A very good morning. I'd like to welcome you to the Horizon Oil 2024 half-year results presentation. My name's Richard Beament, the company's CEO, and with me is Kyle Keen, the company's CFO. Well, it certainly's been a busy period over the last few weeks with our recent announcement of the signing of a sale-and-purchase agreement to acquire a 25% non-operated interest in the producing Mereenie oil and gas field, together with, of course, finalizing our half-year results. This morning I'll make some introductory comments covering the half-year ended 31 December 2023 before handing over to Kyle to run through the half-year results, and indeed the calendar year results in some more detail.
I'll then cover the operational performance of Maari and Block 22/12, provide a bit of a summary of the Mereenie transaction, particularly for those who haven't been through our earlier presentation, and then finish by highlighting the upcoming activity and guidance for FY24 for what is, again, shaping up to be a busy few months ahead. We'll then open up for some questions. Just a reminder, to ask a question, please enter it into the ask- a- question box on your screen at any time during the presentation. Now, look, during the course of the presentation we'll be making some forward-looking statements. While, of course, we take every care in the preparation of these statements, actual results may materially differ depending on a variety of factors. I'd encourage you all to read the disclaimer in full.
Now, look, Kyle, I probably mentioned this as well, but before I get into the numbers, I will just note that all references are to U.S. dollars unless otherwise stated, as that's our functional currency. As can be seen through the numbers, we've had a very solid half-year with continued strong free cash flow generation, leaving the company with a strengthened balance sheet with $45.1 million in net cash. This was despite paying out $21 million in dividends during the half-year. The strong financial position has allowed us to declare an interim dividend for FY24 for the half-year, rather, of $0.015 per share in line with the previous financial year. While sales volumes were lower for the period due to the expected decline of our Block 22/12 fields from a record production peak, profitability was largely maintained with a continued disciplined focus on costs.
Statutory profit after tax for the six months was $18.3 million, with EBITDAX a substantial $44 million. Importantly, the free cash flow generation in the period was substantial as despite the decline in production, CapEx was very modest leading to a rapid buildup of cash, which Kyle will elaborate on further later. Now, while Horizon has had tremendous success on the production and cash flow generation fronts in recent years, we've included this slide to highlight the positive results achieved on the ESG and, in particular, the safety front. As you can see in the chart, lost time injuries for Horizon have trended down over the past five years despite the increased operational activity at Block 22/12. This is in stark contrast to the sector, which has seen a gradual increase in lost time injuries.
This trend has been achieved in no small part by the continued safety focus of our operators at both Block 22/12 and Maari. More broadly, on ESG, we continue to focus on emission reductions, supporting the communities in the areas where we operate, and ensuring modern slavery risks are eliminated to the greatest degree possible in our supply chains. On climate change, we made a seed capital investment in carbon removal credit developer Novocarbo a little over 12 months ago. And I'm pleased to report that the pilot production plant for biochar is now up and running with accreditation of the project for carbon removal credits underway. Now, just turning back to the company's strategy and how we're delivering against it.
The half-year results and, indeed, the full year full calendar year results, which are largely included on this slide, continue to demonstrate the success and the company's focus on our strategy. We've continued to focus on maximizing free cash flow generation, which was boosted by the production success from our Block 22/12 asset, earlier in the year. The 12-8 East development was transformative in turbocharging production rates from Block 22/12 earlier in the calendar year but was aided by infill drilling and workovers in the legacy fields. Maari production was boosted in the second half of the year back above 5,000 barrels of oil per day following successful workover operations. With record premiums achieved, it had a more substantial contribution to cash flow in the latter half of the year.
Combined, the two fields generated over $95 million in EBITDAX on over 1.7 million barrels of oil sales for the calendar year. The fields' cash operating costs remained low despite inflationary pressures, with continued robust oil prices ensuring substantial free cash flow generation. The strong cash flow has allowed us to continue to prioritize distributions to shareholders with the announced AUD 0.015 per share interim dividend following closely behind the AUD 0.02 per share dividend paid in October last year. The interim dividend announced today represents just under a 10% yield based on the share price at the end of the half-year, with the quantum determined to balance shareholder returns, future commitments, and maintenance of the group's liquidity levels. Prioritizing such returns to shareholders remains a key pillar of our strategy, with over $150 million having been paid out in distributions over the past few years.
