Horizon Oil Limited (HZN) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Horizon Oil Limited 2025 AGM. I would now like to hand over to Mr. Bruce Clement, Chair of Horizon Oil. Please go ahead.

Thank you. Good morning, ladies and gentlemen. My name is Bruce Clement, and I'm the Chair of Horizon Oil Limited. Before the beginning of the meeting, I'll acknowledge the traditional owners of the country on which we meet today, The Gadigal People of the Eora Nation, and we pay respects to their elders past, present and emerging. I'd like to welcome you and officially open the Horizon Oil Limited Annual General Meeting for 2025. I'd also like to extend a welcome to those members who are joining us by webcast. And based on the number of voting members in attendance, I declare a quorum for the meeting. Before I commence today's proceedings, I'd like to draw your attention to the safety procedures for this venue. Should you hear an alarm, instructions will be broadcast by the building wardens regarding what actions to take, be it to remain in place or to proceed to evacuate. If required to evacuate, please make sure you do not use the lifts. The evacuation point for the building is located at Wynyard Park in Margaret Street as indicated on the map just across there, if you look out the window. Also I'd like to introduce my fellow directors. On the left of where I'm sitting, has your Chief Executive Officer, Richard Beament; and Nigel Burgess and to the right of where I'm sitting is Catherine Costello; and Dr. Peter Goode. Unfortunately, Greg Bittar is traveling and has apologized for not being able to attend the meeting today. Also joining us in the room are our Chief Financial Officer, Kyle Keen; our Chief Operating Officer, Gavin Douglas; and Company Secretary Vas Margiankakos. I note that Marc Upcroft, representing our auditors, PwC, is also available today to answer questions on the auditor's report in the meeting. Before beginning the meeting or the formal business of the meeting, I'd like to ask Vas our Company Secretary to outline today's procedures and protocols.

Thank you, Bruce. All resolutions will be decided by way of a poll at the end of the meeting. The meeting will consider the items of business outlined in the notice of meeting sent to all shareholders on October 13, 2025. There will be opportunities for shareholders to ask questions and will be confined to the formal business of the meeting. Only those persons holding a yellow or blue card are eligible to ask questions. Gemme Coyle of Computershare has been appointed as a returning officer, following confirmation by Computershare, final proxy and voting results will be released to the ASX and the company's website later today. I will now hand back to the Chair.

