Well, good morning, ladies and gentlemen. My name is Mike Harding. I'm the chairman of Horizon Oil Limited. Before beginning the meeting, we acknowledge the traditional owners of the country on which the board is present today, the Gadigal people of the Eora nation. We pay our respects to their elders, past and present. I would like to welcome you and officially open our virtual annual general meeting for 2021. Based on the numbers of members attending online, I declare a quorum for the meeting. The business for today's meeting will begin with an address by myself, followed by your CEO, Chris Hodge. We will then conduct the formal business of the meeting with a live vote via poll. I would now like to introduce my fellow directors. Your Chief Executive Officer, Chris Hodge.
Non-executive directors, Greg Bittar, Bruce Clement, and Nigel Burgess, are present with me in Horizon's office today. I will ask Nigel to say a few words when he stands for election. I also introduce Gareth DeNiese and Sandra Birkensleigh, who join remotely from Queensland. Sandra is also standing for reelection at today's meeting. Our CFO and Company Secretary, Richard Beament, is also present, and I note that Sean Ruggers, representing our auditors, PwC, is also available today to answer questions on the auditors report later in the meeting. Before beginning the formal business of the meeting, I would like to ask Richard, our company secretary, to outline today's procedures and protocols.
Thanks, Mike. Look, questions can be submitted at any time during the meeting. To ask a question, press on the speech bubble icon, as shown on the slide. This will open a new screen. At the bottom of that screen, there is a section for you to type your question. Once you are finished typing, please hit the arrow symbol to send. For those shareholders who wish to ask a verbal question, an audio questions facility is also available during this meeting. To use this service, please pause the broadcast on the Lumi platform and then click on the link under asking audio questions, as shown on the slide. A new page will open where you will be prompted to enter your name and the topic of your question before being connected. You will listen to the meeting on this page while waiting to ask your question.
When you press the Ready button, you will receive instructions advising that you are in a queue and are muted. When your name and question topic is read out, you will be unmuted. Please note that while you can submit questions from now on, we will not address them until the relevant time in the meeting. Please also note that your questions may be moderated if we receive multiple questions on the same topic. Only those persons registered as shareholders or their duly appointed representatives or proxies are eligible to ask questions. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, the chairman will shortly open voting for all resolutions. At that time, if you are eligible to vote at this meeting, a new polling icon will appear.
Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to hit submit or the enter button as the vote is automatically recorded. You do, however, have the capability to change your vote up until the time the chairman declares voting closed. Rupert Paradkar of Computershare has been appointed as the returning officer, and following confirmation by Computershare, final proxy and voting results will be released to the ASX and on the company's website later today. I'll now hand back to the chairman.
Thank you, Richard. I now declare voting open on all items of business. A polling icon will appear soon. Please submit your votes at any time. I'll give you a warning before I move to close the voting. The meeting will consider the items of business outlined in the notice of the meeting. A notice advising how to access the meeting documents, including the notice of the meeting, was sent to all shareholders on the eighteenth of October. Any undirected proxies in my favor as Chairman will be voted in favor of the relevant resolution. As I mentioned at the beginning of the meeting, I would like to start the meeting with my formal address. This will be followed by the CEO's presentation.
There'll be an opportunity to ask questions on the presentation, and we will then proceed to the formal part of the meeting, where the resolution provided in the notice of the meeting will be put to members. Ladies and gentlemen, from a very uncertain future with oil prices around AUD 45 a barrel and a year with frequent and long periods of lockdown due to COVID, Horizon posted a strong end to the financial year. Given the strength and balance sheet and continued strong free cash flow generation, subsequent to the year-end, we had confidence to return surplus capital to shareholders of some AUD 47 million, which, combined with an on-market and off-market buyback conducted during the year, resulted in distributions to shareholders over AUD 49 million. The strong result was driven by a recovery in the oil price to over currently AUD 70 a barrel.
The company was able to leverage the higher oil price by ensuring maximum oil production was obtained from Beibu and Maari and ensuring production costs were minimized. Following the sale, the group made significant strides in streamlining and reducing corporate costs, with a reduction in headcount over the past year by approximately 50% to 12 full-time staff. Health and safety features prominently in everything we do. We continue to work with our joint venture partners to ensure likelihood of a major safety and environmental incident is minimized. In FY 2021, there were no reportable environmental incidents. Pleasingly, we continued to maintain a strong safety record. Excuse me. During the year our assets performed well.
At Beibu, production was once again held flat as a result of two successful infill wells, water handling capacity improvements, and workovers, which largely offset natural decline. While Maari production has been impacted by COVID-related delays to workover activity, much of the production has been restored during the year. Importantly, cash operating costs remained low at less than AUD 20 a barrel, ensuring continued strong free cash flow generation. This strong free cash flow generation allowed for the continued pay down of debt to circa AUD 13 million. By mid 2022, the debt will be fully repaid. A great achievement when one considers that the group debt levels were over $200 million only six years ago. Looking forward, we will continue to work to maximize production and value from our producing assets in Beibu, China and Maari in New Zealand.
