Thank you for standing by and welcome to the Horizon Oil Limited 2022 full year results presentation. We have with us Mr. Richard Beament, CEO, and Mr. Kyle Keen, CFO. If you wish to ask a question via webcast, please enter it into the Ask a Question box and click Submit. I would now like to hand the conference over to Mr. Richard Beament. Please go ahead.
Thank you, and good morning, everyone. Before I start on the presentation, given my recent appointment as the Group CEO, I felt it appropriate I introduce myself. As most people are probably aware, I was formerly Horizon's CFO and Company Secretary, and I recently assumed the role of CEO from Chris Hodge a few months ago. I have a long history with Horizon, having held various finance and commercial roles over more than a decade, and while I'm an accountant by profession, I have a strong technical understanding of our assets. Most importantly, I'm well supported by a strong technical team headed up by Gavin Douglas, the group's newly appointed Chief Operating Officer. I'm delighted to have such a talented team to work with to deliver on the company's strategy.
Now, before I dive into the financial year results, I'd also like to acknowledge the efforts and leadership of the former CEO, Chris Hodge, who guided the company through the challenges faced over the past few years and has left me with a company in a position of financial strength. I wish him all the very best in his retirement. Now, turning to the presentation, I will initially cover the key highlights for the financial year before handing over to Kyle to run through the financials. I'll then cover the operational performance of our assets and strategic outlook and direction before opening up for questions. Now, Kyle will probably also mention this, but before I get into the numbers, please note that all references to dollars are US dollars unless otherwise stated.
Now, on page two, we have our compliance statement and disclaimer which relates to today's presentation, and I'd encourage you all to have a read of this. Well, what a year it's been. This time last year, oil prices were hovering around $66 a barrel before almost doubling in price earlier this calendar year and settling more recently around 50% higher than this time last year at around $100 a barrel. This higher oil price, coupled with consistent strong production from our low-cost oil producing assets in New Zealand and China, drove a 70% increase in revenues to over $108 million from over 1.2 million barrels of oil sales. Over 100% increase in EBITDAX to $73 million. Over 200% increase in underlying profit after tax to $24.3 million.
Most importantly, drove over 100% increase in cash flow generated from operating activities to $56.9 million. This cash flow generation led to an increase in net cash to $42.8 million after having distributed approximately $35 million to shareholders in the form of a capital return completed in August last year. Pleasingly, with this strong balance sheet position, which has been enhanced by the recent extension to our debt facilities, has provided the confidence to today announce further distributions to shareholders totaling AUD 0. 3 per share. This amounts to approximately $34 million or around AUD 47.4 million. The distribution is comprised of a AUD 0. 165 per share unfranked conduit foreign income dividend and a AUD 0. 135 per share capital return.
The capital return is subject to shareholder approval with an extraordinary general meeting to be held on the seventh of October. In determining the type and split of this distribution, the company has considered the interest of all shareholders and been in discussions with the Australian Taxation Office. Subject to shareholder approval, following the completion of this distribution, the company will have returned almost $70 million or over AUD 95 million in a little over a year. That represents over 40% of the company's current market capitalization. Prioritizing such returns to shareholders is a key pillar of our strategy. Our ability to make such returns is due to the strong cash flow generation from our low-cost production assets, where cash operating costs continued to be maintained below $20 a barrel.
A key milestone was achieved earlier this year when we brought on to production our first new oil field development in over eight years with the commissioning of the 12-8 East Oil Field. This development, in combination with infill drilling in China and workovers at both Maari and Block 22/12, were key to sustaining production levels during the financial year. Importantly, further investment in our producing assets is critical to continuing to sustain production levels and cash flow generation over future years, with our focus being to bring into production our pipeline of contingent and prospective resources. Pleasingly, we've continued to invest in this pipeline of opportunities following the period end with completion of 12-8 East development drilling, the commencement of a WZ6-12 workover and drilling program at Block 22/12, and continuing workover activity at Maari to reinstate production.
We are seeing immediate success in this strategy as subsequent to the period end and following the ramp up in production from 12-8 East, Horizon's current working interest share of daily production is currently over 5,000 barrels of oil per day. Almost 40% higher than the FY 2022 average. While not our primary focus, we also continue to keep an eye out for exceptional new business opportunities, which might complement the existing asset portfolio with a view to further enhancing shareholder returns. Now, I've touched on some of the financial highlights already. However, some additional key achievements were the execution of a $20 million extension to our senior debt facility shortly after the period end, which allows us to further optimize the group's capital structure while also providing access to additional liquidity. Operationally, I've mentioned the successful completion of the Twelve Eight East project.
