Nostalgic report

Horizon Oil (HZN) Eureka Report July 2013

The oil & gas junior is another that is expected to undergo a step change in revenue in the current financial year. Average daily production is expected to jump five-fold to around 5000 barrels of oil equivalent in 2013-14 from the previous year, and Horizon Oil’s finance manager, Richard Beament, believes the next few months will be a very exciting time for shareholders. “The first [major milestone] on the horizon is the ramp up to peak oil production from our Beibu oil fields in China,” he says. “The second key development is the award of the petroleum development license [PDL] for our Stanely project in PNG [Papua New Guinea].” The ramp up in Beibu is important because it will allow the company to capitalise on the current high oil price and give the company a much needed cash injection at a time when capital expenditure is expected to increase significantly. The license is expected to be granted in the September quarter and Horizon is expected to receive a $130 million milestone payment from its PNG joint venture partner, Osaka Gas, once final investment decision is made for the liquefied natural gas development. There is a third catalyst for the stock. The PNG JV will start drilling the “Tingu” prospect, which has a resource potential of 459 billion cubic feet of gas. The two-well program is expected to commence in the September quarter as well. Consensus estimates are tipping a more than 700% surge in 2013-14 net profit to $52.3 million, which puts the stock on very modest seven times price-earnings multiple. Investors are starting to catch on to this story with the stock now trading at 35.5c. However, it is still well below the average broker price target of 52 cents a share. Think big, go smalls!