In particular, we look forward to the successful commissioning of the 12-8 East field development in Beibu during financial year 2022. We will continue to actively pursue infill well drilling in our producing assets, which provide excellent value. We will continue to review our corporate costs and review our cash position regularly to consider further shareholder returns. In the context of energy transition and increasing ESG pressures, we are continually being approached with growth options. For us to consider one of these options, it must be very accretive, and today we have not seen any options that meet this criteria. Our CFO, Chris Hodge, will say more about Horizon's performance shortly. He'll also update you on the company's strategy. Chris and the team are to be congratulated for their achievements in 2021. As previously advised, Gareth DeNiese will retire from the board at the conclusion of this AGM.
On behalf of the board, I would like to take this opportunity of thanking Gareth for his 14 years on the board. Gareth has made an enormous contribution to Horizon through both good and challenging times. The board thanks him for his efforts, and we wish Gareth all the best for the future. We welcomed Nigel Burgess to the board in July this year. Nigel is a nominee of Samuel Terry, who now own 19.9% of Horizon. Nigel, together with Sandra Birkensleigh, are seeking re-election today. Both candidates are unanimously endorsed by the rest of the board. Special mention also goes out to the late Fraser Ainsworth, who many of you should know was chairman for Horizon from 2002 to 2015. Fraser sadly passed away earlier this year. We all owe an immense gratitude to Fraser for the work and the leadership, and he'll be sadly missed.
I would also like to acknowledge Richard Beament, who has now become company secretary in addition to his role as chief financial officer. Finally, we acknowledge the part we have to play in an increasingly low carbon future. We are pleased to present a further enhanced sustainability report this year, which transparently discloses our impact and the actions we are taking to become a more sustainable company. Finally, thank you, all our shareholders, for your valuable support during the year. I will now hand over to Chris Hodge to present the CEO's report before returning to the items outlined in the notice of the business. Chris?
Thank you, Mike. Good morning, everybody. Our strategy is simple. Firstly, we seek to maximize free cash flow. Secondly, we intend to make further distributions to shareholders when it is prudent to do so. Thirdly, we will consider to invest in new business if exceptional. Let me briefly review the 2021 financial and commercial highlights. We produced what we said we would, within guidance of 1.3 to 1.4 million barrels. A much improved oil price allowed us to post higher than expected revenue of $63.6 million, which resulted in some $20 million of free cash flow. Corporate costs have been reduced due to a combination of planned redundancies and staff resignations, reducing the headcount by about 50% and yielding annualized cost savings of about $1.5 million.
Capital management activity during the year was a significant first for Horizon. We tidied up the register by conducting an off-market buyback of unmarketable parcels and completed an on-market buyback of some 20 million shares. We saw a significant change to the shareholder register. Samuel Terry increased its shareholding to near 20% with the exercise of 300 million warrants previously held by IMC. The exercise of these warrants injected AUD 18.3 million into the company, which when combined with existing cash reserves, allowed us to make a AUD 47.4 million capital return to shareholders comprising AUD 0.03 per share. We're very pleased that we now have the Australian Taxation Office, ATO, confirmation that the capital return is not to be treated as a dividend for Australian tax purposes. Moving on to operations. From this perspective, we've been successful in holding production broadly flat, yet reducing costs significantly.
As mentioned in the introduction, the safety and environmental record across the assets was exemplary. Across both assets, we successfully completed 10 workovers, which either restored or enhanced production. The WZ12-8 East project FID, the final investment decision, was made in October last year when oil prices were low. As a result, we'll commence production into what is expected to be a continued high oil price environment. We have maintained cash operating costs at less than AUD 20 a barrel. We made a clean exit from PNG with cash and no residual liability. Finally, we drilled two infill wells in China, which added some 2,200 barrels of oil per day gross. Moving to sustainability, these are our ESG priority areas.
Sustainability of Horizon means the management of risks and opportunities in a way that best balances the long-term needs of all our stakeholders, our investors, employees and suppliers, as well as the wider community and the environment at large. A right-sized approach on sustainability is important for Horizon, for banking relationships, some institutional investors, insurers, and simply because it's the right thing to do. We break sustainability down into our four priority areas, HSE, governance, employees and communities, and climate change. Firstly, on HSE. This is our priority. It is vitally important for us to know that our mid-life assets are in excellent condition. That the highest standards of safety are adhered to. That we hurt no one, that we spill no oil or fluids to the environment.
Look, we're not the operator, but by working closely with our operators, asking the right questions, listening carefully to the response, and if necessary, requesting the right preventative actions, and carrying out regular offshore visits, we help to ensure that risks are kept to a minimum. Our targets are zero fatalities, injury frequency rates below industry averages, zero material environmental incidents, and zero spills to the environment. On governance, we promote and are committed to a high standard of integrity and ethical and transparent behavior. In respect to people, we strive to make a positive impact in the communities where we're active, and we'll keep our staff motivated and supported as we have done through the COVID crisis. To climate change.