Impressively, first oil from this project was achieved within approximately 18 months of making a final investment decision, notwithstanding the pandemic and the numerous global supply chain challenges. This is a testament to the quality and focus of our operators. On ESG, despite the elevated activity levels, we have continued to uphold a strong safety record, significantly better than industry benchmarks. On climate change, we declared our ambition to reach net zero emissions by 2050, and are developing a roadmap to achieve this. Demonstrating our commitment, we voluntarily purchased carbon offsets during the year, covering the majority of our Block 22/12 Scope 1 emissions through a community project in rural China building methane digesters. Whilst I've already outlined our announced distributions totaling AUD 0.03 per share, we've put together the following slide to aid investors in understanding how the quantum was determined.
Essentially, the board has sought to balance the group's cash reserves, access to liquidity, CapEx commitments, and future organic growth plans while retaining a sensible working capital balance. Importantly, the total distribution represents over 73% of the group's free cash flow generation for the financial year. Clearly a substantial return. Set out on the next slide is a summary of the group's 2022 reserves report, which was included in the annual report released earlier today. The report shows an approximate 30% 2P reserves replacement during the year, largely associated with ongoing strong production in Block 22/12, and a 50% increase in Block 22/12 contingent resources, reflecting an expanded portfolio of short to mid-term opportunities identified in the asset.
The increase in Block 2212 contingent resources materially offset a revision to the Maari contingent resources, where we felt it appropriate to constrain the potential for life extension out to 2032, an extension of five years, for some prudence. Reserves and contingent resources remain relatively evenly split between Maari and Block 2212, with contingent resources and prospective resources of 6.1 million and 5.9 million barrels respectively, highlighting the remaining potential in both assets. For the first time, we've included a formal assessment of prospective resources within the Block 22/12 permit, identifying nine independent opportunities. As I mentioned earlier, it is our objective to continue to focus on bringing into production this pipeline of contingent and prospective resources. I will now pass over to Kyle to run through the financial year results in more detail.
Thanks, Richard. Before I go through the results, I would like to emphasize that all references to dollars are to United States dollars, as this is the group's functional currency since all revenues are generated and received in United States dollars. The table on the right of the slide summarizes the financial year 2022 results with a comparison against the prior year. As Richard has mentioned, the full year results were strong, with significant increases in virtually all key metrics, following an 80% increase in average realized oil price and robust production and sales volumes during the financial year. Production and sales volumes were in line with the prior financial year, and coupled with the realized oil price of approximately $90 a barrel, resulted in a 70% increase in revenue during the financial year to $108 million.
With operational costs maintained at less than $20 a barrel produced, EBITDAX, cash flow from operating activities, and statutory profit all increased over 100% during the financial year. EBITDAX increased 100% to $73 million, with the company trading at an EV/EBITDAX multiple of approximately 1.5x. Cash flow from operating activities increased 146% to $56.9 million, or approximately 40% of the company's market capitalization. The results and strong cash generation demonstrates not only the strength of Horizon's producing assets, but also the company's leverage to the high oil price environment, which aided the extension of our debt facility. A phenomenal result given the ESG constraints placed on our sector. Dissecting cash flow.
In this next slide, we can see that the strong net cash inflows from operating activities of $56.9 million were applied against the repayment of debt of $11 million, investing $10 million in our assets, and in particular, the Weizhou 12-8 East development, and replenishing cash reserves following the $35 million capital return paid to shareholders in August 2021. With the closing cash balance in excess of $44 million and the recently executed 12-month extension of our debt facility, the company is pleased to be able to balance further capital management initiatives with continued investment in our producing assets, which is aimed at production enhancement and optimization.
To help dissect the full year results further, the next chart shows the key elements which have driven the substantial increase in underlying profit to $24 million, and clearly shows in the yellow bar the significant impact of the increase in revenues due to the 80% higher realized oil price. These higher revenues were partially offset by reduced sales volumes associated with the timing of Maari liftings during the financial year. As can be seen, and despite cost pressures and a higher inflationary environment, all controllable costs were largely maintained during the financial period, with the increase in operational costs driven by a higher non-cash amortization charge. The higher realized oil price drove substantial increases in revenues and profitability, which notably increased income taxes, royalties and levies during the financial year.