This achievement is quite extraordinary for a company of our size, given we have done so while repaying debt and also investing in production growth. On the production growth side, we continue to prioritize development of the group's substantial inventory of contingent resources, with the earlier 12-8 East development a core example. We've just completed a Block 22/12 workover program aimed at restoring production from a number of wells. And looking forward, we are prioritizing further Block 22/12 infill drilling and water handling upgrades together with Maari workovers and life extension work. On the new business front, we announce the execution of the proposed Mereenie acquisition, which we expect will complement our existing asset base.
Importantly, while this is a new asset for the group, our strategy remains unchanged, and we expect this addition will allow us to continue to focus on cash flow generation and distributions to shareholders while still investing in production growth. The funding structure of the acquisition was key in this regard, with the upfront purchase price wholly debt-funded so as to not impede the group's liquidity for distributions and further investment in production growth. While we will continue to keep an eye out for exceptional new business opportunities, which might further complement the existing asset portfolio, they will continue to need to have a strong investment metrics and, ideally, the potential to further enhance our ability to make distributions. Now I'll pass over to Kyle to run through the financial results in a little more detail.
Thanks, Richard. Before I go through the results, I would just like to emphasize that all references to dollars are to United States dollars unless otherwise stated. The table on the right summarizes the half-year 2024 results against the comparative period. We have also included the very strong 2023 calendar year results, which were characterized by high production from the 12-8 East developments in the first half, while the second half saw natural reservoir decline from Block 22/12. Pleasingly, this was partially offset by improved production performance from the Maari following the successful workover of the MN1 well. Despite the overall drop in year-on-year production, the half-year results were strong, with cost control ensuring that the group maintained a similar level of profitability and, more importantly, generated significant free cash flow.
Production and sales volumes of just over 750,000 barrels for the half-year generated revenue of $66 million at an average realized oil price of $87 a barrel, slightly softer than the comparative period. With maintenance-low cash operating costs of approximately $21 a barrel produced, the group generated EBITDAX of $44 million and cash flow from operating activities of $32 million for the half-year. The resilience of the cash flow and strong net cash position of $45 million provides the confidence to declare an interim distribution of AUD 0.015 per share and continue to return significant value to our shareholders, with the interim distribution representing approximately 70% of the free cash flow net of debt repayments for the half-year. Over the past few financial years, this waterfall chart has highlighted a consistent theme which has been a hallmark of the company's strong performance over that period.
That theme being that the strong cash flow from the group's operating activities replenish the group's cash reserves following shareholder distributions, all while still ensuring funding is available for capital investment in our assets and the repayment of debt facilities. During the half-year, the group generated operational cash flow of $32.5 million, which more than offset the $21 million in shareholder distributions paid and $8 million paid for the final settlement of the group's senior debt facility. This ensured the group completed the half-year with a strong balance sheet with a net cash position of $45 million. With this closing net cash position, the group has the funds to pay the interim distribution of AUD 0.015 per share, pay for the anticipated development wells in Block 22/12, accumulate Maari decommissioning funding, and maintain an appropriate working capital balance.
Accepting the half-year result further, this chart shows how cost reduction enabled the group to maintain a similar level of profitability despite a sales volume reduction and softer realized oil price, resulting in a statutory profit of $18.3 million for the half-year. Despite persistent inflationary pressures, controllable costs reduced during the period, with a $3.9 million reduction in exploration expense and a $6.6 million reduction in operational costs. The reduction in operational costs was largely driven by reduced amortization charge associated with the lower production. On the next three slides, we can see the full calendar year results compared against the previous four years. As in previous presentations, we have included some detail of the impact of Beibu cost recovery revenue, which helps normalize the results.
As previously mentioned, this is additional revenue earned to reimburse the company for historical exploration expenditure in China, with the current period benefit pertaining to the recoupment of exploration costs relating to the 12-8 East development. The first slide highlights the growth in both production and sales volumes over recent years, with the core growth driver in calendar year 2022 being the successful 12-8 East development in China, with the exceptional production performance in New Zealand, largely due to the reinstatement of production from the MN1 well, being the story in calendar year 2023. The revenue chart shows the $3.9 million contribution of Beibu cost recovery sales during the period, which, when coupled with the higher production and sales volumes, largely offset the softer oil price, resulting in calendar year revenue of $142.5 million.
