US$’000 2023 US$’000 2024 US$’000 2023 US$’000 2024 US$’000 2023 US$’000 2024 US$’000 2023 US$’000 Change in crude oil price +10% +10% +10% +10% -10% -10% -10% -10% Impact 4,850 7,509 4,850 7,509 (5,814) (8,846) (5,814) (8,846) [iii] Interest rate risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group has no interest-bearing assets considered to materially expose the Group’s core income and/or operating cash flows to changes in market interest rates. As at 30 June 2024 and 30 June 2023, the Group’s interest rate risk arises from borrowings, issued at variable rates, exposing the Group to cash flow interest rate risk. Group policy is to manage material interest rate exposure. Regular sensitivity analysis is conducted to evaluate the potential impact of unfavourable interest rate movements on the Group’s future financial position. The results of this evaluation are used to determine the most appropriate risk mitigation tool to be used. During the current and prior financial year, the Group did not enter into any interest rate swap contracts. The Group manages its cash flow interest rate risk by using floating to fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating to fixed rates. Under the interest rate swaps, the Group agrees with other parties to exchange, at specific intervals, the difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional principal amounts. The Group’s exposure to interest rate risk for financial instruments is set out below: FLOATING INTEREST RATE FIXED INTEREST RATE MATURING IN: NON- INTEREST BEARING CARRYING AMOUNT US$’000 1 YEAR OR LESS US$’000 OVER 1 TO 2 YEARS US$’000 OVER 2 TO 5 YEARS US$’000 US$’000 US$’000 AS AT 30 JUNE 2024 FINANCIAL ASSETS Cash and cash equivalents 18,057 33,688 - - 825 52,570 Receivables - - - - 7,399 7,399 18,057 33,688 - - 8,224 59,969 Weighted average interest rate p.a. 4.35% FINANCIAL LIABILITIES Trade and other payables - - - - 23,849 23,849 Current tax payable - - - - 3,952 3,952 Non-current payables - - - - 2,367 2,367 Derivative financial instruments - - - - 105 105 Borrowings (nominal) 26,404 - - - - 26,404 26,404 - - - 30,273 56,677 Weighted average interest rate p.a. 9.56% Net financial assets/(liabilities) (8,347) 33,688 - - (22,049) 3,292 HORIZON OIL ANNUAL REPORT 2024 86 FLOATING INTEREST RATE FIXED INTEREST RATE MATURING IN: NON- INTEREST BEARING CARRYING AMOUNT US$’000 1 YEAR OR LESS US$’000 OVER 1 TO 2 YEARS US$’000 OVER 2 TO 5 YEARS US$’000 US$’000 US$’000 AS AT 30 JUNE 2023 FINANCIAL ASSETS Cash and cash equivalents 27,884 - - - 15,707 43,591 Receivables - - - - 18,351 18,351 Derivative financial instruments - - - - 24 24 27,884 - - - 34,082 61,966 Weighted average interest rate p.a. 3.58% FINANCIAL LIABILITIES Trade and other payables - - - - 13,405 13,405 Current tax payable - - - - 7,124 7,124 Non-current payables - - - - 424 424 Borrowings 7,939 - - - - 7,939 7,939 - - - 20,953 28,892 Weighted average interest rate p.a. 6.62% Net financial assets 19,945 - - - 13,129 33,074 As at 30 June 2024 and 30 June 2023, the Group had the following variable rate borrowings outstanding: 30 JUNE 2024 30 JUNE 2023 WEIGHTED AVERAGE INTEREST RATE % P.A. BALANCE US$’000 WEIGHTED AVERAGE INTEREST RATE % P.A. BALANCE US$’000 External loans 9.56% 26,404 6.62% 7,939 Net exposure to cash flow interest rate risk 26,404 7,939 At 30 June 2024 and 30 June 2023, if the interest rates had been 1.0% p.a. higher or lower and all other variables held constant, the net result for the financial year would increase/(decrease) and net assets as at 30 June 2024 and 30 June 2023 would increase/(decrease) by: GROUP NET RESULT NET ASSETS NET RESULT NET ASSETS 2024 US$’000 2023 US$’000 2024 US$’000 2023 US$’000 2024 US$’000 2023 US$’000 2024 US$’000 2023 US$’000 CHANGE IN INTEREST RATE P.A. +1% +1% +1% +1% -1% -1% -1% -1% Impact of Assets 293 98 293 98 (1,274) (349) (1,274) (349) Impact of Liabilities 14 112 14 112 (136) (112) (136) (112) Impact of Net Assets 279 (14) 279 (14) (1,138) (237) (1,138) (237) B. Credit risk Credit risk is managed on a Group basis. Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises from cash and cash equivalents, derivative financial instruments, as well as credit exposures to customers, including outstanding receivables. It is acknowledged that the Group’s sales of crude oil are primarily concentrated with two counterparties. However, the Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history, and that the Group has the ability to sell crude to other parties if desired. Derivative counterparties and cash transactions are limited to high credit quality financial institutions. Where commercially practical the Group seeks to limit the amount of credit exposure to any one financial institution. The maximum exposure to credit risk at the end of each reporting period is the carrying amount of the financial assets as summarised in this note. HORIZON OIL ANNUAL REPORT 2024 87 The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates. CONSOLIDATED 2024 US$’000 2023 US$’000 CASH AND CASH EQUIVALENTS Counterparties with external credit rating (Standard & Poors) AA- 45,122 42,057 A+ 6,624 - Counterparties without external credit rating Share of joint operations cash balances 824 1,534 Total cash and cash equivalents 52,570 43,591 RECEIVABLES Counterparties with external credit rating (Standard & Poors / Fitch) AAA 283 295 AA- 816 67 A+ 5,536 7,143 A- 10 10,757 BBB+ 279 - BBB- 319 - Counterparties without external credit rating Share of joint operation receivables balances 156 89 Total receivables 7,399 18,351 The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. The expected loss rates are based on the payment profiles of sales over a period of 36 months before 30 June 2024 and the corresponding historical credit losses experienced within this period. The historical rates are adjusted to reflect current and forward-looking information on key factors affecting the ability of the customers to settle the receivables. Management has assessed the collectability of these amounts based on the customer relationships and historical payment behaviour and believe that the amounts are still collectable in full. On that basis, the loss allowance as at 30 June 2024 was determined as follows for trade receivables: AS AT 30 JUNE 2024 CURRENT MORE THAN 30 DAYS DUE PAST MORE THAN 60 DAYS DUE PAST TOTAL Expected loss rate 0% 0% 0% Gross carrying amount 7,399 - - 7,399 Loss Allowance - - - - As at 30 June 2024, there were no financial assets that are past due (30 June 2023: US$Nil). At the date of this report, the full balance of the receivables has been received in cash. C. Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities. The Group has policies in place to manage liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual cash flows and matching profiles of financial assets and liabilities. Financing arrangements As at 30 June 2024 and 30 June 2023, the Group had no undrawn borrowing facilities. HORIZON OIL ANNUAL REPORT 2024 88 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 2024 NON-INTEREST BEARING US$’000 VARIABLE RATE1 US$’000 FIXED RATE US$’000 Less than 6 months 27,906 1,273 - 6 – 12 months - 3,950 - Between 1 and 2 years - 14,445 - Between 2-5 years 2,367 13,295 Total contractual cash flows 30,273 32,963 - 1 Includes principal repayments and future interest payments. AS AT 30 JUNE 2023 NON-INTEREST BEARING US$’000 VARIABLE RATE1 US$’000 FIXED RATE US$’000 Less than 6 months 20,720 7,939 - 6 – 12 months - - - Between 1 and 2 years 232 - - Total contractual cash flows 20,952 7,939 - 1 Includes principal repayments and future interest payments. D. 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) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); (b) 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 (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). [i] Fair value measurements The following table presents the Group’s assets and liabilities measured and recognised at fair value as at 30 June 2024 and 30 June 2023: AS AT 30 JUNE 2024 LEVEL 1 US$’000 LEVEL 2 US$’000 LEVEL 3 US$’000 TOTAL US$’000 ASSETS Financial assets at fair value through OCI: Equity investment in unlisted shares - - 1,351 1,351 Total assets - - 1,351 1,351 LIABILITIES Derivatives used for hedging - 105 - 105 Total liabilities - 105 - 105 HORIZON OIL ANNUAL REPORT 2024 89 AS AT 30 JUNE 2023 LEVEL 1 US$’000 LEVEL 2 US$’000 LEVEL 3 US$’000 TOTAL US$’000 ASSETS Derivatives used for hedging - 24 - 24 Financial assets at fair value through OCI: Equity investment in unlisted shares - - 1,351 1,351 Total assets - 24 1,351 1,375 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 2024. [ii] Valuation techniques used to derive fair values The fair value of financial instruments traded in active markets (such as publicly traded derivatives) was based on quoted market prices at the end of each reporting period. The quoted market price used for hedging derivatives held by the Group was the current bid price. These instruments are included in level 1. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimate. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. The fair value of equity investment as at 30 June 2024 is equivalent to the consideration paid to acquire the 3.5% interest in the unlisted shares. As 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: – Discounted cash flow projections based on reliable estimates of future cash flows. All resulting fair value estimates for unlisted equities are included in level 3. [iii] Other fair value measurements The carrying value of receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of other financial liabilities (being financial guarantees), after factoring in the likelihood that the parent entity would be required to perform under the guarantees, was not considered material. The fair value of borrowings for disclosure purposes is not materially different to their carrying value given the likely anticipated repayment profile. Refer to Note 19 for further details. The fair value of other classes of financial instruments not yet covered above was determined to approximate their carrying value. E. 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. F. 