Horizon Oil

[Joshuatree]

Thanks for sharing your research and opinion UU. With the rising price of energy , share prices look to be lagging on stocks like Horizon ,offering opps.

[bermuda]

Hi Guys,
Always liked Horizon. Best of luck.

[gazprom1]

Gidday Gaz,

Are you still holding in here? HZN has a lot going for it. I've been averaging up since my first purchase at 4.2 cents and it now makes up > 50% of my portfolio which is a little scary!

Since the last posts on here, a few things have happened for HZN:

- HZN acquired Todd's 16% stake in Maari oil field, adding to their 10% already held (HZN interest post acquisition 26%). They obtained this for $17.6m USD in Nov-17 with effective transaction date 1st January 2018. With strengthened oil prices, the payback from cashflows is now well under 12 months...
- PNG aggregation and rationalisation of acreage. HZN has been instrumental in driving forward their "Western LNG" scheme and acquired certain acerage on the cheap and swapped portions of their own interests for adjacent permits to ensure they are represented across all permits that would comprise the WLNG. Total 2C resources are between 110m - 140m BOE! Using look through values from the Osaka gas transaction of $3.84 boe, it implied project value for our stake of $430m to $540m USD....yes, that's around 30 - 40 cents per share on it's own. PNG is heating up, Brent is winding down as CEO (although still a significant shareholder) and I understand HZN would be willing to sell reduce or outright sell their interest at FID stage, cementing value.
- Strong cashflows enabling repayment of debt (c. $26m USD last calendar year). Operating cashflows are currently running at around $20m per quarter.
- Reducing hedging exposure at the right time - no new hedging added in the last 5 months but do have some outstanding hedges into Mar-19 at $59 a bbl representing c. 35% of production (by my estimates).
- Beibu and Maari workovers maintaining and even increasing oil production.
- Beibu incremental development plan for WZ-12-8E

HZN is still undervalued relative to peers on a number of metrics such as EV/EBITDAX, EV/Flowing BOPD and DCF / look through values. Current share price of c. 15 cents reflects Maari and Beibu but not much else (maybe not even that at current POO).

Hey UU,

Great work on your investment in HZN. I am out and have made good money on HZN. I wish that I had bought back in. I was not confident enough in the way the company was being financed and thought it might end up being manipulated by the largest shareholder. POO has come good and HZN has made some excellent decisions (Maari oil field being one of them). SP took a bit of a correction regarding the news on that one PNG lease where the JVs have a meeting with the minister. One would hope this can be sorted out quickly. Development plan for Beibu should add lots of oil going forward at a relatively low cost base.

I remember years and years ago when HZN dropped from mid 30's to around 10 cents and there was a cap raising at 10 cents. Went in boots and all to average down to just below 13 cents. She then boomed again into the late 30s but I was out between 25 and 35 cents. No reason why with the projects they have on the go and oil at current prices why it can't move back towards the 30 cent mark.

I own a couple of small cap oilers that are doing ok. Made some good money on BPT but sold too early....but you can never sell at the top. POO is way too difficult to guess.

Good luck and I am following the stock closely.

Cheers
Gaz

[upside_umop]

Gidday Gaz,

It did look like HZN may have been a casualty of the oil downturn there for a while. As you say, IMC did well out of the financing arrangements / 300m options at 6 cents but in hindsight it still would have been difficult to do it any other way.

PRL10 issues - good point. The first announcement released was very unclear and I was little frustrated. The subsequent announcement cleared things up for me and I do believe we should come to a good result (eventually!) in PNG. It's been a while coming, however with a large economic resource and the PNG government wanting commercialisation, things could start moving a bit sooner.

HZN hasn't been the type of stock to put in the bottom drawer unfortunately but I don't believe any oil stock has been over the last few years....maybe except BPT (lucky you!). Will it be a bottom drawer stock now? If PNG comes through, yes...this is where the value is at but purely based on Maari and Beibu the leverage is getting exhausted here without firm drilling to increase the reserves base. In saying that, with LNG being oil price linked and a number of commentators suggesting this link will have to break (upwards?), oil price assists the PNG average a lot too.

I believe HZN is more of a "hold" for me now rather than adding anymore to position - last buy at 10.5 cents (which was difficult enough to pull the trigger). May swap a few to rebalance if we hit the 20's shortly.

Latest analyst report (APP) presents a base case of 30 cents per share. This is using Brent forward price curve (which looks very bearish!) and US $0.45 cents per MCF for PNG. Bull case rises to 45 cents per share largely based on valuing PNG resource valued at US $0.60 per MCF. A Repsol transaction this year (?) will provide an timely look-through value for us / market.

