Horizon has executed a sale and purchase agreement with  Macquarie Mereenie to acquire a 25% non-operated participating interest in the OL4 and OL5 development licences, Northern Territory, Australia, which contain the producing Mereenie conventional oil and gas field. The proposed acquisition has been executed together with New Zealand Oil and Gas (“NZOG”), an  incumbent Mereenie joint venture partner, who will acquire a further 25% participating interest in OL4 and OL5 from Macquarie on identical terms. 

The headline cash consideration is US$27.6 million, with an effective date of 1 April 2023, plus up to US$5.8 million in deferred and contingent payments over the next 24 months which are subject to certain conditions being met. The headline cash consideration will be 100% funded from a new five-year debt facility from Macquarie Bank which is secured against the acquired asset. The funding structure, together with the expected free cashflow generation from Mereenie allows for the continuation and potential enhancement of Horizon’s distribution strategy. The transaction remains subject to customary completion conditions including regulatory, landowner and joint venture approvals, and documentation of the committed debt facility.

Highlights

• Horizon agrees to acquire a 25% non-operated participating interest in the OL4 and OL5 development licenses which contain the producing Mereenie conventional oil and gas field, Northern Territory, Australia. 
• The headline cash consideration is fully debt funded from a new five-year debt facility from Macquarie which is secured against the acquired asset. Importantly, this funding structure, combined with the expected additional cashflow to be derived from the asset allows for continuation and potential enhancement of the Company’s distribution strategy. 
• Horizon is acquiring 6.4 mmboe of 2P reserves as at an effective date of 1 April 2023 (6.3 mmboe 2P reserves as at 30 June 2023, an increase of ~129% compared to the Company’s 2P reserves position at 30 June 2023). Based on a total consideration of US$33.4 million, comprising the headline consideration of US$27.6 million plus deferred contingent payments of US$5.8 million, this represents an acquisition cost of ~US$5.3/boe. 
• Mereenie is a high margin and low-cost conventional oil and gas project, with a long track record of stable production (currently approximately 1,150 boe/d net to Horizon), significant contracted gas offtake with high-quality contract counterparties and material cashflows. Mereenie is linked to both the high demand Northern Territory and East Coast gas markets via the Amadeus and Northern Gas Pipelines. 
• The recent signing by the Mereenie joint venture of a substantial gas offtake agreement with Arafura Rare Earths Limited demonstrates the strategic value of Mereenie, particularly its role in supporting the energy transition.
• Mereenie operating costs are approximately US$13/boe, which is materially lower than the Company’s current unit cost of approximately US$20/boe. 
• Horizon sees potential to enhance value through further Pacoota sandstone infill drilling and the possible development of the shallower Stairway Formation. The extraction of helium from the raw gas stream provides an additional potential revenue stream with the joint venture having signed a memorandum of understanding with Twin Bridges LLC to evaluate a potential project. 
• Central Petroleum are a high-quality operator who have a focus on cost effective and efficient operations at Mereenie, and consistently deliver on safety, sustainability and community support. 
• New Zealand Oil and Gas (NZOG) are an incumbent partner who have also agreed to purchase the remaining 25% of Macquarie’s holding, which takes NZOG’s holding in Mereenie to 42.5%.

Horizon CEO, Richard Beament commented:
“ This asset is an excellent addition to our portfolio - complementing, diversifying and expanding our production base. The acquisition plays to Horizon’s strengths as a non-operator, being also right sized, largely self-funded and with material upside. Consistent with our strategy, we are delighted to have identified an inorganic growth opportunity which meets our strict investment criteria of acquiring assets which allow for the continuation and potential enhancement of our capital distribution strategy. As a long-life cashflow producing asset, this acquisition provides the Company with a strong platform to continue distributions beyond the life of our existing assets.

The consideration payable for the acquisition is substantially supported by the contracted gas offtake from the asset, which has enabled Macquarie Bank to provide full debt funding for the initial consideration on attractive terms.

We are pleased to be able to partner with NZOG, a natural partner in such a deal given our long history together in the Maari asset through NZOG’s subsidiary Cue Energy. Clearly, as an incumbent partner in the Mereenie joint venture, NZOG’s desire to increase their interest through this acquisition is a strong endorsement of the significant remaining value to be unlocked at Mereenie.

Upon completion, the acquisition will increase Horizon’s net daily production by ~1,150 boepd, proved and probable (2P) reserves by 6.3 million barrels of oil equivalent as at 30 June 2023, an increase of ~129% compared to the Company’s 2P reserves position at 30 June 2023, and 2C (contingent resources) by 7.9 million barrels of oil equivalent, an increase of ~114% compared to the Company’s 2C contingent resource position at 30 June 2023.

The acquisition is expected to meaningfully increase net operating cash flow over the next 5+ years and provide a production base beyond the expiry of our existing assets. The asset provides the Company with material exposure to both the Northern Territory and East Coast gas markets, both of which are forecast to have significant supply side opportunities. With domestic gas recognised as key to the energy transition, Mereenie has a strong part to play in providing essential energy to miners and other industrial users to support the energy transition. We look forward to finalising the transaction over the coming months as we finalise debt facility documentation and customary regulatory, landowner and joint venture approvals.”

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