Look, we have a role to play in the world's energy transition, and we're committed to playing our part in addressing climate change and integrating climate-related risk into our business decisions. Our priority is to reduce direct emissions by applying operational efficiencies, but where it is not possible to reduce further, we have a target to offset remaining Scope 1 and Scope 2 emissions. We already offset 100% of Maari's Scope 1 emissions via the New Zealand Emissions Trading Scheme, and we are currently evaluating high quality, officially sanctioned carbon offset projects for Beibu. Turning now to our share price performance. This chart shows the share price movement since the middle of last year. Horizon share price is in red, oil price in green, and the ASX Energy Index in gray. The chart clearly shows the linkage with oil price, disrupted only by the AUD 0.03 per share capital return.
A word about oil price. Last year at this time, the long-term forecast was $45. Now the expert consensus is for $70 long-term. Sentiment has clearly shifted away from fossil fuels. However, it is clear that oil will be part of the energy mix for some time to come. An expected continued high oil price will be the result of supply side pressures, coupled with continued high demand for liquid hydrocarbons. Turning now to the producing assets in China and New Zealand, Beibu and Maari. These assets both continue to perform well. It is a reality that oil fields undergo natural decline. If we let geology and physics take its course, this decline typically follows a mathematical trajectory until the economic limit is reached. Beibu and Maari are no exception.
By making interventions such as drilling infill wells, carrying out proactive workovers, conducting water floods, developing new fields, and generally looking after our assets, we have managed to significantly arrest that decline. In this presentation, I will give some examples of the technical work we are doing to continue this process. Each year, finding suitable opportunities within the current asset base gets a little bit harder, a little bit more subtle, and the prize incrementally smaller. By working collaboratively with our operators and partners, we have been and will continue to be successful. Turning now to China, where we have high margin, reliable production.
Since the start of 2013, oil rate has been maintained between 8,000 and 10,000 barrels of oil per day by undertaking a number of incremental activities, including new field developments, infield and near field exploration, progressively increased water handling, and by having an operator which actively works to optimize production. As discussed later in the presentation, the joint venture has a material pipeline of infill and near field drilling opportunities, which aim to maintain or better current oil rates. China production is currently spread across 19 wells and 6 fields, shown in the green rectangles, with the WZ12-8 East field in the red triangle. The WZ12-8 East field in the red rectangle to be added in the first half of 2022. This geographic spread of reservoirs and assets mitigates the risk of significant disruptions to Horizon cash flow.
The cross-sections on the right are broadly west to east sections across the northern and southern fields. They're included to illustrate the difference in structural style across the assets, in particular, geological complexity of the northern 6-12 production license, and hence the opportunity of numerous partially accessed fault blocks and stacked sands. Depicted here is just one of the infill wells that we hope to drill next year. On the left is that schematic geological section, it shows the Sliver prospect, so-called because it's a discrete sliver of a fault block containing some 15 sands bounded on two sides by sealing faults. On the right is a 3D image showing how the trajectory of the proposed well in red has been configured to penetrate as many reservoirs as possible. The Sliver infill well will target a mix of discovered and undiscovered resources in those reservoirs.
The well is proposed for 2022, gross incremental production could be in the range 600-1,200 barrels of oil per day. That's gross. Turning to future opportunities, this slide shows the locations of the four infill appraisal and near field exploration targets, which we anticipate, subject to joint venture approval, will be drilled next year. The aforementioned Sliver opportunity is a combined appraisal infill well. M3 is also a combined appraisal infill well. The A7 Weizhou is an exploration well with a modest target and will be converted to a WZ12-8 East project water disposal well, if unsuccessful. The 12/8 South East well is a near field exploration well, which can be immediately brought on to production if successful. These wells have been high-graded from our portfolio of opportunities that currently includes an additional eight possible targets. Turning now to the WZ12-8 East development project summary.
The 3D diagram on the right illustrates the main elements of the WZ12-8 East development, six producing wells in all. That's one deviated producing well drilled into the deeper Weizhou reservoir, five horizontal producing wells into the shallow Jiaowei reservoir, and one water disposal well extended to test a deeper Weizhou target. The development includes a self-installing processing and wellhead platform and an export pipeline tied back to the existing WZ12-8 West platform. A general point to help in understanding the special nature of the WZ12-8 East field. Both the map and diagram show the WZ12-8 East Jiaowei oil pool, which is currently characterized as having relatively low recovery. This low recovery is due to the combined effects of three field characteristics. Firstly, the oil is relatively viscous. Secondly, the oil column is relatively thin. Thirdly, the oil is reservoired in a very good quality, porous sandstone.
