Horizon Oil Earnings Call Highlights Growth Momentum

Horizon Oil Limited ((AU:HZN)) has held its Q2 earnings call. Read on for the main highlights of the call.

Horizon Oil’s latest earnings call struck a confident tone, with management emphasizing that operational momentum is outpacing headline profit pressures. Strong volume growth, successful integration of the Thailand assets and robust cash generation offset the drag from weaker oil prices and higher amortization, reinforcing the narrative of a business building scale with manageable balance-sheet risk.

Strong Volume Growth

Production and sales volumes rose sharply, up 26% and 25% versus the prior half, pushing output above 1 million barrels of oil equivalent. This volume expansion reflects both organic performance and the first meaningful contribution from the newly acquired Thailand assets, setting a higher operational base for the group.

Resilient Revenue and Earnings Metrics

Underlying revenue for the half reached $54.2 million, including $9.6 million from Thailand, while EBITDAX came in at $28.6 million, broadly flat on the prior half. That stability is notable given a 15% decline in realized oil price, indicating tight cost control and diversification benefits from gas-weighted assets.

Material Improvement in Operating Cash Flow

Cash flow from operating activities jumped 37% to $25.1 million, underlining the cash-generative nature of the portfolio despite softer prices. This was sufficient to fund the FY’25 final dividend of $15.9 million, reduce debt by $3 million and support $4.6 million of sustaining and development spend without stressing liquidity.

Thailand Acquisition: Immediate Scale and Low Costs

The Thailand acquisition, completed on 1 August 2025, delivered roughly 28% of group production over just five months and $9.6 million of revenue. These assets are particularly attractive given operating costs of about $7 per barrel of oil equivalent and early optimization at Nam Phong already delivering around a 7% production uplift.

Major Development Upside in Thailand

Management highlighted the final investment decision on the Nam Phong Booster Compressor as a key growth lever. Once online from mid‑2026, the project is expected to boost Nam Phong field production by at least 40%, providing material near‑term upside and further leveraging the low‑cost Thailand position.

Maari Permit Extension and Production Recovery

At Maari, a 10‑year permit extension to December 2037 significantly extends field life and underpins investment. Operationally, Maari delivered its strongest daily production in more than five years, with average half‑year output about 12% higher than the comparable period, signaling a meaningful recovery.

Mereenie Performance and Gas Sales Progress

Mereenie also performed well, with two recent infill wells contributing roughly a quarter of the field’s gas production. Improved realized gas pricing and a binding letter of intent with Power and Water Corporation create a pathway for firm gas sales through 2034, supporting plans for further infill drilling in 2026.

Low Cash Operating Costs and Balance Sheet Liquidity

Group cash operating costs remain around $20 per barrel of oil equivalent, positioning the company competitively through cycles. With cash of $35.6 million at 31 December 2025 and modest net debt of $9.8 million, Horizon is able to maintain an interim dividend of AUD 0.015 per share while funding development and working capital.

Record Calendar-Year Context

For calendar 2025, sales volumes were the highest in five years, underscoring the step‑change delivered by Thailand. Underlying revenue of $103.6 million and EBITDAX of $54 million highlight the consistency of earnings capacity even as the portfolio evolves, providing a solid platform for future growth projects.

Lower Realized Oil Price Impact

The main drag on reported results was a 15% fall in realized oil prices, which weighed on profitability. Calendar 2025 profit was limited to $8 million, reflecting not only the weaker price environment but also higher non‑cash amortization that compressed accounting earnings despite firm margins.

Acquisition Funding and Increased Leverage

The Thailand deal was largely funded with debt, and together with the FY’25 final dividend and a loan to a joint venture partner, it drove a reduction in cash and a shift to net debt of $9.8 million. Management framed this leverage as modest and manageable relative to cash flow, but investors will watch balance‑sheet discipline closely.

Operational Interruptions at Sinphuhorm

Not all assets ran at full tilt, with Sinphuhorm’s output temporarily constrained in August and September by planned maintenance at the EGAT power station. Management also flagged similar seasonal effects in February and March, though these interruptions are short‑term and primarily defer rather than destroy value.

Ongoing Projects Not Yet Realized

Several initiatives remain in execution or review, meaning their benefits are not yet in the numbers. These include the Block 22/12 liquids‑handling upgrade, evaluation of a multi‑well development at 12‑8 East and the still‑undrilled Mereenie Stairway formation, where timing is uncertain but potential upside is material.

Non-Cash Accounting Pressure

Higher non‑cash amortization also weighed on reported profit, masking the strength of operating performance. Management emphasized that cash margins and EBITDAX remain robust, suggesting that headline earnings understate the underlying health of the business during this investment phase.

Working Capital and JV Loan Complexity

A loan extended to a joint venture partner to facilitate the Thailand transaction added complexity to the balance sheet and near‑term cash outflows. The facility, which carries a floating rate and amortizes by end‑2027, has already seen more than $1 million repaid, but it remains a notable receivable and funding consideration.

Forward-Looking Guidance and Growth Pipeline

Looking ahead, Horizon plans to pay an FY‑26 interim dividend of AUD 0.015 per share in April 2026, supported by $35.6 million in cash and modest net debt. Operational priorities include ramp‑up of the Block 22/12 liquids upgrade, feasibility work on 12‑8 East, Maari optimization under its extended permit, Mereenie infill wells in late 2026 and major growth from Nam Phong’s booster compressor and Sinphuhorm tie‑ins.

Horizon’s earnings call painted the picture of a company trading near‑term profit dilution for future growth and scale. Strong volumes, low operating costs and clear project catalysts in Thailand, Maari and Mereenie underpin a constructive outlook, while leverage and price volatility are the key risks investors will monitor as the next development phase unfolds.