Turning over to the next slide, we can take a look at the financial 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 in earlier years, which assists in normalizing these results. As mentioned previously, this was additional revenue earned in earlier years, which reimbursed the company for historical exploration expenditure in China, and which largely recouped at the end of the 2019 financial year. The first of these charts shows that production and sales volumes for 2022 was just shy of the five-year average and broadly consistent with the prior financial year. Noting that sales volumes were slightly lower than last year due to the timing of Maari liftings, which left greater crude oil inventory in the FPSO at the end of the year.
Importantly, with production from the Weizhou 12-8 East development commencing towards the latter part of the financial year, we expect an increase in sales volumes for financial year 2023. It is important to note how consistent the Beibu production has been over the past five years, and it is this consistent production, together with low operational costs, which has been the predominant driver of Horizon's cash flow over recent years. This has provided the confidence to further invest in infill drilling and further work over activities in Block 22/12. Maari production has also been a significant contributor, particularly over the last five years, and this is owing to the successful acquisition of a further 16% interest in the fields. The chart also clearly shows the contribution of Beibu cost recovery volumes to sales volumes in financial years 2018 and 2019.
This is now ceased as the vast majority of historical exploration expenditure amounts has been recouped. The revenue chart also clearly shows the contribution to revenue of the Beibu cost recovery sales. Once we strip this away, we can see the significant impact of the 80% higher realized oil price during the current year. Pleasingly, oil prices continue to trade around $100 a barrel, or approximately $10 a barrel higher than the average realized price for the current financial year. This notably bodes well for 2023 revenue and cash flow generation. The next slide again shows the impact of higher oil prices on the group's cash generation and profitability in the 2022 financial year.
The strong EBITDAX and profit results were aided by the group's continued low cost operations, with costs maintained below $20 a barrel produced despite inflationary pressures and the additional Weizhou 12-8 East operating costs, which includes leasing costs associated with the new wellhead platform. We also continue our efforts to further reduce general and admin costs with the recently announced office move and the financial 2022 headcount reduction aimed at further rationalizing our cost structure. The next slide shows the continued strong free cash flow generation, with the orange line in the chart on the left normalized to exclude the cost recovery cash flows.
This again shows the impact of the higher oil price and robust production of free cash flow generation, and it importantly highlights the capacity of our business to sustain free cash flow generation through oil price cycles, with the prior downturn having impacted financial years 2020 and 2021. Now, the company is highly leveraged to the oil price and generates approximately $5 a barrel in additional free cash flow for every $10 barrel increase in the oil price. Now, I have saved the best chart to last with the net cash, net debt chart on the right.
Here we can see how the strong and sustained free cash flow generation from the group's assets has driven consistent and sustained debt reduction from a net debt position of over $88 million at the end of 2018 to a strong net cash position of $42.8 million only four years later. This is after having returned approximately $35 million in surplus capital to shareholders. This represents free cash flow generation over the four-year period of over $165 million if we adjust for the capital return. Now, that's approximately AUD 235 million, near enough the company's market capitalization. Our focus is to continue to drive this free cash flow generation from our assets out into the future by extracting maximum value from our assets.
The resilience of the cash flow, high oil prices, and a strong production result provided the confidence to implement further capital management initiatives during the year. I will now pass over to Richard to provide an update on our asset portfolio and an outlook for the company.
Thanks, Kyle. Look, I'll start with Block 22/12 in China. Block 22/12 production currently comes from 25 wells in eight fields shown in the green rectangles. This geographic spread of reservoirs and assets mitigates the risk of significant disruptions to our cash flow. While historical production has been dominated by the 6-12 and 12-8 West fields, the 12-8 East field in the bottom right-hand side of the graphic is the most recent addition to our production base, having only come into production in April this year. Since the start of production in 2013, the oil rate from the block has been maintained between 8,000-10,000 barrels of oil per day gross by undertaking a number of incremental activities, including new field developments, infill and near field exploration, progressively increasing water handling, and by having an operator which actively works to optimize production.
Recently, we've been able to materially increase production from the asset to an average of over 15,000 barrels of oil per day gross by bringing on the Weizhou 12-8 East field with a new Block 22/12 production record achieved earlier this month of just under 20,000 barrels of oil per day gross, which was roughly 5,000 barrels net to us. Whilst we expect production rates to naturally decline as water production from the fields increases, our objective is to continue to develop the material pipeline of infill and near field drilling opportunities to maintain oil rates well above the Beibu long-term average of 9,500 barrels of oil per day gross.