Combined, these characteristics are expected to result in a high initial oil rate, which then declines rapidly as water production increases. The high expected water rates are managed through disposal down the dedicated disposal well. Combined production from the WZ12-8 East, Jiaowei and Weizhou reservoirs is expected to average 4,000 barrels of oil per day gross or 1,000 barrels of oil per day net to Horizon for the first year of production. Successful production from the initial Jiaowei development, including possible slower than forecast decline, might result in further development. Here is a picture of the WZ12-8 East platform. I've included this photo because frankly, it's spectacular. It was taken in the Qingdao fabrication yard just prior to platform sail away. It's a self-installing four-leg platform with integrated production facilities and living quarters suitable for 30 meters of water depth.
The first of its kind designed and built in China by Cenex Energy Development Corporation or CEDC. Contract effective date was October 2020, and the platform sailed away in August this year, some 10 months later. It's an incredible achievement. CEDC and Roc Oil Company, the operator of this project, are to be commended. Turning now to China history and an indicative forecast. Note that all the data on this slide, production and recovery, is gross to the whole joint venture. The Beibu project has and continues to be a great success for Horizon. The project was approved for development with a reserve space of 16.2 million barrels with a decline curve per the orange dotted line. We anticipate ultimate recovery to more than double to 42.7 million barrels from the existing development, including 12/8 East. I should say, plus the 12/8 East.
The medium to longer term objective of the joint venture is to extend the production at between 8,000 to 10,000 barrels of oil per day gross through a combination of indicative activities such as infill and near field appraisal, exploration drilling, further increases in water handling capacity, and continued well and facilities optimization. We anticipate that these value accretive, indicative future activities are estimated to cost Horizon an amount in the range of AUD 5 million-AUD 10 million per annum for the next three to five years. Turning now to New Zealand and Maari. Maari continues to be an important asset for Horizon, generating approximately 30% of Horizon's cash flow. Importantly, over the last few years, the production decline rate has been arrested through continued water injection and well optimization.
Workovers were conducted in the final quarter of this year, which successfully restored production with the workover of MR-8A recently completed and currently cleaning up. Whilst we completed the MR6A workover during the year, that's MR6A, the well remains offline pending installation of a descending unit in the first quarter of next year. The joint venture focus is to continue to optimize production and to seek to extend field life. I've included this map and cross-section primarily for completeness. The key reservoirs, three in Maari and one in Manaia, are highlighted. The Maari Moki reservoir is the middle reservoir on the right of the cross section, where water injection has been instrumental in maintaining reservoir pressure and keeping production flat. The MR6A, with the sand production issues, is in the Maari Mangahewa reservoir at the bottom right of the cross section. Turning now to Maari way forward.
The OMV sale to Jadestone has been delayed for several months now, but in the meantime, OMV continues to operate the field effectively. "There are significant near-term production adds beyond the 2P reserves case." This is a quote from the Jadestone acquisition document from November 2019, and we still believe this to be the case. These include the potential for additional laterals and behind pipe opportunities. Commenting on the OMV to Jadestone sale, this announcement was made in November 2019, two years ago. The transaction continues to await New Zealand government approval, which is delayed pending the finalization of recently tabled new decommissioning legislation in New Zealand. Both parties, we understand, remain fully committed to this transaction and as reflected in the long stop date for the sale being extended to the 31st of December 2021.
With regards to field life extension, we've ensured that work streams are in place to ensure that the facilities can safely produce to 2027 and beyond. The operator has made good progress in this regard. Finally, to Maari decommissioning. The New Zealand government proposes to strengthen the rules. New legislation is pending, which when enacted, may allow the OMV to Jadestone to proceed. I noticed this morning that this legislation is pushing through parliament at quite a rapid rate, such that it's possible we may get royal assent achieved before the end of the year. Horizon's provision for decommissioning is currently around $31 million. However, we do anticipate a need to set funds aside for cash flow for the next three to five years.
Looking now at Maari history and the indicative forecast, note that all numbers are consistent with the Horizon reserve statement and our gross volumes. The indicative forecast clearly illustrates the importance of the current license expiry in December 2027, which is required to be extended if a significant portion of Horizon's contingent resources are to be commercially viable. Turning to operations activity during 2022. This chart sets out the timing of operations activity during the calendar year ahead. Please note that the budget processes are still underway, and we stress that the timings and estimated costs are indicative and remain subject to joint venture and regulatory approvals and rig availability. In total, we expect to have 11 wells to drill and at least three workovers to carry out.
The 12-8 East drilling campaign will extend over a continuous six-month period, with first oil expected in the second quarter of 2022. The other previously mentioned well and workover programs are expected to be focused in quarter two and quarter three 2022. Now, our summary activity outlook. Our intention is to capitalize on the higher oil prices to maximize value. In China, our priority is the delivery of the 12-8 East project with safe and successful drilling operations. The first six months of calendar year 2022 is very busy. A successful outcome will be to increase production significantly by mid-year. In New Zealand, our focus is to work with OMV, Jadestone, and the New Zealand Government to plan for the future.
