Horizon expands PNG permits

HORIZON Oil opened its account in 2017 by expanding its interests in the western provinces of Papua New Guinea by buying assets once owned by oil field luminaries John Akehurst and Dr Agu Kanstler.
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Haydn Black


In a deal for which no specific details were provided, Horizon said it had bought Eaglewood Energy BVI, a neighbouring landholder.
A publicly-listed Canadian company, Eaglewood was originally purchased in 2014 by privately-held Transform Exploration for around $28 million.
Transform was created by a group of Perth explorationists including Akehurst (the former head of Woodside Petroleum), Kanstler (Woodside's former exploration director and more recently a member of Oil Search's board) and financier Andrew Burt. 
TransformEx held interests in PRL 28 (50% and operator), PPL 430 (50%), PPL 574 (40% and operator) and one licence in Indonesia's Papua province that was not sold to Horizon.
The deal gives Horizon an interest in the estimated 90 billion cubic feet Ubuntu gas-condensate discovery, which sits adjacent to PRL 21 and the Ketu-Elevala-Tingu complex, plus an increased 80% interest in PPL 574 (previously PPL 259) where the partners drilled the Nama-1 duster, and 100% of PPL 430 to the south along the proposed pipeline route to Daru Island. 
Horizon chief financial officer Micheal Sheridan told Energy News that the TransformEx opportunity had been acquired for a "fair price" to both Horizon and Transform, albeit not with a substantial payment from Horizon.
He said TransformEx had been an ideal partner over the past few years, but one that had decided it was best to move on in the current environment.
"The fact is, after the Nami-1 well didn't come in, the outlook wasn't great," he said.
"Ubuntu is dependent on what we can do with Elevala and our gas aggregation strategy, which is dependent on so many other things 
Sheridan admits that while Horizon's PNG portfolio is its main growth option, it is not one that is moving as rapidly as might be hoped.
"We are playing a long game here," he said.
"We started with a very small 7.5% interest in 2002, if I can remember that far back, and we have gradually moved up and traded with the likes of Osaka Gas and Talisman Energy/Repsol, and we have the opportunity now with TransformEx to consolidate further, and it puts us in a good position."
There is about 1.5 trillion cubic feet and 60 million barrels of condensate associated with Horizon's leases, and a few hundred Bcf in fields such as Douglas and Puk Puk that are owned by third parties.
Horizon previously considered a condensate-stripping development, initially at the Stanley field, but over the past few years it has settled on a mid-scale LNG development.
in an ideal world, Horizon and its partners will be able to aggregate a large number of gas resources and move them to the coast, but the company has also studied other options if it needs to go it alone.
Ultimately, how it proceeds will depend on what its neighbours do, planned exploration drilling by Oil Search at Koko and Kimu, and how fields such as P'ynang are developed.
"We are well positioned, and we are trying to advance this development with our partners, who are larger than just Horizon Oil, and any other players who may want to become available in gas aggregation," Sheridan said.
The development planning is now being driven by a joint working team comprising Horizon, Repsol and Osaka Gas.
"We are well positioned, and we are nimble, and we are motivated to push this opportunity," Sheridan said.
The latest move has been welcomed by PNG Energy Minister Nixon Duban, and Horizon is continuing talks with the state-owned Kumul Petroleum Holdings, to provide input on planning of the open access Western Pipeline that will facilitate the commercialisation of several undeveloped gas accumulation to the Port Moresby area or a pipeline south to Daru Island that is not reliant on third parties. 
The possible drop in tax rate on liquids projects from 45% to 30% should stimulate interest in the very rich level of liquids present in Ketu and Elevala, Horizon said.
Horizon produced 1.22 million barrels of oil last calendar year, and is currently producing around 3800bopd from China and the Maari field in New Zealand.
Its revenue for the December quarter was $US14 million, giving it an annual income of $66.3 million.
It has cash on hand of $18.3 million, but net debt of around $US120 million, which Sheridan said had given some shareholders and potential investors a cause for concern last year.
"Yes, we have got debt, which is not well received in the market, but I think I would rather have debt and repay it than to have a development and try to source it in this market," he said.
Horizon was able to extend its debt repayment windows last year, and believes the debt is manageable, although it is likely the overhang of the debt is one of the reasons the company believes it is undervalued.



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