I wo uld now like to hand the conference over to Mr. Richard Beament, Chief Executive Officer. Please go ahead.
Well, look, a very good morning, and welcome to Horizon Oil's FY 26 half-year results presentation for the period ending 31 December 2025. I'm Richard Beament, Horizon's CEO, and I'm joined today by Kyle Keen, our CFO. This half year represents a very important period for the company. Despite a materially lower realized oil price environment, we delivered strong operating and financial performance, underpinned by disciplined cost control and the successful integration of our recently acquired Thailand assets. The completion of the Thailand acquisition on the 1st of August, together with the 10-year extension of the Maari permit to December 2037, has delivered a genuine step change for Horizon, increasing production, strengthening cash flow resilience, extending portfolio life, and further diversifying the business.
This morning, I'll provide a brief overview of the half year performance, then hand over to Kyle to take you through the financials before I return to cover asset performance, outlook, and upcoming activity. Look, we'll then open up to questions. Before we begin, I'll draw your attention to the customary compliance statement on slide 2, which I encourage everyone to read in full. During today's presentation, we may make forward-looking statements, and actual results may differ materially due to known and unknown risks and uncertainties. It's also important to note that in our results, our recent Thailand investment is equity accounted in the half year financial statements. Since we hold the interest through our 75% shareholding in MH Energy Thailand LLC, the company which we acquired together with Matahio from Exxon.
To aid our investors, where possible, we've reported metrics for the half year inclusive of the contribution from Thailand, such as underlying revenue, to aid with comparability. As always, I should also note that all dollar amounts referred to in this presentation are in U.S. dollars, unless otherwise stated. This slide highlights Horizon's diversified non-operated portfolio across Southeast Asia and Australasia. We now have five producing assets across four countries, with China, New Zealand, Australia, and Thailand, with a strong weighting toward long-life, low-cost oil and gas assets operated by experienced partners. The addition of the Sinphuhorm and Nam Phong gas fields in Thailand further strengthens the portfolio, increasing gas exposure and providing additional scale and resilience. Turning now to the investment highlights for the half year.
Production and sales volumes increased by 26% and 25%, respectively, compared to the prior corresponding half year, reflecting 5 full months of contribution from the Thailand assets, together with continued solid performance from our existing portfolio. Underlying revenue for the half year was $54.2 million, including $9.6 million from Thailand, while EBITDAX of $28.6 million was broadly in line with the prior half year, despite a 15% lower realized oil price. Cash flow from operating activities increased by 37% to $25.1 million, demonstrating the resilience of our assets and cost base. We finished the period with $35.6 million of cash and a modest net debt position of $9.8 million, following payment of the FY 2025 final dividend in October.
Importantly, the board has declared an FY 2026 interim dividend of AUD 0.015 per share, payable in April this year, maintaining our long-standing commitment to prioritizing shareholder returns. The next slide brings together how the business is performing against strategy. First, on shareholder returns. With the declaration of the FY 2026 interim dividend, Horizon enters its sixth consecutive year of distributions, with more than AUD 0.17 per share paid or declared since 2021, totaling over AUD 274 million. Operationally, we continued to execute across the portfolio. Thailand is already contributing meaningfully following completion of the acquisition in August. Block 22/12 is in the midst of a liquid handling upgrade.
Maari delivered its strongest production rates in more than five years following workovers, and Mereenie continued to perform strongly, with gas sales now supported by long-term arrangements with the Northern Territory government. Strategically, the Thailand acquisition and the Maari permit extension materially strengthened portfolio longevity at low-risk growth options, and with Thailand's increasing gas exposure, including the sanctioned Nam Phong booster compressor, which is expected to deliver a significant % uplift in production from that field around mid-2026. Finally, from an ESG perspective, safety performance remains strong across the portfolio. Our gas assets continue to support regional energy security, and the completion of a double materiality assessment during the half year helped sharpen our ESG focus as the business evolves. Overall, this half year reinforces that Horizon is delivering disciplined growth, resilient cash flows, and long-term value creation.
Now I'll pass over to Kyle to run through the financial results for the half year in a little more detail.
Thank you, Richard. As always, all references to dollars are to United States dollars, unless otherwise stated. Throughout the financial slides, you will see a constant theme: the strong and positive contribution from the Thailand acquisition. Whilst the acquisition had an effective date of the first of January 2025, completion occurred on the 1st of August 2025, therefore, only five months of contribution is reflected in the half year results. Importantly, cash flows generated between the effective dates and the completion dates were deducted from the initial purchase consideration. Turning to the group's financial performance for the half year, this slide summarizes our results compared with the prior half year period. We've also included 2026 calendar year results, which we reference later. Most key metrics were strong, despite a 15% lower realized oil price, which notably impacted profits.