The immediate priority is to reinstate production from MR6A, and we expect the decommissioning legislation to be finalized during early 2022 at the latest, and the OMV sale to Jadestone to be completed. This will pave the way for progressing further potential near production additions and extracting greater value from Maari. We also wish to maintain our focus on our ESG commitments, our costs, and look to creating shareholder value. We expect to pay down debt by July 2022. We continue to reduce our own costs. We will consider further capital management options, keep abreast of new business opportunities, and maintain a prudent hedging position. Our current hedge position is summarized at the bottom of the slide.
Looking ahead, given the higher oil price outlook, the steep backwardation in the forward curve, and given that most of our commitments are nearer term, any further hedging that we put in place will likely be relatively short-term focused. Let me conclude by summarizing and emphasizing our strategy. Firstly, we wish to maximize free cash flow. Our priority is to optimize and enhance production from our existing assets with a keen and disciplined focus on costs to maximize value and returns. On costs, we have consistently maintained cash operating costs below AUD 20 a barrel.
Further, through a combination of planned redundancies and staff resignations, we have reduced head count by approximately 50% over the past 18 months to 12 employees, driving annualized cost savings amounting to AUD 1.5 million. As a part of the restructuring, the company's key management personnel have been cut in half to two, and we will continue to optimize our cost structure, but ensure that we have the necessary resources to extract the substantial remaining value from the existing assets. Secondly, we look to make further distributions to shareholders. The company is determined to deliver values to shareholders, having distributed approximately AUD 50 million through various capital management initiatives during 2021. 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. Thirdly, to invest in new business.
Our priority is to invest in organic growth within our existing portfolio, of course, to drive the shareholder value. However, we must keep an eye out for opportunistic growth possibilities which could further enhance shareholder value. To this end, we keep an active outlook as to the assets or other opportunities becoming available within the market, which may meet our criteria. Any new business must be exceptional with strong investment metrics and the potential to enhance our ability to make further distributions to shareholders. I thank you for your attention, and I'll now hand you back to the chairman. Thank you.
Thank you, Christopher. I would now like to provide an opportunity for questions on the presentation. There will also be an opportunity to ask questions on the formal business of the meeting later. I will endeavor to give all members who wish to speak a reasonable opportunity to do so. I'll now ask Richard Beament, the company secretary, to read out questions received on the presentation before inviting those shareholders who wish to speak to the meeting, ask their questions directly. So Richard.
Thanks, Mike. Look, we have no written questions, we do have an audio question from Anthony Dillon regarding ESG. Anthony, we'll just, dial you in. If you can just make sure you please unmute your line, and please go ahead.
Thank you very much for taking my question. The shareholders appreciate the recent capital return. Given the International Energy Agency's conclusion that there is no room for new oil and gas production projects in the pathway to net zero emissions by 2050 and the global policy shift to meet that goal, will Horizon commit to no longer allocating capital to new exploration and development projects, and instead focus on maximizing revenue from existing projects and returning capital to shareholders?
I can confirm the second part of your question. We will commit to maximizing the production from the existing assets and returning capital when prudent to do so from shareholders. With regards to acquiring further assets, our focus is to, if we do that, we will be focusing on acquiring probably brownfield assets which are existing, already existing, currently in production. Our intention at present is not to go looking for wildcat exploration in new areas.
Thank you.
Richard?
We have no more questions on Chris's CEO presentation. We do have some other questions pertaining to resolutions, but we'll address them when we get to the formal business.
Okay. Thank you, Richard. Given that the notice of the meeting has been sent to all registered members, I move that the notice of the meeting now be taken as read. The minutes of the previous annual general meeting have been approved and signed in accordance with the Corporations Act. A copy is available for inspection at Horizon's offices should any member wish to do so. We will now move to the businesses of the meeting, which includes the resolutions to be put to the meeting. Prior to each resolution being discussed, the proxies which have been received will be displayed. As I mentioned earlier, all resolutions will be decided by a poll, and a live vote is now open for all items of business. The first item is the financial report.
The first item is to consider and receive the financial report, the director's report, and the independent auditor's report for the year ending 30th of June 2021. These documents have been made available to all shareholders. There's no requirement for a shareholder to approve these reports. Accordingly, item number one is for discussion only, and there will not be a vote on this item. I remind you that only shareholders of the company or their duly appointed representatives or proxies are permitted to ask questions. If you do have a question, please submit your question online or follow the online prompts if you wish to address your question directly to the meeting. I'll now ask Richard, the Company Secretary, to read out questions received on the financial report before inviting those shareholders who wish to speak to the meeting to ask their questions directly. Richard.
Thanks, Mike. Look, we don't have any questions pertaining to the financial report.
