PRE-DEVELOPMENT planning continued on Horizon Oil’s Western Province gas fields during the March quarter as the company awaits the outcome of drilling at ExxonMobil’s P’nyang well site.
Horizon said in its March quarter announcemen it had made progress on landowner, envrionmental and technical matters on the Elevala/Tingu and Ketu gas condensate fields in PRL 21.
But the company also noted activity at neighbouring fields, including P’nyang, where two appraisal wells are to be drilled in the fourth quarter of 2016 and the Repsol-operated PPL 269, at which the Strickland 2 well started drilling in May.
Horizon said the outcome of the P’nyang drilling program, expected to be known by the end of the year, would determine levels of demand for any gas produced at Elevala/Tingu and Ketu.
Horizon is banking on gas from the fields being tied back into a third train at the Exxon-Mobil operated PNG LNG project.
“The company understands that such brownfield aggregation and expansion proposals have considerable PNG governmental support,” it said.
Horizon and its partners in PRL 21 – Repsol-owned Talisman Energy, Osaka Gas, Kina Petroleum and Mitsubishi subsidiary Diamond Gas – are also progressing planning for a greenfield liquefied natural gas plant at Daru Island as its base case for development.
“The company will continue its feasibility analysis for gas sales to West Papuan agribusiness and industrial users,” Horizon said.
“However, the opportunity to participate in a brownfield LNG development by way of aggregation of Horizon Oil’s gas fields with those of other operators represents a potentially attractive proposition with less engineering and financial risk,” it added.
Work at the Repsol-operated Stanley gas-condensate field PDL 10, in which Horizon holds a 30 per cent stake, continued during the quarter as the operator continued discussions with OK Tedi Mining and other potential gas buyers.
“Horizon Oil anticipates the revised project configuration will entail a phasing of the ultimate development and associated capital costs, matching the gas demand for power generation with the requirements of regional mining, industrial and domestic consumers and enabling a reduced initial capital investment.”
The company secured revenue of US$16.1 million in the March quarter of 2016 as well as completing refinancing arrangements that gave it US$60 million in new funding to repay US$58.5 million 5.5% convertible bonds issued in 2011.
Horizon’s major shareholder IMC Investments will underwrite a US$20 million entitlements offer to be run later this year as part of the arrangements, with IMC also to loan another US$40 million to Horizon under the deal.
Bondholders have been asked to extend the maturity of the bonds to 19 September 2016 as well as to adjust the interest rate payable to 10% per annum.
“Importantly, the refinancing arrangements are intended to ensure the company will be well positioned to exploit its key oil production assets in China and New Zealand and material condensate rich gas fields in PNG,” Horizon said.
The loan and rights issue will require the approval of shareholders, to be sought at an extraordinary general meeting in July 2016.