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. HORIZON OIL ANNUAL REPORT 2024 90 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 2024, 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 2024 would increase/(decrease) by: GROUP NET RESULT NET ASSETS NET RESULT NET ASSETS 2024 US$’000 2023 US$’000 2024 US$’000 2023 US$’000 2024 US$’000 2023 US$’000 2024 US$’000 2023 US$’000 Change in NZU price +10 % +10% + % +10% -% -10% % -10% Impact 37 34 58 77 (37) (34) (58) (77) Note 25 New Zealand Imputation Credits CONSOLIDATED 2024 US$’000 2023 US$’000 Imputation credits available for subsequent financial years1 2,929 2,927 1 The franking credits available for subsequent financial years are only available to New Zealand resident shareholders under the Trans-Tasman imputation legislation. Note 26 Acquisition of a 25% interest in Mereenie oil and gas fields Summary of acquisition On 14 February 2024, Horizon Australia Energy Pty Ltd, a wholly owned subsidiary of Horizon Oil Limited, executed a sale and purchase agreement with Macquarie Mereenie (Seller) to acquire a 25% non-operating participating interest in the OL4 and OL5 development licenses, Northern Territory, Australia which contain the producing Mereenie conventional oil and gas field. The effective date of acquisition was 1 April 2023, with the transaction completing on 11 June 2024. The acquisition has been accounted for as a business combination. In accordance with the accounting policy described in note 1(n), the Group identified and recognised the fair value of the individual identifiable assets acquired and liabilities assumed on provisional basis at the effective acquisition date with the exception of the restoration asset and liability of US$7.0 million which was estimated by the Group on acquisition following an external consultant review. Details of the purchase consideration and the net assets acquired at the completion date are as follows: 2024 US$’000 Purchase consideration: Cash Paid via debt funding 28,059 Net working capital cash flows (1,742) Deferred payment 3,301 Contingent payment 2,338 Total purchase consideration 31,956 HORIZON OIL ANNUAL REPORT 2024 91 The assets and liabilities recognised as a result of the acquisition at the completion date are as follows: FAIR VALUE US$’000 Cash 224 Receivable 565 Inventory – consumable spare parts 561 Inventory – gas and crude oil 102 Oil and gas assets 38,143 Prepaid expenses 29 Payables (634) Restoration provision (7,034) Net identifiable assets acquired 31,956 In addition to the aforementioned identifiable assets and liabilities, the Group assumed oil and gas expenditure commitments associated with the acquired license. Refer to Note 37 for further detail in relation to the Group’s capital commitments. Note 27 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 2024 % 2023 % Horizon Oil International Limited New Zealand 100 100 New Zealand Horizon Oil International Holdings Limited BVI 100 100 BVI Horizon Oil (Beibu) Limited BVI 100 100 China Horizon Oil (China Holdings) Limited BVI 100 100 BVI Horizon Oil Employee Incentive Trust Australia 100 100 Australia Horizon Australia Investments Pty Limited Australia 100 100 Australia Horizon Australia Energy Pty Limited Australia 1001 - Australia 1 During the financial year, the Group established Horizon Australia Energy Pty Limited, a stand-alone company that holds the 25% non-operating interest in the Mereenie oil and gas fields. This entity is consolidated in accordance with the principles in Note 1(C). HORIZON OIL ANNUAL REPORT 2024 92 Note 28 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 (N), under the following classifications: CONSOLIDATED 2024 US$’000 2023 US$’000 CURRENT ASSETS Cash and cash equivalents 825 1,534 Receivables 156 89 Inventories 9,531 2,953 Total current assets 10,512 4,576 NON-CURRENT ASSETS Oil and gas assets 119,747 104,707 Total non-current assets 119,747 104,707 Total assets 130,259 109,283 CURRENT LIABILITIES Payables 15,712 10,320 Total current liabilities 15,712 10,320 NON-CURRENT LIABILITIES Restoration provision 61,459 53,879 Total non-current liabilities 61,459 53,879 Total liabilities 77,171 64,199 Share of net assets employed in joint operations 53,088 45,084 Contingent liabilities in respect of joint operations are detailed in Note 35. Exploration and development expenditure commitments in respect of joint operations are detailed in Note 37. The Group had an interest in the following joint operations: PERMIT OR LICENCE PRINCIPAL ACTIVITIES INTEREST (%) 30 JUNE 2024 INTEREST (%) 30 JUNE 2023 NEW ZEALAND PMP 38160 (Maari/Manaia) Oil and gas production, exploration and development 26.00% 26.00% CHINA Block 22/12 Oil and gas production, exploration and development 26.95% 26.95% AUSTRALIA Mereenie OL4 & OL5 Oil and gas production, exploration and development 25.00%1 - 1 During the current financial year, the group acquired a 25% non-operating interest in the Mereenie oil and gas fields. HORIZON OIL ANNUAL REPORT 2024 93 Note 29 Remuneration of external auditors CONSOLIDATED 2024 US$ 2023 US$ 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: PwC Australia Audit and other assurance services Audit and review of financial reports 231,304 212,371 Other assurance services 13,417 12,649 Total auditors’ remuneration 244,721 225,020 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. Note 30 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 2024 US$ 2023 US$ Short-term employee benefits 1,153,248 1,071,190 Post-employment benefits 53,750 52,476 Long-term benefits (11,181) 24,183 Share-based payments (non-cash) 1,073,433 1,225,588 Total key management personnel remuneration 2,269,250 2,373,437 Detailed remuneration disclosures are provided in sections 1 - 6 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. 