Where to From Here, page-4

26/7/21 Where to FromHere

Hi ces,

In good hands: Assuming a shift to Cash Harvesting and Distribution, I believe that all HZN shareholders are in good hands. Nigel Burgess, Samuel Terry, will look to maximise shareholder returns because Samuel Terry own 19.9% of HZN. In other words, our interests are aligned. Nigel has a track record of excellent returns as a company director in 2 cases, specifically Yellow Pages NZ, and Spicers (ASX now delisted).

Cash Harvesting andDistribution is a straight forward, low execution risk strategy. Of course other risks exist: commodity price; production; FX; sovereign; etc.

The Path to MaximiseValue: Because we are in good hands, I am confident that we will tread the path assessed as the best total return to shareholders. Having said that, a takeover offer that I may see as the best path due to a desire to redeploy my capital, may be rejected as inadequate. I then have the option of selling out.

The Possible WaysFroward: The possibilities are many, and how it actually unfolds may NOT be on my list of possibilities. The guys in charge are smarter than me. I am happyto accept their judgement. Having said that, it is always interesting to ponder these things.

Basic Strategy: Harvest and Distribute Cash: this may continue until end-of-life, or we prepare for sale, and sell off assets after several years of distribution. Objective being to maximise (risk adjusted?) shareholder return.

Timing of any sale of assets (HZN initiated) would (should) only occur after the potential value of both Beibu Gulf, and NZ, have been assessed, understood and at least partially developed. In other words, if there is Blue Sky there, I/we want part of it.

I suggested end of 2022 (at a minimum, and more likely to be closer to end 2023) to get a better understanding of the potential of

· Beibu Gulf, most importantly, 12-8-E (CNOOC has higher recovery oil than HZN) would be in production for 12 months, and we would know if there will be Phase 2 and beyond. 12-8-E has significant potential. It isn't risk free and it may not live up to expectations. There are other development opportunities in China that may be developed and matured in this timeframe.

· NZ. Hopefully Maari would have been transferred to Jadestone (JSE). I am very hopefully that JSE will add value to this asset (lower costs and additional reserves/production). This is their area of expertiese. There is also potentially a very substantial resource at Moki-Matariki. JSE need to assess this resource, and it only has a slim chance of being drilled, and even less chance of being developed.

So ces, I think that we are on the same page, agreeing that there is significant potential in our existing assets, and we want to capture most of that for us, if it is real.

I'll throw in another (unlikely) possibility: Build a War Chest if Oil Price trade higher, and look to purchase an asset at fire sale prices (possibly via purchase of deeply discounted Convertible Note of a target Company). This relies on a significant pullback of oil prices prior to end-of-life of our assets. Being the eternal optimist, I see an oil price crash as unlikely in this timeframe.

External Event: We are approached with a compelling offer. I think that this may happen as an emerging oiler in needs of funds to develop a new asset would be attracted to HZN's producing assets: cash flow to fund development; reserves to support a larger reserve based facility. A script takeover, at a significant premium to our share price could realise these benefits for the bidder. I suspect that paying the full NPV10 value (maybe more) of our assets may make sense due to ESG funding restrictions which are likely to get more onerous going forward.

Valuation GoingForward: Clearly when you distribute cash, the share price should drop by around the distributed amount. By way of example, I'll assume that the current NPV10 valuation of $0.20. Distribute $0.03. New NPV10 would be $0.17.

In 12 months time, the NPV10 valuation increases by approximately 10% (cash in the bank and future cash flows discounted by 10% less). So that is an increase in the order of a $0.02, NPV10around = $0.22.

Less a $0.03 distribution gives an NPV10 in 12 months of $0.19.

Hence net 12 month NPV10 change after a $0.03 distribution is around $0.01. My model (which is dodgy) has a net change of approximately minus $0.012 Or an increase of $0.018 including the distribution.

Hope that makes sense.