That impact was largely offset by the 5 months contribution from Thailand, allowing us to maintain underlying revenue and EBITDAX, while increasing operating cash flow. Production and sales for the half year increased by over 20%, exceeding 1 million barrels of oil equivalent, and generating underlying revenue of $54.2 million. On the cost side, the group continued to maintain a low cash operating cost base of around $20 a barrel of oil equivalent, supporting continued strong free cash flow generation with an EBITDAX result of $28.6 million and cash flow from operating activities of $25.1 million for the half year. At the 31st of December, the group held cash reserves of $35.6 million, resulting in a modest net debt position of $9.8 million.
This reflects the payment of the FY 2025 final dividends and completion of the predominantly debt-funded Thailand acquisition. This chart clearly illustrates how the business has performed over the past 6 months, breaking down operating cash flow and how those funds were deployed. The $25.1 million of operating cash flow, including Thailand's contribution, has completely funded the 2025 final dividend of $15.9 million, $3 million of debt repayments, and $4.6 million of investments in our low-cost producing assets. The chart also highlights the minimal equity contribution to the Thailand acquisition, with the majority of the purchase price debt-funded. The primary reason for the decline in cash over the period was the loan to our joint venture partner to aid with completion of the transaction.
That loan generates interest income of at SOFR + 9% per annum and fully amortizes by the 31st of December 2027, with over $1 million already repaid. The group closed the half year with $35.6 million of cash, this provides sufficient liquidity to pay the interim distribution of AUD 0.015 per share. That's to be paid in April 2026. Fund ongoing development activity across the asset base, progress organic and inorganic growth opportunities, and to allow us to maintain appropriate working capital balance, which includes the provision for Maari's long-term decommissioning obligations. Moving to the calendar year context, 2025 sales volumes were the highest in five years, reflecting the contribution from Thailand following completion in August 2025.
Mereenie continues to play an important role in offsetting natural reservoir decline at Block 22/12, reinforcing the strategic value of that acquisition. While revenue remains closely linked to production volumes, it is also influenced by realized oil and gas prices, and despite the lower realized oil prices, calendar year underlying revenue of $103.6 million was achieved, noting it was supported by Thailand's contribution. Building on production performance and continued cost discipline, the group remained profitable. Half year EBITDAX remains strong at $28.6 million, while calendar year EBITDAX of $54 million demonstrates the consistency of earnings following the Thailand acquisition. Calendar year profit of $8 million primarily reflects a higher non-cash amortization expense, together with the impact of lower realized oil prices, with underlying cash operating margins remaining resilient.
The strong profitability delivered over recent years has been underpinned by disciplined capital allocation and the contribution from high-quality acquisitions and development projects, including the Weizhou 12-8 East development and, more recently, the Mereenie and Thailand acquisitions. Turning to our final financial slide. The charts highlight the group's ongoing ability to generate free cash flow and return capital to our shareholders. At the 31st of December 2025, net debt was $9.8 million, following the Thailand acquisition and shareholder distributions during the half year. Cumulative distributions now exceed $165 million U.S. dollars, or approximately AUD 250 million over the past 5 calendar years, excludes the FY 2026 interim distribution of AUD 0.015 per share, which will be paid in April later this year.
These outcomes reflect a clear strategy focused on value, disciplined investment, and consistent shareholder returns while maintaining balance sheet strength and flexibility. With that, I'd now like to hand you back to Richard to provide an update on the asset portfolio and an outlook for the company.
Look, thanks, Kyle. I'll now provide an update on the assets, as Kyle mentioned. Look, starting with Block 22/12 in the Beibu Gulf. Block 22/12 delivered a solid operational performance during the half year, with production broadly in line with expectations. As anticipated, natural reservoir decline was partly offset through a combination of workovers, slickline activities, and ongoing optimization initiatives. A key focus for the joint venture remains the liquid handling capacity upgrade, which is scheduled to come online progressively over the coming months. This upgrade is expected to aid with sustaining and potentially increasing oil production rates later this year. Feasibility studies have progressed on a potential multi-well development at WZ12-8 East, which continues to be evaluated by the joint venture. Turning to Maari in New Zealand.
Maari delivered an outstanding half-year performance, achieving the highest daily production rates in more than five years during August, following successful workover activities. Average production for the half year was approximately 12% higher than the prior corresponding period, underpinned by stable reservoir performance and effective water injection. A major milestone during the period was the award of a 10-year permit extension through to December 2037, providing long-term certainty for continued production, further optimization, and decommissioning planning. This extension reflects the increasing focus on energy security in New Zealand and reinforces Maari's value as a long-life cash-generating asset. Moving now to Mereenie in the Northern Territory. Mereenie continued to perform strongly during the half year, with production supported by the two infill wells drilled in early 2025, which still contribute almost 25% of total field gas production.