Okay. If we're happy to move on. I'll go to item 2, the adoption of the remuneration report. The meeting now needs to consider item 2, adoption of the remuneration report for the year ended the 30th of June 2021. The board unanimously recommends that shareholders vote in favor of this item. Proxies received in relation to this item are displayed. The remuneration report is now open for discussion. If you do have a question, please submit your question online or follow the prompts if you wish to address directly. Richard, we've had a question on resolution 2, this one.
Yeah. Thanks, Mike. We do have an audio question from Graham Nicholas regarding the remuneration report. Graham, if you just unmute your line, please go ahead and ask your question.
Hello?
We've got you.
All right. Not sure how to Hello?
Yeah, we can hear you, Graham. Go ahead, please.
I just was wondering whether I needed to unmute, but that's good. I'm probably gonna be a little bit long-winded, but I'll try and make it fairly short. Just as a preamble, unfortunately, Horizon is now a much smaller and less complex company than several years ago when the current cost structure was put in place. Notably, the market cap has declined from AUD 500 million to AUD 150 million. From operator in PNG, a difficult jurisdiction, to a non-operator in the two remaining countries. Oil price, lower from $100-$120 range down to $80-$85. From a financially vulnerable company, scrambling to refinance debt to financially sound with net cash in the bank and significant cash flows. Tellingly, we've gone from ASX 300 to not even in the ASX or the All Ords or the top 500 companies.
With that, I just pose a rhetorical question, given that Horizon is now a relatively straightforward business to direct and manage, are our directors and CEO overqualified for the task? In other words, are we paying for expertise that is no longer essential nor required? Just to get my head around whether they're reasonable costs or not, I've researched several ASX companies and would like to highlight two, being Norwest Energy and Carnarvon Petroleum. I'll give some brief details about the relative cost structures. Before I do that, I'd like to warn Mr. Clement, as a non-executive director of Norwest, that I would like to ask him if he could provide a summary of the relative complexities of steering and managing the two companies, Horizon and Norwest. That may actually explain the fairly large differences in cost.
By way of comparison, the market cap of Horizon is AUD 140 million, Norwest is AUD 140 million, and Carnarvon is AUD 500 million. Horizon has 6 directors, Norwest 3, and Carnarvon 5. Horizon's chair is paid AUD 178,000. Norwest Energy is AUD 48,000 plus AUD 10,000 in options, and Carnarvon AUD 150,000. The other non-executive directors get AUD 89,000 Horizon, Norwest AUD 38,000 plus AUD 10,000 in options and AUD 100,000 to the other non-executive directors at Carnarvon. The total non-executive directors costs are just a tad over AUD 534,000. This is AUD, I think. For Horizon, AUD 124,000 to Norwest and AUD 30,000 in options, and Carnarvon AUD 450,000. A bit, AUD 80,000 less than Horizon.
The MD CEO cost, including STIs, Horizon AUD 910,000, Norwest AUD 321,000, and Carnarvon AUD 766,000. In summary, the MD costs and board costs are significantly higher at Horizon compared to the much larger Carnarvon, which I anticipate based on what they've got on their books is a far more challenging company to manage and steer. Even more pronounced at Norwest, we're a similar market cap and a cost typically around one-third of Horizon's, and where I would imagine the challenges and complexities are probably fairly similar to Horizon. I also want to have some input on LTIs and STIs, but as flagged earlier, I would appreciate any input Mr. Clement could give to us on the relative complexities of managing and steering the two companies to see whether there's an explanation for the significant difference in running costs.
All right, Graham. Lots and lots of questions there. I'll ask Bruce to say something in a few minutes. You touched on more or less everything. We have benchmarked our costs against other companies. We'll go back to that in a tick. I wanted to, because, we all read HotCopper, whether you like it or not, my friend. The size of the board. Our constitution allows the board to have eight directors. We don't need eight. We've currently got a very good mix of skills and experience. However, Gareth's retirement, and Nigel's addition will now give us two non-independent directors, one from IMC and one from Samuel Terry. Whether you like it or not, for good governance reasons, we have to remain independent. You've got Bruce, Sandra, and myself as independent directors for that reason.
I know when Chris took the job over as CEO, now I've got to make the round number up. I think the previous CEO was getting AUD 900,000 a year. Chris gets AUD 600,000 a year. On round numbers, don't hold me to the exact dollars. We do look at our costs, and we looked at the costs of the board and NED fees, or Greg Bittar did, against other companies. We're on top of costs. As we said earlier, we've reduced our people count to 12 people, and we're going to look at that moving forward. The difference between Norwest and Horizon, I can't answer that, but we've got the expert in the room, Bruce, who can probably comment on that.
