Where to From Here

25/7/21 Where to FromHere

Capital Return Increased from $0.014 to $0.03, very likely heralds a change to a Cash Harvesting, Cost Cutting and Distribution Strategy, and that the search for an acquisition has been shelved, at least for the time being.

HZN holders will get a $0.03 tax deferred distribution in late August, subject to shareholder approval at EGM.

Distributions. Isthere a chance of an additional return at the FY21 results. IMO, No. We will likely have to wait 12 months.

I have upgraded my earlier estimate of a distribution of $0.05 to $0.06 by August 2022 to $0.06 to $0.07, which after $0.03 this year, means $0.03 to $0.04 next year (maybe slightly more depending on oil price, production - especially the 7 months from new 12-8-Eaast development on stream early 2022).

Based on my back of an envelope calculations, I estimate that HZN will have Net Cash of around usd$40m as at 30/6.

By late August, after returning usd$34m capital, receiving usd$6m? in July from late June Maari lifting, and China revenue for 2 months, we are likely to have around usd$18m to usd$20m in bank (very rough estimate).

This will be required to fund 12-8-East development H2,21; other development; fund cost cutting costs; service remaining debt; contingency. So no distribution at Full Year in August 21.

Longer term (after 12to 18 months)

As I said earlier, I anticipate that there will be a distribution of $0.03 to $0.04+ around Aug 2022.

Under a Cash Harvesting, Cost Cutting, Distribution Strategy, HZN has a limited life: around early 2030's. There are a number of ways that this can unfold to maximise shareholder value.

1. harvest cash to the very end. Unlikely for various reasons.

2. Harvest cash close to the end, leave a bit on the table, and offload the residual assets.

3. Harvest cash for a period of time, say until end 2022 in order to

a. 12 months production data for 12-8-E to understand its' potential

b. give JSE time to add value to NZ assets.

4. then look to exit via

a. sell assets. Sell Maari. China may be very appealing to Chinese companies.

b. sell Company. HZN cashflow could be very valuable to an oiler that needs to finance a development. With Bank finance drying up due to ESG considerations, they may be willing to pay a significant premium via a script takeover offer.

The Path Forward - MyBest Guess (distributions are very much guesstimates)

1. 08/21: Distribution of $0.03 - actual, subject to shareholder approval.

2. 08/22: Distribution of $0.03 to $0.04+

3. 08/23 sooner or later: Script takeover at around NPV10 (due to funding requirement of bidder).
Clearly this may not happen, however, it is likely to happen, and would likely yield the best reurn.

4. 08/23: Distribution of $0.025 to $0.04+

5. etc. Distributions will reduce over time. Rate of decline is dependent on 12-8-E performance, and remaining exploration potential.