Horizon Oil has announced the execution of a share sale and purchase agreement, through one of its wholly owned subsidiaries, with Exxon Mobil which results in the acquisition of a 7.5% working interest in the E5N and EU1 development licences, onshore Thailand, which contain the producing Sinphuhorm conventional gas and condensate field, and a 60% interest in the E5 development licence, onshore Thailand, which contains the producing Nam Phong conventional gas field. The acquisition is proposed through a consortium, with Horizon to acquire 75% of the shares in Exxon Mobil Exploration and Production Khorat Inc. (EMEPKI) with Matahio Energy acquiring the residual 25% and agreeing to manage EMEPKI employees and operatorship of the Nam Phong field on behalf of the consortium.
Horizon’s headline cash consideration for the 75% holding in EMEPKI is US$30 million, with an effective date of 1 January 2025, plus up to US$7.5 million in contingent payments over the next six years which are subject to certain conditions being met. The upfront cash consideration will be substantially funded from a credit approved amendment to our existing Macquarie Bank debt facility which will provide additional debt capacity for the acquisition of up to approximately US$22 million, with up to a further US$10 million of finance made available following completion of the acquisition.
The funding structure, together with the expected free cashflow generation from Sinphuhorm and Nam Phong allows for the continuation of Horizon’s distribution strategy. The transaction remains subject to customary completion conditions.
HIGHLIGHTS
This a compelling opportunity which requires minimal capital to gain access to a relatively low risk suite of gas producing assets, which offer attractive returns and rapid payback with upside. The proposed transaction offers Horizon the following:
- Acquisition of 3.9 MMboe of 2P Reserves as at an effective date of 1 January 2025 associated with the acquisition of a 7.5% working interest in Sinphuhorm, and 60% working interest in Nam Phong gas fields. Based on the headline consideration of US$30 million (net to HZN), this represents an acquisition cost of ~US$7.7/boe.
- Positive cash flow generation from a well-understood reservoir; stable and predictable gas production of approximately 2,000 boe/d net to Horizon, based on current rates (approximately comparable with current net Block 22/12 boe/d production rates), with the asset running at close to 100% uptime in 2024
- It is anticipated that, due to the effective date of 1 January 2025 and proposed debt funding, the impact on Horizon’s existing cash reserves on completion will be less than US$10 million.
- Gas is contracted under a long-term gas sales agreement with PTT as the buyer for ultimate use in a regional power station for electricity generation.
- Represents a Thailand country re-entry and establishes a low-cost platform for growth in Thailand and SouthEast Asia, partnering with both PTTEP and Matahio as operators, at the same time providing further diversification of the Company’s production base.
- The acquired assets are exposed to limited abandonment obligations (currently estimated at c.US$5 million net to HZN).
- Potential to enhance value through life extension at both fields, infill drilling, facility upgrades and optimisations, together with additional opportunities in both assets.
Horizon CEO, Richard Beament commented:
'These assets are excellent additions to our portfolio - complementing, diversifying and expanding our production base. With combined net daily boe production similar to our current Block 22/12 fields, and with existing concessions running into the next decade, these assets have the potential to allow Horizon to sustain production at current preacquisition levels through into the 2030’s. In partnering with Matahio, we have structured the transaction to play to Horizon’s strengths as a non-operator, being also right sized, requiring minimal capital and with upside. We are delighted to have identified another inorganic growth opportunity which meets our strict investment criteria of acquiring assets which allow for the continuation of our capital distribution strategy.
We are pleased to re-enter Thailand, a jurisdiction we know reasonably well from our time as offshore explorers between 2006 and 2008. Whilst financial pressures during this period, primarily driven by Maari development capex commitments, led Horizon to divest its Thai interests, we have always viewed Thailand as an attractive jurisdiction for oil and gas investment.
The consideration payable for the acquisition is well supported by the contracted gas offtake from the assets, which has enabled Macquarie Bank to provide a substantial debt funding package on attractive terms.
We are delighted to be able to partner with Matahio, an independent energy company focused on Southeast Asia and Australasia which operate onshore and offshore oil and gas fields in New Zealand and the Philippines. Our teams are like minded and have collaborated extremely well over many months to bring this deal to a close. We look forward to working with them closely as we move forward to complete this transaction. We are also delighted to partner with PTTEP, as both operator of the Sinphuhorm gas field and JV partner in Nam Phong. We have been extremely impressed with the work they have done at Sinphuhorm over recent years, in particular, the multi-well drilling campaign and the immensely successful booster compression project which was commissioned in 2024.
Upon completion, the acquisition will increase Horizon’s net daily production by ~2,000 boe/d, and Proved and Probable (2P) reserves by 3.9 million barrels of oil equivalent as at 1 January 2025. This compares with Horizon net Proved plus Probable reserves of 9.9 MMboe reported as of 30 June 2024 (nb not adjusted for production to 1 January 2025). The acquisition is expected to meaningfully increase net operating cash flow over the next 5+ years and provide a substantial production base beyond the end of the decade. The assets provide the Company with further diversification into gas production in a country with growing gas demand. The power station using the gas from these fields has a key role in providing essential energy for domestic consumption in north-east Thailand and aiding the country to achieve its energy transition objectives.'
We look forward to finalising the transaction over the coming months as we finalise debt facility documentation, transition matters and customary approvals.
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Source: Horizon Oil
