Horizon Oil Limited (HZN) Earnings Call Transcript & Summary

Thank you. Good morning, ladies and gentlemen. My name is Mike Harding, and I'm the Chairman of Horizon Oil Limited. I would like to welcome you to today's Extraordinary General Meeting of Horizon. Today's meeting is a hybrid physical and virtual meeting. Attending physically in Horizon's offices is my fellow independent Nonexecutive Director, Bruce Clement; and our company Secretary, Kylie Quinlivan. All of the attendees, including myself and my other fellow directors, your CEO, Chris Hodge; Gerrit de Nys; Sandra Birkensleigh; Greg Bittar; and Nigel Burgess joined the meeting via the Lumi Meeting platform. Also joining online is your CFO, Richard Beament. Attendees can watch a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. Given the hybrid format of today's meeting, we will follow a slightly different procedure. Given I'm attending the meeting online, your directors have elected your Independent Nonexecutive Director, Bruce Clement, to chair the meeting today. Bruce is physically attending the meeting in Horizon's office. I'll now hand over to Bruce to chair the meeting.

Thank you, Mike. As Chairman of this meeting, I hold all proxies given to the Chairman, and based on the proxies held, I declare a quorum for the meeting. The meeting will consider the item of business outlined in the notice of meeting sent to all shareholders on the 28th of June 2021, as supplemented by the supplementary notice sent to all shareholders on 23rd July 2021. We will begin the meeting with a brief summary of the purpose of the meeting by the Chairman of Horizon's Board, Mike Harding. Questions can be submitted at any time. Questions will be confined to the share capital reduction resolution only. [Operator Instructions] Please note that while you can submit questions from now on, I will not address them until late -- under the relevant time later in the meeting. [Operator Instructions] Only those persons registered as shareholders or their duly appointed representatives or proxies are eligible to ask questions. Voting today on the share capital resolution will be conducted by way of a poll. In order to provide you with enough time to vote, I will shortly open voting on the share capital reduction resolution. At that time, you will -- if you are eligible to vote at the meeting, a new polling icon will appear. Selecting this icon will bring up the share capital reduction resolution and present you with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until I declare voting closed. I now declare voting open. The polling icon will soon appear. Please submit your votes at any time. I will give you a warning before I move to close voting. Roopa Paradkar of Computershare has been appointed as the returning officer. Following confirmation by Computershare, final proxy and voting results will be announced to the ASX later today. Any undirected proxies in my favor as Chairman will be voted in favor of the share capital reduction resolution. I will now ask the Chairman of Horizon's Board, Mike Harding, to briefly summarize the purpose of the EGM.

Thank you, Bruce. Ladies and gentlemen, the notice of the meeting cover the details behind the capital return. However, due to most of us joining the meeting virtually, I'll provide a brief summary of our proposal. The EGM has been convened to allow shareholders to vote on a proposal to return approximately AUD 47.4 million of share capital to shareholders, which amounts to $0.03 per share. On the 28th of June 2021, Horizon announced the proposal to undertake a share capital return to shareholders of $0.014 per share. Since that announcement, the Board has recommended a significant increase in the share capital return to $0.03 per share. The Board listened to the feedback from its shareholders who understandably wanted the company to maximize its capital return. Less than 12 months ago, the future was less clear. We're in the middle of a pandemic and oil prices fell below $40 a barrel during this period. It was important that the company maintained a liquidity buffer and secured its future cash flows through hedging. Today and since the announcement of the meeting on the 28th of June, oil prices have averaged about $70 a barrel, with cash operating cost maintained below $20 a barrel, further strengthening Horizon's balance sheet. The longer-term outlook for all remains robust, which helps to support future cash flows generated from the group producing assets. The improved outlook, together with the group's net cash position increasing to over USD 30 million following the receipt of the PNG sale proceeds and $18.3 million of exercise of 300 million options, has put the company in a position to maximize its return to surplus capital. Looking forward, we will continue to work to maximize production and value from our producing assets in Beibu Gulf, China and Maari in New Zealand. We will continue to actively pursue into well drilling of our producing assets which provides excellent value. And we will also review our cash costs. We will review regularly our cash position to consider shareholders' returns. And in the context of the energy transmission and increasing ESG pressures, Horizon is continually being approached with growth options. For us to consider one of these options, it must be very value accretive. To date, we have not seen any option that meet our criteria. Finally, Horizon has amended its application to the Australian tax office for a class ruling on the income treatment of the proposed share capital reduction. I will now hand back to Bruce to begin the formal business of the meeting.

Thank you, Mike. I move on to the item of business of the meeting being the share capital reduction. Given that the notices of meetings have been sent to all registered members, I move that the notices of the meeting be taken as read. We will now move on to the business of the meeting, being the approval of the share capital reduction. The proxies received for this item are displayed on the screen. I remind you that only shareholders of the company or their duly appointed representatives or proxies are permitted to ask questions. If you do have a question, please submit your question online. I will now ask Kylie Quinlivan, the company's Secretary, to read out questions received on the share capital reduction resolution.

Thank you, Bruce. We've received a question from a shareholder. Has the search for an acquisition being canceled, i.e. is the main strategy now, cash harvest and distribution?

Thanks, Kylie. I think probably the best person to answer this one is Chris, our CEO, Chris Hodge, our CEO. So Chris, I'll put the question to you. Has the search for an acquisition being canceled, i.e., is the main strategy now cash harvest and distribution?