Realized gas pricing improved materially following the expiry of legacy contracts. The execution of a binding letter of intent with Power and Water Corporation provides a pathway to firm supply of uncontracted gas through to 2034. This agreement underpins the planned drilling of additional infill wells later in calendar year 2026 and reinforces Mereenie's role as a critical supplier of domestic gas to the Northern Territory. Turning now to Thailand, our most recent addition to the portfolio. The acquisition of interests in the Sinphuhorm and Nam Phong gas fields completed on the 1st of August 2025 and delivered an immediate positive impact during the half year. Over the five-month period, Thailand contributed approximately 28% of group production, with revenue of $9.6 million and very low average operating costs of around $7 per barrel of oil equivalent.
Operational performance has been strong, with both fields exceeding nominations and early optimization at Nam Phong delivering an estimated 7% uplift in production with no additional capital. A final investment decision was reached in early January on the Nam Phong booster compressor, which is expected to increase field production by at least 40% from mid-2026. At Sinphuhorm, regulatory approvals are now in place and works commenced for the tie-in of the PH14 well, which, along with the perforation of a shallow section of the original discovery well, the PH-1 sidetrack on the same pad. This is targeted for completion later in 2026. Overall, integration of the Thailand assets has been seamless, and they are already making a meaningful contribution to group cash flow and portfolio resilience. Finally, turning to our activity plan for the next 12 months.
At Block 22/12, the liquids handling upgrade is expected to ramp up over the coming months, with further drilling and workover activity under review. At Maari, focus remains on ongoing optimization and infrastructure integrity following the permit extension. At Mereenie, the joint venture is progressing planning for additional gas infill wells, supported by long-term gas sales arrangements. In Thailand, we are advancing the Nam Phong booster compressor project and the Sinphuhorm infill well tie-ins, both of which are expected to support higher production and cash flow from the second half of calendar year 2026. Once again, we have a busy calendar of activity, firmly focused on extracting more value out of our assets. In summary, this has been another strong half year for the company.
We've delivered resilient financial results in a lower oil price environment, successfully integrated the Thailand acquisition, extended the life of Maari, and maintained our commitment to shareholder returns, all while preserving balance sheet strength. With that, Kyle and I would now be very happy to take any questions you might have.
Thank you. If you wish to ask a question, please type it in the Ask a Question box on the bottom right-hand corner of your screen.
The first question we have right now is: How have you found Thailand as a jurisdiction and working with PTT EP?
I might take that one. Look, it's been a really rewarding and good experience going into Thailand. Our relationship with PTT EP has been very strong. I think, you know, the testament to that is, you know, that within five or six months of taking over and completing the transaction, we've reached FID on that booster compressor project at Nam Phong, to reach that milestone so quickly after taking the reins there in Nam Phong, you know, as to how strong that relationship has been. Moreover, you know, the energy security requirements in Thailand, these fields provide fundamental gas supply to a power station.
You know, all we've seen is positivity around how we can continue to help them to extract more gas and deliver into the power station.
Thanks, Richard. The second question we have, again on Thailand, is Sinphuhorm was lower in August and September and February and March. Can you explain why?
I mean, that was purely as sort of depicted on the slide. That was purely due to a planned maintenance outage in the EGAT Power Station. They essentially did a 5-year turnaround on one of their gas turbines earlier in the year, and the second one in that August-September period. You know, production's back up over 100 million standard cubic feet per day, and we expect it to be maintained at that level for the foreseeable future.
Thank you. Another question we have here is: What consideration is being given to testing Mereenie Stairway untapped gas?
Yeah, I think you're referring there to the Mereenie Stairway formation. The immediate priority of the joint venture is to drill infill wells in order to fulfill and essentially support the Northern Territory gas demand. Yeah, those infill wells plan to be drilled into the existing Pacoota Reservoir. The Stairway formation continues to be a priority for us, is something we are keen to drill. The joint venture continues to consider its options in respect of that. Whether it can be drilled as part of the campaign later this year or in a subsequent campaign, that's still to be determined.
Thanks for that. We might just give it another 30-odd seconds or so to see if any final questions come through. Please put your questions in the Ask Question box and send them through. I don't think we've received any more questions, so please feel free to email us any questions you might have at info@horizonoil.com.au. This concludes our webcast for today. I'll hand you back to the operator.
Thank you. That does conclude our conference for today.