July 31, 2016 - 11:52 PM EDT
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Horizon Oil Ltd (HZN.AX) Reserves and Resources Update

Sydney, Australia (ABN Newswire) - Horizon Oil (ASX:HZN) recently engaged an independent expert to provide a report for the Notice of Meeting and Explanatory Statement to be sent to shareholders in connection with the Refinancing Arrangements announced on 27 June 2016. The independent expert engaged an independent technical specialist to provide a report which included a review of Horizon Oil's petroleum reserves and resources. The attached reserves and resources update is based upon the results of the independent technical specialist's report after application of Horizon Oil's economic assumptions. A copy of the independent technical specialist's report together with the independent expert's report has been provided to shareholders with the Notice of Meeting and Explanatory Statement.

The following table (see in link below) summarises the reserves and resources update.

The reserves and resources update will be incorporated in the assessment of the carrying value of Horizon Oil's assets at financial year end. At this stage, and subject to finalisation of our full year results, Horizon Oil anticipates a non-cash reduction in the carrying value of its Maari producing asset in New Zealand as at 30 June 2016.

2016 Reserves and Resources Update

Highlights:

- At 30 June 2016, Horizon Oil's total proved plus probable reserves (2P) and contingent resources (2C) for oil and condensate were 33.3 mmbbl (2P: 9.0 mmbbl, 2C: 24.3 mmbbl). This represents an increase of 0.2 mmbbl to remaining reserves and resources since 30 June 2015, after net production of 1.4 mmbbl. This was primarily attributable to an increase in China due to cost recovery benefit under the Petroleum Contract, the impact of ongoing production optimisation efforts and the addition of reserves and initiation of production from the WZ 12-10-2 field in Q4 2015, offset by a change to the economic cutoff criteria applied at Maari/Manaia, reflective of lower oil prices.

- The Company's 2C contingent gas resources were 497 bcf, representing a 97 bcf increase to the June 2015 position as a result of modifications to the proposed field development concepts in PDL 10 and PRL 21.

- In China improved reservoir performance from ongoing production optimisation, and the addition of production from the WZ 12-8W-A6H well drilled in late 2015 increased 2P net reserves by 1.4 mmbbl.

- In New Zealand, a delay to the reinstatement of water injection in the Maari field, and a lower than expected benefit to field performance of the well intervention program also contributed to decreased 2P net reserves of 1.7 mmbbl.

Oil and gas reserves

At 30 June 2016, the Company's proved plus probable petroleum reserves (2P) were 9.0 mmbbl of oil, distributed as shown in Table 1 (see link below).

All of the reserves at Maari/Manaia and in China Block 22/12 are classified as developed. In China the 2015 undeveloped reserves of 0.3 mmbbl were reclassified as developed and increased to 0.9 mmbbl as a result of the WZ 12-8W-A6H well drilled in late 2015. In PNG, the 3.2 mmbbl of 2P undeveloped reserves at Stanley has been reclassified as 2C contingent resources with respect to June 2015 due to changes to the proposed field development plan for the Stanley field which is now envisaged to be a gas sales development as opposed to a condensate stripping project.

Reconciliation of Reserves

The key changes in the Company's proved plus probable petroleum reserves (2P) since 30 June 2015 are summarised in Table 2 (see link below).

- Production: Reserves at 30 June 2016 reflect net production in the year to 30 June 2016 of 1.4 mmbbl (0.5 mmbbl in Maari/Manaia and 0.9 mmbbl in Block 22/12, China).

- China: Increased 2P economic reserves in Block 22/12 of 1.4 mmbbl net of production. This increase recognizes the effect of cost recovery benefit under the Petroleum Contract, and results from ongoing production optimisation efforts and the initiation of production from the WZ 12-10-2 field in Q4 2015. The remaining discovered resources are the subject of ongoing development planning and are held as 2C resources.

- New Zealand: Downward 2P reserves revision of 1.7 mmbbl at Maari/Manaia resulting from a delay to the reinstatement of water injection in the Maari Field, a lower than expected benefit to field performance of the well intervention programme and a change to the economic cut-off criteria applied to Maari/Manaia, reflective of lower oil prices.

- Papua New Guinea: Downward 2P reserves revision of 3.2 mmbbl of condensate at PDL 10 due to a change to the proposed field development plan for the Stanley field, which resulted in a reclassification of undeveloped reserves to contingent resources. Minor other adjustments result in a net increase in 2C resources of 2.9 mmbbl of condensate.

Contingent Resources

At 30 June 2016, the Company's net 2C Contingent Resources were 24.3 mmbbl of oil and condensate (Liquids), and 497 bcf of gas, as summarised in Table 3 (see link below).

Reconciliation of Contingent Resources

The key changes in contingent resources since 30 June 2015 are as per Table 4 (see link below).

- Papua New Guinea: Upward revision of 92 bcf gas in PRL 21 due to an extension of production duration in the development concept (from 20 years to 30 years), and in PDL 10, reclassification of 3.0 mmbbl of condensate to 2C contingent and an increase 5 bcf gas, largely due to a change to the proposed field development concept for the Stanley field.

- China: Downward revision of 1.1 mmbbl of oil resulting from a reclassification of contingent resources to developed reserves due to the successful WZ 12-8W-A6H well drilled in late 2015.

- New Zealand: Upward revision in Maari/Manaia contingent resources of 1.5 mmbbl, largely due to reclassification of 2P reserves to 2C contingent resources following a change to the economic cut-off criteria applied to Maari/Manaia as a result of the prevailing low oil price environment.

To view tables and figures, please visit:
http://abnnewswire.net/lnk/J2C5RH0D



About Horizon Oil Limited:

Horizon Oil Limited (ASX:HZN) is an ASX-listed petroleum exploration and production company, with a geographic focus on the Asia-Pacific region. The company currently produces over 4,000 barrels of oil per day net from its fields in New Zealand and China, which generated over US$80 million in net operating income after operating expense for the year ended 30 June 2015. Further development candidates remain in and around these producing fields.

Horizon Oil maintains prudent policies of oil price hedging and loss of production insurance to ensure that sufficient cash flow is generated to meet the funding requirements of its growth program.

The company holds a large undeveloped reserves and contingent resource position in Western Province, onshore Papua New Guinea. These are liquids-rich gas resources and reflect Horizon Oil’s strategy to focus on Asian gas for growth. Gas constitute about 2/3 of the reserves and resource base. Commercialisation pathways for the gas are emerging.

Although Horizon Oil anticipates continuing strong cash generation over the medium term from its existing producing fields, these developed reserves account for only 10% of total reserves and resource base. The focus going forward will be on new field development, funded largely from existing production cash flow.



Source:

Horizon Oil Limited



Contact:

Mr Michael Sheridan
Phone: +61-2-9332-5000
Email: [email protected]
www.horizonoil.com.au
 

Source: ABN/Asia Business Newswire (July 31, 2016 - 11:52 PM EDT)

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