This slide reiterates the story of how the higher production, the maintenance of low operational costs, and Beibu cost recovery volumes offset a softer realized oil price, resulting in calendar year EBITDAX of $95 million and a $7.7 million increase in statutory profit to $43 million for the calendar year. During the calendar year, cash operating costs were sustained below $20 a barrel produced. The free cash flow chart on the left highlights both our record calendar year free cash flow generation and the rapid payback period of the 12-8 East development, with the capital cost of $20 million being fully recouped during the calendar year. As always, we've saved the best chart to last with the net cash net debt chart on the right.
This chart highlights how the strong and sustained free cash flow generation from the group's assets has driven significant cumulative distributions to shareholders, all while bolstering the group's balance sheet. Over the past four years, the group has generated free cash flow of approximately $155 million or nearly $240 million. Cumulative distributions now stand in excess of $100 million or over $150 million, with a further $16 million to be paid out in April 2024. Our focus is to continue to drive this free cash flow generation from our assets and continue to build on our significant value handed back to shareholders over recent years. I will now pass over to Richard, who will provide an update on our asset portfolio and the outlook for the company.
Look, thanks, Kyle. I'll look, I'll start with Block 22/12 in China. This was a strong year for the asset, with the recent addition of the 12-8 East field development providing that third production hub. Production at the beginning of the calendar year was approximately 20,000 barrels of oil per day on a gross basis, an almost doubling of the long-term average from the fields. As expected, production did decline during the year and returned closer to the long-term average by year's end of somewhere between 9,000-10,000 barrels of oil per day. Subsequent to the period end, as I mentioned, the joint venture completed a three-well workover program to restore production from two inactive wells and perform preparatory work on a third inactive well to enable side-tracking during the proposed infill drilling program.
This program continues to mature with three to four wells, infill wells targeted for drilling later this year, subject to joint venture and regulatory approvals. Some further detail on these is on the next slide. The joint venture's also progressing work on water handling upgrades and further infill drilling campaigns with a view to support material reserves replacement over the longer term. So, as highlighted previously, Block 22/12 has a large portfolio of future opportunities which can add reserves and boost production rates, comprising infill and appraisal wells and facility upgrades. On this slide, we highlight the locations of the various opportunities, all of which are being actively evaluated and matured by the venture.
As mentioned, the immediate focus is on maturing an infill well program targeting three to four wells in the Weizhou 6-12 and 12-8 East production areas, with the location of the planned infill wells, highlighted in red on the slide. Now, this chart has become a regular feature of our presentation and shows the production history of the asset and our view of its future. This chart reflects our current 2P reserves forecast in the dark green, production history in the light green, and indicative future activities in the light blue.
As can be seen, we've been pretty successful in sustaining production rates from this block, at around 9,000-10,000 barrels a day, virtually since production began over a decade ago through infill drilling, water handling upgrades, and other production initiatives, with the most recent project being the successful 12-8 East development, which resulted in the spike in production that you can see to 20,000 barrels of oil per day at the beginning of the 2023 calendar year. The success of this project has given us a greater level of confidence on further potential phases of infill drilling, some of which are depicted in the blue indicative future activities on the chart.
Now, while I stress that the indicative future activities shown in light blue are purely indicative, our focus is to mature the pipeline of infill and other opportunities to continue to unlock the substantial remaining value in the asset. To this end, we're firming up plans for a further infill drilling program later this year. As mentioned previously, in order to unlock this remaining value, we expect to have to spend somewhere between $10 million-$15 million per annum over the next three to five years. Turning now to New Zealand and Maari, where we've seen continued stable reservoir performance, the successful workover of the Manaia 1 well around the middle of the calendar year boosted production rates back above 5,000 barrels of oil per day gross.
With sustained water injection into the main Maari- Moki reservoir, together with the maintenance of high facility uptime, production has been largely sustained throughout the half-year without the need for significant CapEx. This sustained production led to a 33% increase in Maari production for the half-year against the prior comparative half-year. Operating costs for Maari are modest in the context of the current oil price, with cash flow enhanced from the strong premiums being received on oil sales into East Coast Australia. The immediate focus at Maari is on a workover of the currently shut-in MR6A production well, which aims to reinstate oil production from the Maari Mangahewa and to exploit a previously unproduced Matapo sandstone behind pipe opportunity. Following some repairs to the workover unit, the workover is expected to be completed later this financial year.