In recent years, these fields have generated approximately 70% of Horizon's cash flow, due in part to the very low cash operating costs, which were maintained at approximately $13 per barrel during the year. Now, looking at the 128 East development in more detail, the 3D diagram on the right illustrates the main elements of the development. six producing wells in all, one deviated production well drilled into the deeper Huajiao reservoir, five horizontal producing wells into the shallow Xiahua reservoir, and one water disposal well. The development includes a self-installing processing and wellhead platform and an export pipeline tied back to the existing 128 West platform. As mentioned, the project was successfully commissioned and brought on to production in April 2022, with Horizon's share of development costs in line with the original budget of around $20 million.
While the field experienced a few teething issues later in the financial year, once production was restored on the 24th of July, it has since contributed over 9,000 barrels of oil per day gross. Combined production from the Xiahua and Huajiao reservoirs is expected to average around 4,000 barrels of oil per day gross or around 1,000 barrels of oil per day net to Horizon over the first year of production. We are encouraged by initial production results from the fields, and continued strong production may result in further development. Now, this map shows the locations of the various infill, appraisal, and exploration opportunities which make up part of the strong portfolio of reserves, contingent, and prospective resources in Block 22/12.
As mentioned, our objective is to focus on bringing these opportunities into production, commencing with the drilling of two wells this year, one of which has been approved by the joint venture, the M-3 Well, and another, the North Well, which we anticipate will be approved shortly. As part of this program, a five-well workover campaign will also be undertaken, which is already well advanced. This project is designed to reinstate and enhance production from existing 6-12 wells. The M-3 and 6-12 North wells have been high graded from our existing portfolio of opportunities. We focus on infrastructure-led targets that can be readily drilled from one of the three platforms in the block. That way, in the event of success, the wells can be immediately turned into production wells. Looking to the history of the asset and our view of its future.
This chart has recently been updated to reflect our current 2P reserves forecast in the dark green. The chart shows the indicative future production potential from the fields with the natural decline profile or reserves profile representative of almost the current value inherent in the share price. The blue sawtooth profile is the additional production potential and value to be unlocked from future activities. Also on the slide is an indication of the expected incremental CapEx spend required over the next 3-4 years of $10-15 million per annum to unlock this value. Pleasingly, we've already successfully executed the first big production uplift with the commissioning of the 12-8 East field earlier this year. We are now embarking on workovers and further infill drilling to continue to unlock this value. Now on to our other asset.
While this presentation has been heavily focused on Block 22/12, due in part to the recent commissioning of the 12-8 East Field, Maari continues to be a very important asset for Horizon, generating approximately 30% of Horizon's cash flow. Importantly, over the past few years, the production decline rate has been arrested through continued water injection and well optimization, and production rates are expected to be sustained without the need for significant CapEx spend. Our operating costs are modest in the context of the current oil price, and as a result, the asset is highly cash generative. Maari Crude attracts strong premiums with deliveries mainly into East Coast Australia. Planned workovers to restore production during FY 2022 were impacted by COVID, but we expect those wells to be back online shortly.
While the long-awaited operatorship transition from OMV to Jadestone continues to await regulatory approval, we've been quite impressed by OMV's continued focus on costs and conducting safe operations. Similar to Block 22/12, this chart has recently been updated to reflect our current 2P reserves forecast in the dark green also. With regards to the future, the joint venture focus is to continue to optimize production, evaluate infill drilling opportunities, and seek to maintain field life to at least the end of the license period in December 2027, with the potential to extend being actively investigated. This chart sets out the timing of operations activity during the calendar year. Please note that some budget processes are still in progress, and we stress that the timings are indicative and remain subject to JV and regulatory approvals, and indeed rig availability.
In Block 2212, we've drilled eight of the planned 10 wells to drill and are in the process of completing the five planned workovers scheduled. The 12-8 East drilling campaign successfully extended over a continuous six-month period, with first oil arriving early in 2022. We are firmly focused on developing plans for further infill drilling in 2023, with opportunities currently being high-graded. In Maari, we are reinstating wells through workovers and planning for the next activity cycle. In summary, FY 2022 was a strong year for Horizon, delivering significant value to shareholders. The outlook remains positive as our low production costs and material positions in high-quality assets provide significant leverage to the oil price and aids us in generating strong cash flows. We have a strong balance sheet with net cash at financial year-end of over $40 million.