Thanks, Vas. As there may be holders who may not be able to stay for the entire meeting, I now declare voting on all items of business open. Any undirected proxies in my favor as Chairman will be voted in favor of the relevant resolutions. The meeting will consider the items of business outlined in the notice of meeting sent to all shareholders on 13th of October 2025. I'd like to start the meeting with my formal address. This will be followed by a presentation from our CEO, and there will be opportunity to ask questions following Richard's presentation. We'll then proceed to the formal part of the meeting, where the resolutions provided in that notice of meeting will be put to the members. I note that we have not received any questions ahead of the meeting on any of the items of formal business. I will start by pointing to -- pointing out to you our compliance statement a disclaimer, which relates to today's presentations, which I would encourage you all to read. I also like to highlight that all references in today's presentation are in U.S. dollars unless otherwise stated. I'll leave Richard to discuss in detail the company's financial results. However, it is worth noting some of the key cash flow outcomes for the year. This chart shows our EBITDA performance over the past few years and continuing to perform in 2025, supported a dividend payment of AUD 0.03 per share, a total of USD 31.8 million during the year. Our cash flow performance and our balance sheet -- I should have asked beforehand, you got a phone, turn it to silent. That's all right. Our cash flow performance and our balance sheet position places the company in a relatively unique position for energy companies of our size in being able to provide material distributions to shareholders as well as support funding for value-adding investment opportunities. Importantly, we have used our financial capacity to continue the implementation of the company strategy. During the year, we delivered the $0.03 per share dividend, while completing the acquisition of the Thai assets, completed actually in July after the end of the year. Our strategy has remained consistent and focused over the 5 years I've been on the board. We've aimed to maximize production and cash flow from our portfolio of assets, including investment in opportunities within those assets that have delivered significant returns. We've provided distributions to shareholders totaling AUD 0.155 per share over the period, and working within our strict financial discipline, we've executed major investments in our producing assets, and we've completed strategic asset acquisitions that have delivered additional reserves, production, cash flow and material value to the company. As a company, our performance continues to be strong as reflected in our share price. The chart displayed, shows a comparison between accumulation basis over the past 5 years, showing the cumulative returns from share price and distributions over that period. Horizon has been one of the best performing companies on ASX, outperforming the 200 index and the majority of oil and gas companies on ASX reflects the benefit of our focused company strategy. At this point, we should recognize and thank the Horizon team led by Richard for their efforts in delivering these results. Their work across all our assets and new ventures has been critical to the company's performance. And I also acknowledge and thank the Board for their part in achieving this performance. During the year, we've seen renewal within the Board following the retirement of Mike Harding and Sandra Birkensleigh, and the appointment of Peter Goode and Catherine Costello as non-executive Directors. I thank Mike and Sandra for their contribution to the Board over many years. And in particular, Mike provided outstanding leadership for the Board and company in the 6 years as Chairman and contributed greatly to the healthy position we're in today. Richard will provide a more detailed update on our assets and the performance. However, I would like to reflect on the recent acquisition of the Thailand assets. It represents an important part of our strategy and highlights the disciplined and innovative approach the company has in building the business as well as the capability of our Horizon team. The Thai acquisition represented a USD 30 million investment for the company in which we acquired interest in 2 onshore gas fields in Thailand. Through the transaction, we acquired additional 2P reserves of 3.5 million barrels of oil equivalent, which represents an additional 28% to our year-end 2P reserves. In the 2 months following completion of the deal, we added 1,700 barrels of oil equivalent per day to production, inclusive of planned maintenance activities in the field. We saw a 28% increase to group production from the acquisition with an operating cost base for the Thai assets of approximately USD 6 per barrel of oil equivalent. To complete the transaction, management identified and negotiated the deal with the vendor ExxonMobil, completed thorough due diligence on the assets, established our credentials with and obtained approval from the Thai government regulator. We arranged the finance facility with Macquarie Bank and established a new joint venture arrangement with our operating partner. The Horizon team is small, relatively small by other oil companies, but clearly very capable. We now hold a fourth cash flow generating business in the Thai assets, and we've built new relationships in the region, particularly with the Thai government and the Thai National Oil Company. The longer-term success of the transaction will be measured in the performance of the asset over the coming years, although clearly, initial performance has been good, successfully executing the transaction as well as the earlier Mereenie acquisition does highlight the company's and management's capability and the benefits we have derived from financial discipline and focusing the company on delivering operating and financial performance. I'll finish by reflecting on where Horizon is positioned in this period of change, particularly in the energy industry. Recently, we've seen a reduction in the Brent oil price to approximately $65 per barrel from an average of $73.60 in '24, '25, and this will have some impact on the current year performance. However, we continue to see forecast strong global demand for both oil and gas as well as increasing domestic importance for gas in Australia and in Thailand. With the expansion and diversification of our asset base, I believe that Horizon is well positioned in this environment with our people and our financial position to continue to pursue our strategy, and I look forward to working with the shareholders, management and the Board to deliver more positive results for our shareholders. I'll now hand over to Richard to provide a review of the 2025 performance and details on each of our assets.