In addition, the continued strong production from the Maari field, together with the recent five-year extension to the FPSO class certification, has given the joint venture confidence to prepare a license extension application to seek to continue production beyond the current December 2027 permit expiry. Our aim is for the license extension application to be lodged later this year. Provisioning for Maari's decommissioning funding is continuing, and we are looking forward to receiving further clarity from the New Zealand government regarding the expected financial security arrangements in relation to decommissioning later this year. Now, the chart on this slide reflects our current Maari forecast, mainly in the dark green, which, as you can see, is expected to exhibit a more modest decline when compared to that of Block 22/12.
You can clearly see on the slide the stability of production over the past six months or so and with, with a negligible decline. This trend is very positive and is certainly supportive of our, of our forecast. Now, while we have included indicative future activities in light blue, these would likely require a significant CapEx expenditure commitment and a prolonged permit extension to be commercially viable, such that most of our current efforts are focused on low-cost production optimization works and workover activity with the objective of maintaining current production rates. We see significant value in simply extending the permit by up to five years to maximize value from the current well stock, and that that would involve unlocking the dark blue profile you can see on the slide.
As I mentioned, the immediate focus is on a workover to the MR6A well to reinstate production as well as life extension works. So, just touching on the recent Mereenie transaction announcement, core of the company's strategy has been keeping an eye out for exceptional new business opportunities which could complement the existing asset base with strong investment returns and ideally an ability to enhance our distribution strategy. The announced acquisition meets all of these criteria, providing a relatively unique opportunity for the company to acquire a material non-operated position in a low-risk producing domestic gas asset with a funding structure that allows the group's distribution strategy to be continued and potentially enhanced.
The initial purchase price of approximately $27.6 million is to be funded entirely from debt, which is secured against the Mereenie asset only, with deferred and contingent milestone payments of up to $5.8 million to be funded from cash flow over the next 24 months. The acquisition price, inclusive of the contingent payments, represents a cost of approximately $5.30 per barrel of oil equivalent on a 2P basis, with a substantial portion of the forecast gas production over the next five years already contracted at attractive gas prices. The acquisition has a number of strategic benefits, providing a low-risk and readily fundable entry into the Australian domestic gas market, which is forecast to have robust demand.
With an acquisition effective date some months ago of the 1st of April 2023, the acquisition is expected to be cash accretive, with the 2P reserves forecast to generate over a 20% internal rate of return for Horizon at relatively modest gas prices. As I mentioned, the acquisition consideration is substantially debt funded, allowing our distribution strategy to continue. It will diversify and grow Horizon's production base by adding a third asset and diversify the product mix with the addition of gas, a key fuel for the energy transition. The Mereenie asset itself has several significant infrastructure-led opportunities, which provide some running room and upside potential in the asset. Now, to help illustrate the impact of Mereenie on the group's production portfolio, we've included a chart which builds upon the Maari and Block 22/12 production charts shown earlier.
The chart shows the base Maari and Block 22/12 2P production forecasts, with Mereenie's 2P production forecast layered on top in the purple. As you can see, Mereenie provides relatively stable long-term production, roughly equivalent to Maari's daily production on a barrels of oil equivalent basis. Importantly, Mereenie's production has the potential to continue out until the late 2040s, so provides the foundation for production from the group to continue well beyond the existing asset base. This clearly has many benefits. It provides a strong platform to allow for the continuation of distributions beyond the life of our existing assets. It provides an additional cash flow stream to help support funding for Maari's ultimate decommissioning, potentially reducing the amount of funds that we'll need to set aside over the coming years. And it provides a domestic revenue stream, which establishes a pathway to potentially franking of dividends in the future.
Now, we've also added some select indicative future activities for Maari and Block 22/12. And I, I do want to stress that these are indicative only, but as previously mentioned, bringing into production our substantial contingent resources is a priority. In dark blue, we've added the Maari indicative life extension through to the end of the decade, which is mentioned and applications currently being prepared by the venture. And in light blue, we've added the Block 22/12 indicative future activities, for which a three to four well infill drilling program's currently being matured for potential drilling later this year.