Thank you, Mr. Chairman. Look, I can't speak for Carnarvon, who you've mentioned in your question. I can speak for where Horizon and Norwest sit in terms of complexity of business and activity levels in the business. They are not the same. Horizon is involved in two international assets that are in production mode, with significant activities ongoing pretty much every year in terms of drilling, workovers, and even production operations activities. Now, Horizon is a non-operator in those ventures but is a significant influencer in those operations and businesses. Compared with that, Norwest is a Perth Basin player, onshore Perth Basin largely, and has been successful recently, obviously, in exploration for gas in the Perth Basin. It is a non-operating player as well. It is very much in the infancy of its growth in terms of activity levels, in particular.
It's drilled an exploration well that was very successful. It has a program of work coming up next year that Mineral Resources, as the operator, will be conducting. I would expect that activity will grow there, as will the overheads for running that business as that company moves into appraisal and hopefully future development. They're not in the same position on the life cycle and certainly not in the same position in terms of activity level and complexity of the businesses. I'm of the view that they are probably right-sized for what they're doing right now in terms of board and management structures. I'm supportive of where Horizon has got to with its management structure and staffing levels right now, following obviously the divestment of PNG and the most recent reductions in staffing levels and overheads for the business. I think they're not the same.
I think they're probably both in about the right position with the level of overheads and staffing that they're running.
Graham, the other thing that, and I can't quote you the direct numbers, but we did yesterday. We approved the budget for 2022, I think it was, Chris. As part of Richard's presentation, we look at our costs today. We've looked at them for the next five, six, seven years and looked at how we decrease things like insurance, staff numbers, office accommodation. Help me, Richard. A whole manner of things that reduce our costs, if you want, over the next four to five years. We're not just going to sit here and look at what we are today.
Okay. Thank you for that, I've gone.
I don't know what else to say on the matter.
No. That's it.
There's now an opportunity for discussion on the resolution. Have we had any questions, Richard, on Sandra?
There's no questions, Mike, on.
Thank you. Excuse me. Move to item 4, which is approval of the Managing Director's long-term incentive. The meeting now needs to consider item 4, approval of the Managing Director's long-term incentive. The details of the long-term incentive plan are set out in detail in the notice of the meeting. Proxies received in relation to this motion are displayed up on the screen. There's now an opportunity for discussion on this resolution. Richard, are there any questions? I can see there's one from Graham again. Graham, over to you. Gone? I think he's gone now.
I think he might have just disconnected then. Yeah, I think Graham's question was addressed in his earlier commentary.
Oh, was it? Have you gone, Graham? You've disappeared. Yeah?
I think my understanding is that the questions he had related to.
Well, that's fine.
He's dropped off, yeah.
Oh, he's dropped off. He's gone. Sorry, Graham's gone. There are no more questions. Thank you very much, ladies and gentlemen. That completes all item of business for the meeting. In a couple of minutes, I'll close the voting system. Please ensure that you've cast your votes on all resolutions. I'll now pause for about 90 seconds, so votes can be finalized. We're going to go quiet for 90 seconds now whilst everybody votes. Thank you. I'll come back. Okay, we're back off mute now, hopefully everybody's voted. Graham, we lost you for some reason. Even though everybody's voted, can you ask your question, please?
Final or-
We're back off mute now, hopefully everybody's voted.
Oh, yeah. Hello, can you hear me?
We've got you, Graham.
Okay. I just need to bring up the question. It's sort of going back in time a little bit. It's relating to the long-term incentive, the LTI scheme. I'm just bringing up my notes. If there's any other questions, perhaps you could cover those first. Hang on a second.
No, I don't think there's any other questions, Graham. I think we're just waiting for yours.
Oh, okay. Well, I've got it up, but I guess it's back to the remuneration report and the LTI framework. Just looking, comparing Horizon's LTI framework to other companies, Horizon seems to have got out of kilter. My understanding is it was the LTI approach of SARs was introduced in 2010, initiated to new legislation by the Rudd Government. Horizon was an early adopter. The initial scheme has pretty much remained unchanged. As a consequence, I believe it is out of step with industry best practice, which has evolved over those 12 years. For instance, our absolute return hurdle is 10% minimum over a five-year period, which is less than 2% per annum, which in my opinion is pretty low when you look at Australian shares which have returned 10% per annum. If you include franking credits, probably in excess of 10%.
In comparison, Carnarvon's absolute return hurdle is less than 10% per annum, 0% vest, 10% per annum, 33% vest, 20% plus per annum, 100% vest. Obviously between 10% and 20% return per annum, vesting is prorated. This turns out to be a 10% compound rate over three years is 33% total return, over five years it's 61%. The Horizon hurdle is exceptionally easy to get over. The relative return hurdle for vesting of SARs is linked to the S&P/ASX 200 Energy Index, which includes four multi-billion-dollar oilers, Woodside, Santos, Oil Search, and Beach, which make up about 60% of the index, five other companies being Ampol, Soul Pattinson's, not sure what their connect, which is a listed investment company, Viva Energy, Whitehaven Coal, and Worley Parsons. The relative return is zero, matches at 50% vest and exceeds by 14%, 100% vest.