Thanks, Bruce, and I'd like to also welcome you all to today's Annual General Meeting. Well, what a difference a year can make. This time last year, we had 3 production assets with permits running out really in just a couple of years with the exception of Mereenie. Today, we've got 5 producing assets in 4 countries producing now about 50% higher production levels of around 6,500 barrels of oil equivalent per day. And we've achieved that, as Bruce mentioned, while still paying those substantial dividends and distributions, which now amount to some AUD 0.25 billion paid back to shareholders over the last 5 years. So look, this morning, I'm planning to sort of build on Bruce's commentary, give you a bit of an update on the strategy, an update on the assets and the outlook for the company over the coming year. First of all, how we've gone on delivering strategy. We focused firmly on our 3 key pillars, with maximizing free cash flow really being at the core of everything that we do. We had continued strong production from our fields in FY '25 for around about 1.6 million barrels of oil equivalent. And that was really underpinned heavily by that additional Mereenie production that came through following the earlier acquisition in the prior year. That, combined with strong production from our other legacy assets led to EBITDAX of just under USD 56 million, and indeed led to free cash flow generation of around just under USD 36 million. With that cash flow, that helped us to deliver on our second core pillar being distributions to shareholders. And as Bruce mentioned, we've now returned USD 0.155 over the last 5 years. And that's the fifth consecutive year of paying at least AUD 0.03 per share with a dividend yield of at least 15% per annum for 5 years on -- in succession. Needless to say, distributions continue to be a core priority. The last pillar, investing in production growth. I'll leave it to last, but really, it's fundamental to the future of the company. And we did a number of infill wells during the year in Mereenie and in China in Block 22/12, together with workover activity and that all important acquisition in Thailand. That helped us to deliver future cash flow, deliver that continued growth that we need to keep the business running. And I can't leave it out, probably a core highlight that happened just after the year-end was the award of a 10-year permit extension of our Maari field, which gives us substantial more running room to continue to deliver cash flow from that asset. These results have all been done while still focusing on ESG, and we had, again, very, very good ESG and safety credentials throughout the year, beating most industry benchmarks. And we also continued our focus on emissions reduction as well as delivering on community support programs in all of the operational fields. Also, I'd also reflect on our Mereenie acquisition and indeed, Thailand, both being gas production assets, core to the energy security of both the Northern Territory for Mereenie and for Thailand as well. And we see gas being critical to the energy transition and also features as part of our ESG strategy. If we just have a look at the assets then, and I'll sort of run through them. We've got a few more to add. I'll start with our foundation assets, Maari and Block 22/12, which continued to perform quite well. At Maari, we had workover activity and that all important life extension, which has led to Maari production over recent months, in fact, being some of the highest levels we've seen in over 5 years. At Block 22/12, we've continued to see strong production levels, and we've continued to invest in that asset with -- I think it was 5 infill wells drilled throughout the year, together with some workover activity, which has allowed us to sustain production levels. But the focus really in Block 22/12 as we move forward is work on our water handling upgrade project, which is currently being commissioned and should be online early in the new year. We expect that will help us to continue to boost and sustain production rates from Block 22/12 as we go forward. But we always continue to look also at other infill well opportunities in that asset, largely focused around the 2-8 East field, which came online in 2022. If we just look at the recent additions, and I'll start with our Australian asset, Mereenie, which came into the portfolio towards the end of FY '24. That asset has been a standout addition, as Bruce highlighted. We came into the venture, the deal completed in June, June 2024. Shortly thereafter, we signed a 6-year gas sales agreement with the Northern Territory government, showing how critical that asset is to the energy security for the Northern Territory. In January, February this year, we drilled 2 successful infill wells, which helped to boost field production rates by around about 25%. And it continues to be a solid performer for the group as we go forward, and has a lot of running room. The joint venture continues to look at further infill drilling, leveraging the learnings from those earlier wells we drilled earlier this year. So now moving to our Thailand assets. A number of you would have seen our earlier presentations on these assets. But for those less familiar, we picked up from Exxon an effective 7.5% interest in the simple home gas field, together with a 60% interest in the Nam Phong field. These 2 fields are located in the northeast of Thailand. If you look at the map there on the right. And all of that -- the gas from these fields goes to one power station, the Nam Phong power station, which relies 100% on the gas from these 2 fields. That power station provides about 20% or meets about 20% of the electricity demand for Northeast Thailand. And so it's a critical infrastructure asset for the country, and it shows the importance and strategic nature of that investment. The 2 fields, if we start with Sinphuhorm, the larger of the fields. That field produces at around about 100 million standard cubic feet per day. There was a lot of investment made to sustain production rates before we came in, they put in a large booster compressor, which you can see in the picture there, and that's really helped to boost production rates. And they also drilled an infill well up in the north of the block the PH-14 well, which is yet to be tied in, and there's plans to tie that in throughout 2026 to help sustain production rates right out through to the end of the concession. The concessions on both of these, and I guess, showing how critically important these assets are. Both assets are underpinned by gas sales agreements with the state-owned energy provider right out to the end of the concession, taking essentially all of our gas at market prices. The Nam Phong field smaller by production volume today, but it was originally producing at about 130 million standard cubic feet per day. It's in the latter part of its life, producing around 6 million standard cubic feet per day. But we have plans now to install a booster compressor to further boost production rates. And we expect the addition of that could boost production rates by up to 50%. So whilst it's small, with a 60% holding, it still makes a material impact to the business. As Bruce alluded to, these are very, very low-cost production around that $6, $7 per barrel of oil equivalent. And when we're selling gas up here at $67 per gigajoule, it makes a very healthy margins and strong cash flow generation. As Bruce mentioned, it also gives us a great foothold up in Southeast Asia for further expansion if we find quality assets and partnering with PTTEP and indeed Matahio has really put us on a different footing. So if we just -- I just want to look now at the outlook for production and perhaps reflect on where we were just 2 years ago. So this is really what our production forecast would have looked like had we just retained Maari and Block 22/12. So you can -- and indeed without a license extension at Maari. And you can see, really, we had about 2 or 3 years left of production, 2 or 3 years left of cash flow and a very small window in which to get out there and grow the business. We fast forward to today and what the outlook looks like is something completely different. We've now got essentially diversified production portfolio, which goes right out with robust production out to the end of the decade and beyond, with geographical and product diversification, roughly a 50-50 split between oil and gas diversified by geography, as I mentioned, helping us to balance the political risk of all the various jurisdictions we operate and the changing energy policies that we see occur around the world, quite a contrast. So look, our priorities as we go forward are very clear. It's to continue to deliver development upside from all of our assets, but in particular, in Thailand with the booster compressor project at Nam Phong and the PH-14 well at Sinphuhorm. In Block 22/12 was that liquid handling upgrade, which is our immediate focus. Obviously, maintaining capital discipline and cash flow is key and indeed focused on prioritizing distributions as we have over previous years. So we believe that, that combination of delivering cash returns to shareholders, growth and low-cost production continues to make a rise in a very compelling investment proposition. And look, before I open the floor to questions, the results we've achieved really aren't possible without an extraordinary team. And I'd like to thank on behalf of the Board the executive team, Gavin, Kyle, Hany and Vas, together with the staff and indeed our dedicated consultants for all they've done over not just the last 12 months, but for over many years and helping us to deliver these results. I'd also like to thank the Board for their support and indeed to the shareholders for your ongoing support. And with that, happy to answer any questions.