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 - 6 of the remuneration report. Note 31 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 - 6 of the Remuneration report and Note 32. Subsidiaries Interests in subsidiaries are set out in Note 27. 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 2024 and 30 June 2023 consisted of: HORIZON OIL ANNUAL REPORT 2024 94 (a) Contributions to share capital by Horizon Oil Limited; (b) Loans advanced by Horizon Oil Limited; (c) Loans repaid to Horizon Oil Limited; (d) Payments to Horizon Oil Limited under financial guarantee contract arrangements; (e) Interest payments to Horizon Oil Limited on loans advanced to subsidiaries; (f) Dividends paid to Horizon Oil Limited; and (g) 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. 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% (2023: LIBOR plus 4.53%). Outstanding balances are unsecured and repayable in cash. Note 32 Share-based payments Set out below is a summary of performance rights, deferred STI rights and share appreciation rights on issue: GRANT DATE ESTIMATED EXPIRY DATE EXERCISE PRICE BALANCE START OF FINANCIAL YEAR NUMBER GRANTED DURING FINANCIAL YEAR NUMBER EXERCISED DURING FINANCIAL YEAR NUMBER LAPSED/ CANCELLED DURING FINANCIAL YEAR NUMBER BALANCE END OF FINANCIAL YEAR NUMBER VESTED AND EXERCISABLE AT END OF FINANCIAL YEAR NUMBER CONSOLIDATED ENTITY 2024 SHARE APPRECIATION RIGHTS ISSUED 01/07/2020 01/07/2025 A$0.021 3,720,681 - (3,720,681) - - - 01/07/2021 01/07/2026 A$0.031 3,386,400 - (3,386,400) - - - TOTAL 7,107,081 - (7,107,081) - - - PERFORMANCE RIGHTS ISSUED 16/11/2022 30/06/2027 - 19,600,000 - (19,600,000) - - - 08/08/2022 30/06/2027 - 9,800,000 - (9,800,000) - - - 01/05/2023 30/04/2028 - 7,000,000 - (7,000,000) - - - 21/02/2024 30/04/2028 - - 1,752,233 (1,752,233) - - - TOTAL 36,400,000 1,752,233 (38,152,233) - - - DEFERRED STI RIGHTS ISSUED 30/06/2022 N/A - 3,221,275 - (3,221,275) - - - 30/06/20232 N/A - - 4,315,706 - - 4,315,706 4,315,706 TOTAL 3,221,275 4,315,706 (3,221,275) - 4,315,706 4,315,706 1 No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a SAR, Performance Rights and Deferred STI Rights. The ‘strike price’ for SARs is the 10-day volume weighted average price for Horizon shares at effective allocation date. Following shareholder approval of a A$ 1.35 cent capital return, at an extraordinary general meeting on 7 October 2022, the strike prices of SARs on issue have been reduced by A$ 1.35 cents. 2 In accordance with the plan, the number of 2023 deferred STI rights held by each KMP were adjusted during the financial year for the aggregate A$ 3.5 cent dividend distributions per share. HORIZON OIL ANNUAL REPORT 2024 95 GRANT DATE ESTIMATED EXPIRY DATE EXERCISE PRICE BALANCE START OF FINANCIAL YEAR NUMBER GRANTED DURING FINANCIAL YEAR NUMBER EXERCISED DURING FINANCIAL YEAR NUMBER LAPSED/ CANCELLED DURING FINANCIAL YEAR NUMBER BALANCE END OF FINANCIAL YEAR NUMBER VESTED AND EXERCISABLE AT END OF FINANCIAL YEAR NUMBER CONSOLIDATED ENTITY 2023 SHARE APPRECIATION RIGHTS ISSUED 01/07/2017 01/07/2022 A$0.021 39,191,714 - (39,191,714) - - - 01/07/2018 01/07/2023 A$0.111 6,453,777 - (6,453,777) - - - 01/07/2019 01/07/2024 A$0.081 8,179,878 - (8,179,878) - - - 01/07/2020 01/07/2025 A$0.021 3,720,681 - - - 3,720,681 - 01/07/2021 01/07/2026 A$0.061 9,194,811 - - (5,808,411) 3,386,400 - TOTAL 66,740,861 - (53,825,369) (5,808,411) 7,107,081 - PERFORMANCE RIGHTS ISSUED 16/11/2022 30/06/2027 - - 19,600,000 - - 19,600,000 - 08/08/2022 30/06/2027 - - 9,800,000 - - 9,800,000 - 01/05/2023 30/04/2028 - - 7,000,000 - - 7,000,000 - TOTAL 36,400,000 - - 36,400,000 - DEFERRED STI RIGHTS ISSUED 30/06/20222 N/A - - 3,221,275 - - 3,221,275 3,221,275 TOTAL - 3,221,275 - - 3,221,275 3,221,275 1 No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a SAR, Performance Rights and Deferred STI Rights. The ‘strike price’ for SARs is the 10-day volume weighted average price for Horizon shares at effective allocation date. Following shareholder approval of a A$ 1.35 cent capital return, at an extraordinary general meeting on 7 October 2022, the strike prices of SARs on issue have been reduced by A$ 1.35 cents. 