Horizon Oil (HZN) is pleased to announce that it has entered into a sale and purchase agreement with a subsidiary of P3 Global Energy Company Limited (P3GE) of Thailand to appraise and develop Horizon Oil’s gas / condensate resources in western Papua New Guinea. Under the agreement, P3GE will acquire a 50% interest in Petroleum Licence (PRL) 4, which contains the Stanley discovery and a 24.82% interest in PRL 5, which contains the Elevala and Ketu discoveries, for a total consideration of US$55 million. The consideration is to be paid as US$30 million in cash on closing, scheduled for 31 July 2009, US$15 million by way of a letter of credit to be drawn down at any time after closing and applied to Horizon Oil’s share of exploration and development expenditure , US$10 million by way of a letter of credit to be drawn down upon the grant of a Petroleum Development Licence (PDL) for development of a petroleum field within either PRL 4 or PRL 5 and applied towards Horizon Oil’s share of development expenditure within such PDL.
The Company has previously reported the good progress being made in planning for the commercialisation of its PNG resources. The proposed project entails the production of 140 million cubic feet of gas per day from two wells, extraction of initially over 4,000 barrels of condensate per day and potentially 40 tonnes of LPG per day, with re-injection of the dry gas until a gas market develops. Detailed reservoir modelling supports the recovery of more than 8 million barrels of condensate over a 10 year period. Export of condensate by shipping via the Fly River has been extensively studied, as have the various commercialisation alternatives for the dry gas itself. The preliminary view is that the Stanley gas resource will most likely be utilized for power generation to supply local domestic and industrial consumers, while the larger combined Elevala / Ketu gas resource will rely on export by pipeline or as a liquid, via a small scale LNG process.
Social mapping and landowner identification review and preparation of the environmental impact assessment are at an advanced stage. Discussions on the Gas Agreement with the DPE are continuing.
Horizon Oil’s Chief Executive Officer Brent Emmett’s comments, “This transaction has delivered three substantial outcomes for the Company – firstly we have found a partner who shares our vision for building and commercialising large scale gas and liquid petroleum resources. Secondly the transaction fairly recognises the value of Horizon Oil’s PNG assets and thirdly the consideration to be received for the transaction, together with cash on hand from the recent capital raising and forecast Maari oil field revenues, puts the Company in a sound financial position.
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