Further to previous post; ABN Amro recommendation as of 15...

Further to previous post; ABN Amro recommendation as of 15 December have HZN as spec buy with a proce target of 21c.

Some overview type elements of the report follow:

Exploration, development and production.
Horizon has a geographically diverse portfolio ranging from a mature oil field with redevelopment
potential around the Bayou Choctaw salt dome, onshore Louisiana Gulf
Coast, to offshore oil development projects in Block 22/12, Beibu Gulf, and the
Maari/Manaia fields, offshore Taranaki Basin, New Zealand.


Drilling program.
The Kapul #1 well, PNG forelands (HZN 20%) will commence drilling December 2004.
The work-over and development drilling programme at Bayou Choctaw should see
stable oil production established in 2005. The final investment decision on the
development option for the offshore NZ Maari field (HZN 10%) should be selected
1Q05. Pre-feasibility and feasibility studies relating to the development of a cluster
of small oil pools offshore China. FID expected in 2005.


Valuation.
Risk adjusted oil development potential is assessed at $0.21/share, with a further
$0.15 of risked exploration potential assuming a US$30/bbl oil price. A 12 month
price target of $0.21 assumes that all three development projects are approved
during 2005 and proceed according to current plans.


Risks.
Horizon Oil faces similar risks as other Exploration & Production (E&P) companies i.e.
commodity prices, country, project and key personnel risk. Project risk is diversified,
given there are multiple components to the Bayou Choctaw (USA) and China projects.
Horizon Oil will need to replenish its cash reserves following the drilling of Kapul-1
(US$1m) to fund its equity share of the China and New Zealand developments.

OVERVIEW
Summary.
Horizon Oil is two years into a 5 year plan under the new management team to
achieve peak market value (at least $0.50/share) for a portfolio of producing
properties via takeover or trade sale. It boasts a geographically diverse portfolio
ranging from a mature oil field with re-development potential surrounding the Bayou
Choctaw salt dome onshore Louisiana, to offshore oil development projects in Block
22/12, Beibu Gulf, China (3 small fields) and the Maari/Manaia fields in the Taranaki
Basin New Zealand. The escalating oil price has catapulted these projects from
acceptable returns under a US$20/bbl oil price scenario to serious returns under
current prices. Exploration potential resides with Kapul-1 in Papua New Guinea
(December drilling), deeper potential at Bayou Choctaw and the recently acquired
100% interest over the virgin Lei Dong Basin, offshore China.


Valuation
Risk adjusted oil development potential is assessed at $0.21/share, with a further
$0.15 of risked exploration potential assuming a US$30/bbl oil price. A 12 month
price target of $0.21 assumes that all three development projects are approved
during 2005 and proceed according to current plans. Under this scenario, it is
envisaged that the current discount to risked value will narrow and unwind further in
2006 as the two major projects approach first production in late 2006/early 2007.
Near term activity
�¡ The 75-130 million barrel (mmbbl) Kapul-1 exploration well (20%) in the
forelands of Papua New Guinea (PNG) commences drilling in December.
�¡ A US$5m work-over and development drilling program at Bayou Choctaw, USA
(free carried interest) should see stable oil production established.
�¡ A preferred development option for the 50 mmbbl Maari Oil Field (10%) offshore
New Zealand will be selected by end 2004, followed by final investment decision
(FID) in 1Q05. First oil expected 2Q07.
�¡ Pre-feasibility and feasibility studies relating to the development of a cluster of
small oil pools offshore China. FID expected mid-2005. First oil late 2006.


Re-rating potential
Horizon Oil currently has modest, but growing oil production: firstly out of the USA,
then offshore New Zealand and finally offshore China. By mid-2007, production is
expected to be over 6,000 b/d with over US$50m/yr in pre-tax cash flow after capex
assuming US$30/bbl oil price. A re-rating will occur once these projects are funded
and come into production. Exploration success is a wild card.


Key risks
Horizon Oil faces similar risks as other Exploration & Production (E&P) companies i.e.
commodity prices, country, project and key personnel risk. Project risk is diversified,
given there are multiple components to the Bayou Choctaw (USA) and China
projects. The US project is being funded by farm-in partner CLK Energy Inc. through
2005. High viscosity oil in China adds technical complexity to one of the three oil
fields being developed. Horizon Oil will need to replenish its cash reserves following
the drilling of Kapul-1 (US$1m) to fund its equity share of the China and New
Zealand developments. The support of its major shareholder is expected. Current oil
prices are favourable to a high proportion of debt funding.

ETC....


Cheers
OG