2 In accordance with the plan, the number of 2022 deferred STI rights held by each KMP were adjusted during the financial year for the A$ 1.35 cents capital return per share and aggregate A$ 3.15 cent dividend distributions per share. Long Term Incentive Plan (SARs) 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. A SAR is a right to receive either or both a cash payment or shares in the Company, as determined by the board, subject to the Company satisfying certain conditions, including performance conditions. The LTI Plan provides that the amount of the cash payment or the number of shares in the Company that the participant receives on exercise of the SAR is based on the value of the SAR at the time it is exercised (’SAR Value’). The SAR Value is the excess, if any, of the volume weighted average price (’VWAP’) of shares in the Company for the ten-business day period up to the date before the date the SAR is exercised over the VWAP of shares in the Company for the ten-business day period up to the day before the “Effective Allocation Date” for the SARs. The Effective Allocation Date for the SARs is the grant date of the SARs or any other day determined by the board, at the time of the grant. The Effective Allocation Date would generally be the date the executive’s entitlement was determined. If the board determines that the SARs are to be satisfied in cash, the amount of cash that the participant receives on the exercise of the SARs is the SAR Value multiplied by the number of SARs exercised (less any deduction for taxes that the Company is required to make from the payment). If the board determines that the SARs are to be satisfied in shares, the 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. Long Term Incentive Plan (Performance Rights) The LTI arrangements approved at the 2022 annual general meeting apply to senior executives and involve the grant of performance rights which may vest subject (amongst other things) the achievement of certain share price hurdles, A$25 million of cumulative share trades at or above the share price hurdles and the one-month VWAP, at the one year anniversary HORIZON OIL ANNUAL REPORT 2024 96 of achieving the share price hurdle, must meet or exceed the share price hurdle. This plan applied for from and including the 2023 financial year. Under the LTI Plan, the board has the discretion, subject to the ASX Listing Rule requirements, to grant performance rights to executives as long-term incentives. A performance right is a right to receive shares in the Company, subject to the Company satisfying certain conditions, including performance conditions. Each performance right entitles the holder to one Horizon Ordinary share should the performance right vest. No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a SAR or Performance Right. During the financial year, the Horizon Long-Term Incentive Plan and Horizon Employee Option Scheme are also administered by the Horizon Employee Share Trust. This trust is consolidated in accordance with Note 1(C ). Shares issued by the trust to the employees are acquired through the issuance of new Ordinary shares by the Company. Shares held by the trust and not yet issued to employees at the end of the reporting period are shown as treasury shares in the financial statements. Refer to Note 23(D) for details. Performance Rights issued The independently assessed fair value’s at grant date of these performance rights are disclosed below. The terms and conditions of each grant of Performance Rights presently on issue are as follows: TRANCHE NUMBER OF RIGHTS SHARE PRICE HURDLE (A$)1 EXPIRY DATE FAIR VALUE PER PERFORMANCE RIGHT AT GRANT DATE2 DATE EXERCISED CEO Performance Rights issued with a Grant Date of 16 November 2022 Tranche A Rights 7,000,000 0.085 30 June 2027 A$0.094 25/08/2023 Tranche B Rights 5,600,000 0.115 30 June 2027 $0.077 25/08/2023 Tranche C Rights 4,200,000 0.135 30 June 2027 A$0.065 25/08/2023 Tranche D Rights 2,800,000 0.155 30 June 2027 A$0.046 25/08/2023 COO Performance Rights issued with a Grant Date of 8 August 2022 Tranche A Rights 3,500,000 0.085 30 June 2027 A$0.065 25/08/2023 Tranche B Rights 2,800,000 0.115 30 June 2027 A$0.045 25/08/2023 Tranche C Rights 2,100,000 0.135 30 June 2027 A$0.038 25/08/2023 Tranche D Rights 1,400,000 0.155 30 June 2027 A$0.033 25/08/2023 CFO Performance Rights issued with a Grant Date of 1 May 2023 (Trance E, F) and 21 February 2024 (Tranche G, H) Tranche E Rights 3,500,000 0.135 30 April 2028 A$0.086 03/05/2024 Tranche F Rights 2,800,000 0.145 30 April 2028 A$0.077 03/05/2024 Tranche G Rights 907,406 0.135 30 April 2028 A$0.125 03/05/2024 Tranche H Rights 844,827 0.145 30 April 2028 A$0.121 03/05/2024 1 In accordance with the plan, the Share Price Hurdles were adjusted to account for distributions to shareholders during the 2024 financial year. Share price hurdles were only adjusted for distributions made prior to the Performance Rights being exercised 2 The value per Performance Right at grant date is determined by an independent expert. 