Another analyst report (Euroz) shows a target based on an EBITDA multiple. I fundamentally disagree with this methodology for HZN given it largely relies on Maari / Beibu and doesn't consider PNG appropriately. Still, it's higher than the current share price so shouldn't complain too much.

What other small cap oilers are you in these days? It would be good to bring the ASX threads back to their glory days - I do miss the contributors but understandable it's been quiet with the performance over the last few years...

[babymonster]

i am holding HZN, OEL and ATS, and SEA as well.. HZN average price is 7c, so trimmed a bit a 15c but still holding some.. OEL same, average 4c and trimmed a bit 7c which is way to early... ATS is a recent hold and not very liquid stock, good potential tho. SEA was a dog, very risky with among of debt and past history of the management. among these one, HZN is the best, fingers crossed with the PNG development.

[gazprom1]

Gidday Gaz,

It did look like HZN may have been a casualty of the oil downturn there for a while. As you say, IMC did well out of the financing arrangements / 300m options at 6 cents but in hindsight it still would have been difficult to do it any other way.

PRL10 issues - good point. The first announcement released was very unclear and I was little frustrated. The subsequent announcement cleared things up for me and I do believe we should come to a good result (eventually!) in PNG. It's been a while coming, however with a large economic resource and the PNG government wanting commercialisation, things could start moving a bit sooner.

HZN hasn't been the type of stock to put in the bottom drawer unfortunately but I don't believe any oil stock has been over the last few years....maybe except BPT (lucky you!). Will it be a bottom drawer stock now? If PNG comes through, yes...this is where the value is at but purely based on Maari and Beibu the leverage is getting exhausted here without firm drilling to increase the reserves base. In saying that, with LNG being oil price linked and a number of commentators suggesting this link will have to break (upwards?), oil price assists the PNG average a lot too.

I believe HZN is more of a "hold" for me now rather than adding anymore to position - last buy at 10.5 cents (which was difficult enough to pull the trigger). May swap a few to rebalance if we hit the 20's shortly.

Latest analyst report (APP) presents a base case of 30 cents per share. This is using Brent forward price curve (which looks very bearish!) and US $0.45 cents per MCF for PNG. Bull case rises to 45 cents per share largely based on valuing PNG resource valued at US $0.60 per MCF. A Repsol transaction this year (?) will provide an timely look-through value for us / market.

Another analyst report (Euroz) shows a target based on an EBITDA multiple. I fundamentally disagree with this methodology for HZN given it largely relies on Maari / Beibu and doesn't consider PNG appropriately. Still, it's higher than the current share price so shouldn't complain too much.

What other small cap oilers are you in these days? It would be good to bring the ASX threads back to their glory days - I do miss the contributors but understandable it's been quiet with the performance over the last few years...

Hey UU,

HZn looks really solid with diverse revenue streams and plenty of upside in PNG and China. The forum has been very quiet due to the market downturn. I was smashed in TAP and it is a disaster zone there. Risco and Northern Gulf control it and there has been an on market offer at 7 cents. Owes me 13 cents after averaging down. TAP is a bit of one trick pony but has some drilling commencing this week. Not holding my breath. Current price is 7.3 cents.

I am heavily invested in FAR and have a decent paper profit at the current price of 9.8 cents. The major issue with FAR is that there are thousands of retail investors and seems to get shorted a lot. SNE development is going to FID this year and first oil probably 2022. Management are solid. Big drill this year in the Gambia fully funded by Petronas....huge prospect on trend with SNE. Downisde limited due to SNE. Funding for SNE the only real big question but they are looking at JV financing for some and debt/ equity for the rest.

Feeling like I missed a trick with BPT - sold at $1.40 and now is $1.76. Has the potential to go higher in the current oil price environment.

Also have bought into AJQ. Have reservations again about the funding provided by DGR. They finally have revenues flowing in and ramping up production. They are providing gas to that lucrative Queensland market. Taped the government for $6mn which is great. Possibly going to add to my position....???

During the downturn was a bit discouraged so decided to invest in an aussie fund called Ophir High Conviction. Have you heard of them? They invest in a portfolio of 15 to 30 stocks. They have another fund which was closed but has done very well over the past 6 years - something greater than 25%pa. I think the High Conviction is now closed to new investors. I am up around 17% for 7 months so really solid. I would take 17%pa compounding for the next 10 years!!!!

If you have any investment ideas, I am open to suggestions. I have invested too much in FLC (Fluence). Love the environmental benefits and the solutions they provide in the water space but are certainly unloved. Under water (no pun intended) but believe the downside is protected mostly due to revenues and forward orders. It is a core holding and if they can get some traction in China (where they have manufacturing and partnerships) it could go anywhere.

Cheers
Gaz