OilVoice - Horizon Oil Announces Divestment of Thai Petroleum Concessions

Horizon Oil Announces Divestment of Thai Petroleum Concessions

Friday, February 13, 2009

As foreshadowed at the Annual General Meeting held on 27 November 2008 and advised in the December 2008 quarterly report, the Company commenced a process in the December 2008 quarter to reduce its offshore drilling obligations in the Gulf of Thailand in 2009.

As a result of that process, the Company has transferred all its interests in Blocks G1/48, G3/48, G6/48, G10/48 and G11/48 (“Thai petroleum concessions”) to Pearl Energy Limited, which either directly or indirectly via subsidiary companies, operates each of the petroleum concessions.

The divestment of the Thai petroleum concessions has eliminated Horizon Oil’s liability to a committed and obligatory 2009 offshore drilling program with an estimated cost, net to Horizon Oil, of US$22 – 30 million. As a consequence of the transfer, Horizon Oil has no further obligations in respect of, nor participating interests in, the Thai petroleum concessions.

The Company’s considerable carry obligations in Blocks G1/48, G3/48 and G6/48 in favour of Pearl Energy Limited were offset against the Company’s expenditure to date in all concessions, resulting in no consideration payable by either the Company or Pearl Energy Limited. As a result of the transaction, the Company will recognise an impairment charge of US$6.8 million in respect of the Thai petroleum concessions in its 31 December 2008 half-year accounts.

Horizon Oil’s Chief Executive Officer Brent Emmett’s comments-:
“This was a tough decision for the Horizon Oil Board but it is the right one. The six months delay in anticipated cash flows from Maari field production, coupled with current economic conditions and low oil prices, call for a disciplined approach to managing cash reserves.

Our priorities are clear – until Maari is on stream later this month and market conditions improve, the focus will be directed towards Horizon Oil’s development and pre-development projects, where proven and probable reserves and resources already exist and provide greater certainty of generating shareholder value. There will be a time to look to exploration for growth but it is not while oil prices of US$40 – 50 per barrel, combined with exploration costs at the high levels of 2008, prevail.

The reduction in exploration expenditure resulting from divestment of the Thai acreage is considerable, making this an important one of several initiatives that are currently being undertaken by the Company in response to the situation described above.”