3 No price is payable by a participant in the Long-Term Incentive Plan on the exercise of a Performance Right. The Group engages external, independent and qualified valuers to determine the fair value at grant date. The fair value of the performance rights is using a Monte Carlo simulation technique. The Monte Carlo simulation technique used to calculate the theoretical value of the performance rights uses current stock prices, expected dividend yield, expected interest rates, time to expiration and expected volatility. A calculated share price volatility of 55% - 60.0% was applied in the valuations. All other parameters were based on the specific terms of the share appreciation rights issued or observable market data. HORIZON OIL ANNUAL REPORT 2024 97 The simulation inputs for the grant of Performance Rights during the financial year ended 30 June 2024 included: CEO COO CFO - 2023 CFO - 2024 Effective allocation date 1 July 2022 1 July 2022 1 May 2023 1 May 2023 Expiry date 30 June 2027 30 June 2027 30 April 2028 30 April 2028 Grant date 16 November 2022 8 August 2022 1 May 2023 21 February 2024 Exercise price Nil1 Nil1 Nil1 Nil1 Expected price volatility 60% p.a. 60% p.a. 60% p.a. 55% p.a. Risk free rate 3.04% p.a. 3.42% p.a. 3.08% p.a. 3.8% p.a. Expected dividend yield 20.00% p.a. 20.00% p.a. 20.00% p.a. 20.00% p.a. Expenses arising from share-based payment transactions Total expenses arising from share-based payment transactions recognised during the financial year as part of employee benefits expense in profit or loss were as follows: CONSOLIDATED 2024 US$’000 2023 US$’000 SHARE APPRECIATION RIGHTS ISSUED UNDER: Long Term Incentive Plan 1,203 1,369 Total employee share-based payments expense 1,203 1,369 Performance Rights/SARs in respect of which expiry dates were modified during the financial year No Performance Rights/SARs expiry dates were modified during the financial year. Performance Rights/SARs exercised during the financial year During the financial year 7,107,081 SARs and 38,152,233 Performance Rights were exercised and settled with the issuance of 20,220,683 Ordinary shares which were transferred from the Horizon Employee Incentive Trust, cash paid/payable of A$1,057,719 and an upward variation of PAYG amounting to A$2,841,093. Performance Rights/SARs lapsing or cancelled during the financial year No Performance Rights/SARs lapsed or were cancelled during the financial year. Performance Rights/SARs lapsed subsequent to 30 June 2024 No performance rights or SARs have lapsed subsequent to financial year end. Deferred STI Rights exercised during the financial year During the financial year 3,221,275 Deferred STI Rights were exercised and settled with the issuance of 1,707,274 Ordinary shares which were transferred from the Horizon Employee Incentive Trust and cash paid/payable of A$234,670. Deferred STI Rights issued subsequent to 30 June 2024 Subsequent to period end, 3,691,728 deferred STI rights were issued in relation to the FY24 STI’s awarded. 1,135,434 of these rights remain subject to shareholder approval at the 2024 Annual General Meeting. HORIZON OIL ANNUAL REPORT 2024 98 Note 33 Employee entitlements CONSOLIDATED 2024 US$’000 2023 US$’000 EMPLOYEE ENTITLEMENT LIABILITIES ARE INCLUDED WITHIN: Current – other creditors 175 136 Non-current - other creditors (Note 17) 192 233 NUMBER 2024 NUMBER 2023 EMPLOYEE NUMBERS Average number of employees during financial year 10 11 Note 34 Contingent asset The Group had no contingent assets as at 30 June 2024. Note 35 Contingent liabilities The Group had contingent liabilities as at 30 June 2024 and 30 June 2023 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. Note 36 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 2024 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 28 August 2024. The Board of Directors has the power to amend and reissue the financial statements. Note 37 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. HORIZON OIL ANNUAL REPORT 2024 99 2024 NEW ZEALAND DEVELOPMENT CHINA EXPLORATION & DEVELOPMENT AUSTRALIA DEVELOPMENT1 TOTAL Within one financial year 1,083 3,629 - 4,712 Later than one financial year but not later than 5 financial years - - - - Total 1,083 3,629 - 4,712 1 Subsequent to period end the Group approved development commitments of US$5.9 million (net to HZN) which will be incurred within one financial year. 2023 NEW ZEALAND DEVELOPMENT CHINA EXPLORATION & DEVELOPMENT TOTAL Within one financial year 1,808 2,745 4,553 Later than one financial year but not later than 5 financial years - 697 697 Total 1,808 3,442 5,250 The above commitments may be deferred or modified with the agreement of the host government, by variations to the terms of individual petroleum interests, or extensions to the terms thereof. Another factor likely to delay timing of these commitments is the potential lack of availability of suitable drilling rigs in the area of interest. The commitments may also be reduced by the Group entering into farm-out agreements or working interest trades, both of which are typical of the normal operating activities of the Group. In addition to the above commitments, the Group has invested funds in other petroleum exploration interests, but is not exposed to a contingent liability in respect of these, as it may choose to exit such interests at any time at no cost penalty other than the loss of the interests. HORIZON