Accordingly, you can see that with the addition of Mereenie and subject to us being able to unlock the remaining potential in Block 22/12, we've got the potential to average production rates over the next three to four years at around 5,000 barrels of oil equivalent per day on a net basis, something similar to the record production we achieved in the last financial year. I should also note that the Mereenie production forecast also excludes any production potential from the Mereenie indicative future activities, such as development of the Stairway Formation, which could be quite substantial. Look, for further information on the Mereenie transaction, please refer to our earlier ASX announcements issued on the 14th of February.
Turning to our operational activity plan for the next 12 months or so, I would just note again that this timetable is indicative, and most of the activities remain subject to further technical and economic evaluation, joint venture, and regulatory approvals. As already mentioned, we've got a three to four well infill drilling program in Block 22/12, which is being matured, and is expected to be drilled around about the middle of the year. There's a continued focus on upgrading the water handling capacity at Block 22/12 in order to increase production rates. Further infill well opportunities in a possible third phase of 12-8 East drilling is also being considered, with the possibility of drilling these in future years.
At Maari, we have an immediate workover priority, which is aimed at reinstating production from the shut-in MR6A well, and other activity at Maari's focus on life extension, around looking at how we can extend that permit beyond 2027, progressing decommissioning studies, and examining other value accretive opportunities. We've also included on the slide some color on possible operational activity at Mereenie over the next 12 months, noting that our acquisition is subject to completion, and this indicative plan has been extracted from one of the current Mereenie joint venture partner's market releases. The joint venture is progressing a flare gas recovery compressor installation, which aims to significantly reduce Mereenie emissions and provide a modest increase in sales gas volumes. The joint venture is also evaluating the possibility of drilling two infill wells later in the year and possible appraisal of the Stairway Formation.
I will just reemphasize that those activities remain subject to further technical and economic evaluation, joint venture, and regulatory approvals. Just finally, I'll turn now to guidance. We're anticipating a strong end to the financial year driven by robust production and aided by a sustained high oil price. I must emphasize that the guidance excludes the impact of the proposed Mereenie transaction as it remains subject to completion. We therefore have production guidance net to Horizon of 1.4 million-1.5 million barrels. Sales we expect to be in the range of 1.35 million-1.45 million barrels. If oil prices are maintained at current levels of around $80 per barrel, we anticipate $110 million-$120 million of revenue. Finally, our EBITDA estimate is $62.5 million-$72.5 million, following continued focus on cost control and other initiatives to maximize earnings.
Look, we, we don't provide any guidance on distributions at this time. Needless to say that having just declared another interim dividend, this element of our strategy is clearly a priority for the board, and we are continually reviewing our capital management options. Due to the continued focus on investing in production growth, the high levels of operational activity combined with timing uncertainties will be in a much better position to quantify the extent of any final dividend with the release of the full year results in August. And with that, Kyle and I'll be very pleased to answer any questions that you might have.
Thank you, Richard and Kyle. The first question we've got here is, when would you expect the loan for the Mereenie purchase to be fully paid off?
Thanks, Vas. I'll take that one. Look, as we mentioned, the loan facility for the Mereenie acquisition is largely self-funding from the cash flows from the assets, with a repayment profile of that debt facility or amortization on that debt facility largely being linear over the five-year period.
Thanks for that, Kyle. The next question we have is, how many barrels of hedging do you currently have in place?
So we currently have 30,000 barrels of oil hedged for the March month, which is the next forecast Maari lifting. Those 30,000 barrels are just a touch under $83 a barrel.
Great. Thanks, Kyle. Next question we have here is, when do you think the Mereenie acquisition will settle and what impact on the price to be paid is? In terms of upfront completion adjustments.
Mereenie capital adjustments.
Yeah. Capital adjustments.
Yeah. So look, it's always hard to tell with these things, but look, we'd expect it will settle before the middle of this calendar year. In terms of the settlement, sort of working capital adjustment, look, it's probably a net few million dollars to us once you sort of factor in stamp duties and various transaction costs. But, yeah, it's probably once you net all that together, it's a little modest income.
Great. Thanks for that, Richard. We might just hold for 30 seconds just to see if any other questions come through. If you do have a question, please put it in this ask-a-question box and hit submit.