Compared to Carnarvon, they use an index of peers, as does Cooper Energy and Karoon Energy. Carnarvon's peer group is 88 Energy, Buru Energy, Central Petroleum, Cooper Energy, Elixir, Empire, Galilee Energy, Helios, Horizon, Karoon, Senex, Strike and Warrego. Less than 50% percentile, 0% vest, 50% percentile, in other words, you match the return of the peer group, 50% vest and the 75th percentile, 100% vest. I just think that to be at the 75th percentile, you're more than likely going to have to have a more than a 14% return, which again, over three years is 3% per annum. The 75th percentile will be significantly higher than that. Cooper has a different group of companies as a peer group and more stringent vesting requirements. Rather than waste time on that, I'll continue on.
The other thing that I just think the actual functioning of the SARs is quite problematic to me. On the 21st of October 2021, Horizon Oil announced that the quantity of SARs had been exercised and others had lapsed. I was under the impression that a primary purpose of SARs is to attract and retain appropriate skilled staff. One of the benefits that I perceived of the minimum three-year to maximum five-year vesting period was that the accrued value acts as an incentive for staff to remain employed by the company.
Okay, Graham. It's Mike.
Yep.
You've done your homework. Listen to that. I'm not going to give you the answer. Greg is in a minute. You know how long I've been around on boards. I'm not a great lover of SARs or LTIs. I really find them so difficult to understand, and at times, the conversation just doesn't come to an end. Greg will just give you two minutes on SARs, and then we need to close the meeting.
Yeah. Well, if you don't mind, Mike, I've got a very important point to make because Kylie's-
Go on.
It's okay to go ahead, is it?
Yeah.
Kylie's payout amounted to AUD 170,566. This was as a result of her 2019 SARs, which would have vested because they'd been issued for three years, but unfortunately had a negative value of AUD 33,000. Basically expired worthless, and they're the ones that expired. Kylie's 2020 SARs had not vested because they hadn't been issued for three years yet, had a payout value of AUD 11,500 odd after three years of effort. The bulk of the payout came from 2021 SARs, which is obviously not vested because they'd only been issued for one year. They had a value of AUD 158 or nearly AUD 150 A tad under AUD 159,000. These numbers sort of highlight a complete disconnect between LTIs accrued value and the years of toil. Look, I could go on and on and on, I really have trouble understanding why Kylie's 2021 SARs were paid out in full.
Okay, Graham.
when they could have been by the board.
I don't want to comment on an individual, Kyle, in this particular AGM. We can get back to you on the numbers and the comments and why we did what we did for Kyle. I promise you that either Richard or Greg will get back to you. I'm not going through-
Okay.
In fact, I don't have the numbers in front of me to even argue against you. We will get back to you, though, because we should respect your question.
Well, it's really more the concept.
Yes, I understand the point you're making. Yeah.
It's a broader question. It's a policy question. I'm not picking on Kyle.
No
somebody you'd want to keep.
Look, Graham, it's Greg Bittar. As you say, this is a legacy program, 2010 initiated. We've got to keep this in context, right? The number of key management personnel that participate, and the extent to which they participate by virtue of their reduced salaries is coming down. I think something like the vast majority of those SARs that are on issue remain on issue as a result of legacy previous management grants. I think that's something in the order of 75% or certainly 75 million odd SARs at the moment relate to three previous key management employees. Look, we've all done the comps. We had a review that was commissioned for the board, probably 12 months ago, of this program. There were some tweaks made, but we found that it, by and large, was representative or not an outlier in terms of programs out there.
We do have a broad range of comps simply beyond Norwest and Carnarvon that we've compared it to. Keep in mind that the value of these SARs are ultimately the upside that's created. It's the difference between the share price at the time that they're exercised and the strike price or the share price at the time of the grant. To get the full allocation and the full value, to your point around benchmarks and hurdles to fully vest, Horizon has to perform in the top 25% of the companies in that peer group that you referred to, must out-
I don't understand how that's true, Greg.
In the top 25% and outperform the index by at least 14 or 15%. We can argue about the sliding scales and tweaking it, but I think the board, based on its review previously and its constant review and thinking about what's relevant in the market, is quite comfortable with the scheme.
Graham, I'll need to either get back to you if you're not satisfied.
Well.
I don't think we can talk specifically, publicly or privately about individuals.
We'll get back to you, either Richard will or Greg will, because I need to move us on. Now, I'm guessing all the voting's finished now. Yeah. As I mentioned earlier, the voting results will be announced to the ASX later today. Before we conclude, I'd like to thank you again for this opportunity to recognize the service of Gareth as he retires as a director at the conclusion of this meeting. Thank you again, Gareth, for your dedication and efforts, and I wish you all the best for the future. If there's any other business that can be lawfully brought forward, let me know. If there's no further business, ladies and gentlemen, I declare the meeting closed. Thank you very much for your attendance and time.