OIL ANNUAL REPORT 2024 100 Note 38 Reconciliation of profit after income tax to net cash flows from operating activities CONSOLIDATED 2024 US$’000 2023 US$’000 PROFIT FOR FINANCIAL YEAR 25,900 43,852 Exploration and development expenditure written off/expensed 837 4,549 Depreciation expense 177 215 Movement in employee entitlement liabilities 39 51 Non-cash employee share-based payments expense 1,203 1,369 Amortisation expense 30,139 38,500 Amortisation of prepaid financing costs 33 240 Discount unwinding on provision for restoration 2,182 1,542 CHANGE IN OPERATING ASSETS AND LIABILITIES: Decrease/(Increase) in trade debtors 11,007 (264) Decrease/(Increase) in other debtors and prepayments 140 (127) (Increase)/Decrease in inventory (6,577) 1,230 (Decrease) in net deferred tax liabilities - (4,536) (Increase) in net deferred tax assets (1,416) - (Decrease) in tax payable (3,107) (2,029) Increase/(Decrease) in trade creditors 696 (12,945) Increase in other creditors 2,964 313 NET CASH INFLOW FROM OPERATING ACTIVITIES 64,217 71,960 HORIZON OIL ANNUAL REPORT 2024 101 Note 39 Earnings per share CONSOLIDATED 2024 US CENTS 2023 US CENTS (a) Basic earnings per share attributable to the ordinary equity holders of the Company 1.60 2.74 (b) Diluted earnings per share attributable to the ordinary equity holders of the Company 1.58 2.66 2024 NUMBER 2023 NUMBER WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE DENOMINATOR Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 1,617,370,026 1,598,627,894 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 1,637,486,880 1,650,327,032 2024 US$’000 2023 US$’000 RECONCILIATION OF EARNINGS USED IN CALCULATING EARNINGS PER SHARE Profit attributable to the ordinary equity holders of the company used in calculating basic and diluted earnings per share 25,900 43,852 Information concerning the classification of securities A. Partly paid ordinary shares Partly paid ordinary shares carry the rights of fully paid ordinary shares and to that extent they have been recognised as ordinary share equivalents in the determination of basic earnings per share. All partly paid shares on issue are held by the Company. Details regarding the partly paid ordinary shares are set out in Note 22a. B. Performance rights and share appreciation rights granted as compensation Performance rights and share appreciation rights (SARs) granted to employees under the Long-Term Incentive Plan or Employee Option Scheme issued are included in the calculation of diluted earnings per share to the extent to which they are dilutive. The SARs are considered to be contingently issuable shares and are treated as outstanding and included in the calculation of diluted earnings per share if the relevant performance hurdles have been met. Performance Rights and SARs have not been included in the determination of basic earnings per share. Details regarding the options and share appreciation rights are set out in Note 32. HORIZON OIL ANNUAL REPORT 2024 102 Note 40 Parent Entity financial information [i] Summary financial information The individual financial statements for the Parent Entity show the following aggregate amounts: PARENT ENTITY 2024 US$’000 2023 US$’000 STATEMENT OF FINANCIAL POSITION Current assets 38,511 29,560 Non-current assets 118,707 116,298 Total assets 157,218 145,858 Current liabilities 1,821 1,215 Non-current liabilities 193 239 Total liabilities 2,014 1,454 Net assets 155,204 144,404 Contributed equity 150,095 147,792 Share-based payments reserve 7,310 11,122 Accumulated losses (74,967) (74,967) Profit reserve 72,766 60,457 Total equity 155,204 144,404 Profit for the financial year 49,164 70,911 Total comprehensive profit for the financial year 49,164 70,911 [ii] Guarantees entered into by the parent entity The parent entity has provided guarantees in respect of bank loan of its subsidiaries amounting to US$26,403,729 (2023: US$7,939,200) and has also provided customary joint venture guarantees. No liability has been recognised for guarantees provided. After factoring in the likelihood that the parent entity would be required to perform under the guarantees the fair value of the liability was not considered material. [iii] Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at 30 June 2024 or 30 June 2023. For information about guarantees given by the parent entity, see above. [iv] Contractual commitment for the acquisition of property, plant or equipment As at 30 June 2024, the parent entity had no contractual commitments for the acquisition of property, plant or equipment (30 June 2023 – US$Nil). HORIZON OIL ANNUAL REPORT 2024 103 INFORMATION SHARE- HOLDER HORIZON OIL LIMITED SHARE- HORIZON OIL ANNUAL REPORT 2024 104 Horizon Oil Limited and Controlled Entities Securities Exchange Information as at 15 August 2024 DISTRIBUTION OF EQUITY SECURITIES The distribution of equity security holders ranked according to size at 15 August 2024 was as follows: ORDINARY SHARES SIZE OF HOLDING SHARES UNLISTED OPTIONS SHARE APPRECIATION RIGHTS PERFORMANCE RIGHTS DEFERRED STI RIGHTS 1 to 1,000 295 - - - - 1,001 to 5,000 469 - - - - 5,001 to 