We've commenced FY 2023 with very strong production rates and sustained high oil prices, which bodes very well for continued strong cash flow generation. To put things into perspective, Horizon's current daily share of production from both assets is over 5,000 barrels of oil per day. That's almost 40% higher than the average rate achieved in FY 2022 of around 3,600 barrels of oil per day, driven largely by the new 12-8 East production. At current oil prices, we are generating around half a million dollars in revenues daily, up from the FY 2022 average of around $300,000 per day.
Now, while we don't expect to sustain these rates from our current well stock due to natural reservoir decline, our focus is on bringing onto production our pipeline of contingent and prospective resources in an effort to sustain production rates, commencing with the 6-12 workover and drilling program. We're determined to deliver value to shareholders, having distributed approximately $47 million in FY 2022 with a further $47 million in distributions announced today. Further capital management initiatives are under constant review, and the company will consider these when prudent to do so, needing to balance shareholder returns with managing liquidity levels and future commitments. As I've mentioned, in terms of new business, our priority is to invest in organic production growth initiatives within our existing portfolio.
We recently commissioned a new field development in China, which has boosted production and have further growth plans to follow in both of our assets. We keep an eye out for opportunistic inorganic growth opportunities which could further enhance shareholder value, but they need to have very strong investment metrics and the potential to enhance our ability to make further distributions to shareholders. Whilst our business continues to face challenges, whether it be increased ESG pressures or supply chain issues, we have a focused, active management approach and a high caliber hands-on team with the expertise and the influence to navigate these challenges and deliver value for shareholders. Now, that concludes our presentation today, and we'll turn to questions. We'll perhaps just take 30 seconds or so to have a look at the questions which are flowing through.
Thank you. If you wish to ask a question, please type it in the Ask a Question box in the bottom right-hand corner of your screen.
Okay. Our first question we have here is: Can you give us any guidance as to a dividend or capital management policy going forward, and would you look to base it on a percentage range of free cash flow?
Thanks for the question. We haven't put out guidance at this stage on a capital management policy. I think at some point in the past, we did talk about, you know, at least 30% of free cash flow. You can see from the current year. You know, we've really tried to deliver, you know, almost the biggest return we can, and we've put out 73% of our free cash flow. We might consider some guidance going forward, but, you know, we're obviously trying to balance, you know, what organic growth opportunities we have, liquidity levels and so on. Putting out specific guidance at this stage is not our intention, but we'll consider it going forward.
Thank you, Richard. Next question we have is: What is the position of the ATO with regard to consistent capital returns? Also, if oil prices remain elevated and Horizon continues to generate significant free cash flow, would the ATO allow a further capital return in, say, 12 months' time?
Look, I'll take this one. Look, in the business at its current state, generating significant profits. As I mentioned over there, we generated a statutory profit of approximately $24.3 million. It's unlikely that we will continue to be able to return funds as capital returns going forward.
Okay. Thanks, Kyle. The next question we have is: Given the franking credit situation, going forward, would you consider pursuing a buyback rather than a dividend policy?
Look, I'll take that one. Look, as Richard mentioned, we constantly evaluating capital management and all forms of capital management at that. Now, we look to balance our approach, recognizing that our share registry is roughly balanced 50/50 between foreign shareholders and resident shareholders. We'll continue to evaluate all forms of capital management going forward, and as Richard mentioned, look to return funds to shareholders when prudent to do so.
Thanks, Kyle. The next question we have is that we mentioned net CapEx going forward around $10-15 million per annum. Would you say is a rough split between sustaining and growth expenditure on that?
Yes. Thank you for the question. Look, that's all for growth expenditure with sustaining expenditure or capital costs being fairly modest.
Thank you, Kyle. Next question we have is: If 12-8 East continues to perform well, would the JV consider an immediate phase II on completion of the current work over program?
Oh, look, as you'd appreciate, having just completed the drilling, we've got, you know, tremendous amount of data flowing through on production rates, water cuts, and so on. So we've got quite a lot to digest, and, you know, that'll probably take us through this sort of H2 of the year, really, to digest all of that. One of our key considerations as well, and I sort of flagged it earlier, is rig availability, you know, becoming perhaps more challenging given the high oil price environment. Even if we wanted to jump into something straight away, we've got to make sure we can secure a rig and indeed get the various regulatory approvals.
Look, it's not out of the question, but we do just need a bit of time to digest the information and ensure we're confident in the economic returns that subsequent phases would deliver.