Yes, Bruce, thank you. Sorry, A question on your production forecast, you had a layer of gray on the top, which was other production opportunities. Can you tell us a little bit more about where they come from?

Look, it's a bit of a bucket. We can sort of go back to that slide. But look at asset. We've got further infill wells in Mereenie that we throw into that bucket, further drilling at 12-8 East in China, which is -- in Thailand, we haven't added anything substantial into that bucket yet. We're still working through the opportunities there and seeing what's live in front of us. But yes, it sort of captures a number of those buckets. Could we do better than that? Yes. Will we do all of them depends on oil prices and then I guess, the maturation of those opportunities.

Nice presentation, Richard. Thank you. Where do you see the price of oil going in the next 12 months?

If I knew, I probably wouldn't need to be here. Look, I think we see -- there's a lot of competing supply demand, geopolitical things at play, where oil prices are right now. We expect there could be a little bit more softness, if I'm honest with you. But $60, $65 barrel is probably where we see things for the time being.

This is not under your domain, but could you explain why the price of petrol is so expensive at the moment. I mean it really is, when you talk about $60 a barrel, it's outrages.

Yes, not really my domain. But look, obviously, exchange rates play a part in that with the Aussie dollar being continue to be reasonably depressed. But yes, it's refining margins, it's all these things, government excise you name it.

I was just wondering in the breadth of your activities, will the economics has got, to some extent, Donald Trump to tell us where we're going to go next, I'm sure he knows. But I just wonder how much of those are risky if at all, I mean, I always thought in China often wondered where you're going to -- was that any sort of political risk. And just wanting to Thailand and there anyone else? Is there anything particularly concerns you? And perhaps secondly, how much of your product is Australian used?

A few questions there. Look, I think, first of all, I'll answer the last one first. Obviously, our gas goes 100% from Mereenie into the domestic market. Currently, Mereenie new supply is about 30% to 40% of Northern Territory domestic gas demand. So that's certainly all Australian going into the Australian economy. In terms of our crude, look, Maari crude all goes into the East Coast refineries in Australia and has done for many years, either Geelong or Lytton. And I think when we visited the refinery, they told us that it roughly represented of a couple of percent of Australia's domestic refined product. So not insignificant, but it seems important.