10,000 855 - - - - 10,001 to 100,000 2,348 - - - - 100,001 and over 902 - - - 5 TOTAL 4,869 - - - 5 A total of 372 holders held less than a marketable parcel of 2,632 ordinary shares. TWENTY LARGEST SHAREHOLDERS The names of the twenty largest shareholders of the Company’s ordinary shares are listed below: NAME NUMBER OF ORDINARY SHARES % OF ISSUED ORDS 1 IMC Investments Limited 400,574,175 24.68 2 J P Morgan Nominees Australia Limited 363,785,205 22.41 3 Citicorp Nominees Pty Limited 184.868,815 11.39 4 HSBC Custody Nominees (Australia) Limited 52,986,764 3.26 5 BNP Paribas Nominees Pty Ltd 38,536,076 2.37 6 Mr Michael Francis Sheridan 27,433,289 1.69 7 Carrington Land Pty Limited 20,000,000 1.23 8 Mr Richard Cameron Beament and Mrs Sophie Nicole Beament 11,952,724 0.74 9 VLH Pty Limited 9,264,367 0.57 10 Kaluki Pty Limited 7,890,417 0.49 11 Neweconomy Com Au Nominees Pty Limited 7,049,613 0.43 12 Amidor Investments Pty Limited 6,250,000 0.39 13 Botanic Farm Pty Limited 6,158,920 0/38 14 Spinel Investments Pty Limited 5,854,604 0.36 15 Brides Pty Limited 5,550,000 0.34 16 Mr Kyle Christopher Keen and Ms Janine Jacqueline Gossman 4,801,966 0.30 17 Mr Anthony James Emmett 4,526,712 0.28 18 Mr John Bernard Porteous 4,313,593 0.27 19 Berne No 132 Nominees Pty Limited 4,000,000 0.27 20 Merryl Lynch (Australia) Nominees Pty Limited 3,837,123 Total 1,169,584,363 1,169,584,363 72.06 3,837,123 0.25 HORIZON OIL ANNUAL REPORT 2024 105 Horizon Oil Annual Report 2024 106 ISSUED SECURITIES Issued securities as at 15 August 2024: SECURITY NUMBER ON ISSUE NUMBER OF HOLDERS Ordinary fully paid shares1 1,622,962,814 4,869 Ordinary partly paid shares 1,500,000 1 Unlisted deferred STI rights 4,315,706 5 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 SECURITY NUMBER OF ORDINARY SHARES % OF ISSUED ORDS IMC Investments Ltd (an associate of Austral-Asia Energy Pty Ltd) 400,574,175 24.68 Samuel Terry Asset Management Pty Limited 314,232,423 19.36 Spheria Asset Management Pty Limited 106,379,080 6.55 Total 821,185,678 50.59 VOTING RIGHTS Ordinary shares – fully 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 one vote for each share on a poll. 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. Deferred STI rights - unlisted No voting rights. A-IFRS Australian equivalents to International Financial Reporting Standards ASIC Australian Securities and Investments Commission ASX Australian Securities Exchange bbl(s) Blue barrel(s), oil barrel volume is 0.159 cubic metres bcf Billion cubic feet of natural gas boe 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 boepd Barrel of oil equivalent per day bopd Barrel of oil per day inclusive of NGLs CNOOC China National Offshore Oil Corporation EBITDAX Earnings before interest, tax, depreciation, depletion and amortisation, and exploration expenses ESP Electrical submersible pump FID Final investment decision FPSO Floating production, storage and offloading vessel GST Goods and services tax JOA Joint operating agreement km Kilometres LIBOR London inter-bank offered rate LNG Liquified natural gas mmbbl/mmbo Million barrels of oil mmboe Million barrels of oil equivalent mmcfb Millions cubic feet barrels NDRC National Development and Reform Commission NGL(s) Natural gas liquid(s) OTCQB OTC Markets Group Venture Market ODP Overall Development Plan PEP Petroleum exploration permit PMP Petroleum mining permit 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. GLOSSARY HORIZON OIL ANNUAL REPORT 2024 107 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 Production Sharing Agreement SDA Supplemental Development Agreement SPE-PRMS Society of Petroleum Engineers – Petroleum Resources Management System Sq km Square kilometres tcf Trillion cubic feet of natural gas USD / US$ United States dollars WHP Wellhead platform WOU Workover unit 2D Seismic Seismic recorded in 2 dimensions 3D Seismic Seismic recorded in 3 dimensions HORIZON OIL ANNUAL REPORT 2024 108 HORIZON OIL LIMITED ABN 51 009 799 455 Board of Directors Michael Harding (Chairman) Richard Beament (Chief Executive Officer) Sandra Birkensleigh Gregory Bittar (Alternate: Bruno Lorenzon) Bruce Clement Nigel Burgess Company Secretary Vasilios (Vas) Margiankakos Assistant Company Secretary Kyle Keen Australian Registered Office (Principal place of business] Level 4, 360 Kent Street, SYDNEY NSW 2000 Telephone: +]612] 9332 5000 Facsimile: +[612] 9332 5050 Email: info@horizonoil.com.au Website: www.horizonoil.com.au Domicile and country of incorporation Australia Share Registrar Computershare Investor Services Pty Limited 6 Hope Street Ermington NSW 2115 Telephone: +[613) 9415 4000 Solicitors King & Wood Mallesons Level 30 Waterfront Place 1 Eagle Street BRISBANE QLD 4000 Auditor PwC One International Towers Sydney Watermans Quay, Barrangaroo SYDNEY NSW 2000 Stock Exchange 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: Cliftons Level 13, 60 Margaret St Sydney NSW 2000 Time: 10.00am Date: 20 November 2024 HORIZON OIL ANNUAL REPORT 2024 109 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.

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