Thank you, Richard. The next question we have is that the maiden prospective resources of 5.9 million barrels in nine structures declared in China, what would be the earliest the JV will drill these or one of these nine opportunities?
Well, look, thanks for the question. I mean, to be honest, we're actually about to embark on that straight away. The M-3 well that I flagged, you know, that's targeting one of these resources. It's very close to the existing fields, and it's in a fault block we have a reasonable amount of data on, but it's already the first cab off the rank. And then we'd expect, ideally, subject to joint venture approvals and rig availability to hopefully be targeting another one or two of those opportunities next year as well.
Thank you, Richard. Another question on capital management. Is this anticipated to be annual or half yearly distributions in 2023?
Look, as Richard mentioned in the presentation, we constantly evaluating capital management, and we'll look to return funds to shareholders when prudent to do so.
Thank you. Another question we have for you, Kyle, is: Would you consider any hedging, if at all?
Yeah. We have a fairly modest hedge position at the moment of approximately 60,000 barrels. You'll note that this isn't as significant as the hedge programs we've had in the past, but that was indicative of the level of indebtedness that the business had over the past five-year period. We will look to continue to put in hedging going forward, but it likely will be far more modest given the fact that the company's got sufficient cash reserves and available liquidity to cover all of our committed costs.
Okay. Next, we've got a couple of questions here. The first one is: What is the reason for the unfranked dividend rather than a full capital return, as due to the tax implications of an unfranked dividend for Australian shareholders? Going forward, is this likely to be the type of split we will see in future shareholder returns?
Yeah. Thanks and good question. Look, we got to be honest with ourselves. As we mentioned, we've generated decent profitability in the current period with statutory profits of around $24 million. Now, we've been in consultation with the ATO, and we've determined the split based on our current year profitability and the additional debt that's been drawn down of approximately $20 million. It's unlikely that we will contemplate full capital returns going forward.
I think just adding to that, I think people probably need to understand. Yeah. When the tax office looks at this, they look firmly focused on the source of the funds. As Kyle's mentioned, clearly, the company is heavily profitable, and it's clear Maari and Beibu cash flow is where most of these funds are coming from. More importantly, if hypothetically, we put everything out as a capital return and the ATO look through it and determine that actually it's a deemed dividend, that has fairly adverse tax consequences for our foreign shareholders who then have to pay withholding taxes, which otherwise wouldn't be the case had we declared it a CFI dividend up front. Again, we've tried to balance what's important for all shareholders, and that's been key in our considerations.
Thank you both. The next question we have is: When will the Maari sinking fund payments begin, and do you still expect Horizon's proportion to be about $32 million?
Look, there's no sinking fund per se for Maari at this stage. Obviously, they've passed new decommissioning legislation which looks at a level of financial security needing to be put in place, but that legislation will still take some time to sort of work through. Nevertheless, you know, we have decommissioning obligations and we need to make sure that we are setting funds aside progressively to ensure we can meet that obligation. We flagged it late last year that we'd start to be making sure that we build up funds and we'll endeavor to do so. At this stage, there's no formal sinking fund requirement.
I think this is the final question we have. The question is: While it presently seems unlikely, has it been considered what might happen with Block 22/12 should there be any Western sanctions imposed on China due to China-Taiwan issues, similar to what happened with Russia?
Yeah. I mean, look, it's a common question we get. Obviously, you know, concerns over the geopolitical situation in China and what that might mean. I think the first comment I'd make is that, you know, we're essentially a domestic producer in China or seen like that, such that, you know, in China, we have a very cooperative relationship. Certainly we saw through the whole 12-8 East development drilling program that the joint venture takes on board our views and our thoughts, and we work exceptionally collaboratively. You're right. Probably the concern is not the China end. It's more what the Western countries do to China, which could have implications for us.
We continue to consider it, but you know, we do think it's unlikely to see a situation similar to Russia, given how intertwined our economies are, whether it be from a banking level all the way through, you know, operationally, et cetera. You know, something we are mindful of. What's the best way we can manage it? Well, the best way is to produce the barrels and extract the cash, and that's what our objective is. Given the permit runs to the end of the decade, you know, we'd like to think and hope that you know, we won't see any issues in this area.
Great. Thank you, Richard. That concludes our webcast for today. If you have any further questions, please feel free to email them through to info@horizonoil.com.au. I'd like to now pass you back to the operator.
Thank you very much. That concludes our conference for today. Thank you for participating. You may now disconnect. Thank you.