Horizon Petroleum Ltd. (the “Company” or “Horizon”) (TSXV: HPL) is pleased to announce that following its recent qualification with the Polish Government to conduct oil and natural gas activities (press release dated May 1, 2019), it has completed the acquisition (the “Acquistion”) of two of the five concessions to be acquired, as previously announced in Horizon’s press release dated September 19, 2017, from subsidiaries of San Leon Energy plc (“San Leon”). Most importantly, the Bielsko-Biala concession, containing the Lachowice natural gas discovery, is one of the concessions acquired. The acquisition of the other three concessions, under similar but separate transactions, are expected to close within 60 days. The closing of the Acquisition shows Horizon continues to make progress on it’s business plan of developing a natural gas production company focused on opportunities in Europe.
Highlights of the Acquisition
The Acquisition consists of operated concessions (100% working interest) containing a number of undeveloped natural gas discoveries in proven basins. The Lachowice discovery in the Bielsko-Biala concession is the most advanced of these discoveries and has the following attributes:
Probable Undeveloped Reserves (2P) of 36 Billion cubic feet equivalent (Bcfe) (6.0 million barrels of oil equivalent, (MMBoe)) valued at US$98 million Net Present Value discounted at 10% before taxes (NPV10 BTAX)
Risked Best Estimate Contingent Resources (2C) of 171 Bcfe (28.5 MMBoe) valued at US$398 million (NPV10 BTAX)
Unrisked Best Estimate Contingent Resources (2C) of 249 Bcfe (41.4 MMBoe)
Risked Best Estimate Prospective Resources of 123 Bcfe (20.6 MMBoe)
Unrisked Best Estimate Prospective Resources of 487 Bcfe (81.2 MMBoe)
An anticipated phased development plan, consisting of a new vertical well expected to be drilled in Q2 2020, targeting facility-constrained natural gas sales of 3.0 million cubic feet equivalent per day (MMcfe/d) by early 2021
Two horizontal or highly deviated wells expected to be drilled in Q4 2021, targeting an increase in production to 17.5 MMcfe/d by Q1 2022
Drilling to continue, targeting production increases to over 30 MMcfe/d thereafter
The terms agreed and previously announced by Horizon and San Leon were for Horizon to pay San Leon consideration at closing of US$900,000 in cash (net) (the “Cash Consideration”), C$1,000,000 in Horizon shares (the “Share Consideration” and collectively with the Cash Consideration, the “Consideration”), and a 6% Net Profits Interest (“NPI”), plus closing cost adjustments. Horizon and San Leon originally agreed that San Leon would transform the concessions to new concession agreements prior to closing. However, due to delays in this process, Horizon has agreed to take responsibility for the completion of the transformation of the concessions, and in exchange, the parties have agreed that payment of the Consideration will be made contingent upon the transformation of the Biesko-Biala concession. The transformation of the concessions involve the conversion of the Bielsko-Biala and Cieszyn concessions to the new Polish concession structure and the completion of the award of the three remaining concessions to Horizon. These transformations are expected to occur by the end of 2019 or early 2020. In the event that the transformation of the Bielsko-Biala concession is not completed, Horizon will not pay the Consideration to San Leon. Payment of the Consideration is subject to a number of additional conditions, including the transformation of the concessions, final approval of the TSX Venture Exchange, Horizon’s ability to raise sufficient funds to pay the Cash Consideration and the potential need for shareholder approval for issuance of the Share Consideration.
Discussion of Reserves and Resources
APEX Global Engineering Inc. (“APEX”) prepared an independent reserve and resource evaluation (the “Reserve Report”) on the Lachowice conventional natural gas field in the Bielsko-Biala concession in southern Poland with an effective date of January 31, 2018. The Reserve Report was prepared in compliance with the standards set out in National Instrument 51-101 of the Canadian Securities Administrators and the Canadian Oil and Gas Evaluation Handbook (COGE Handbook). APEX assigned the Probable Reserves and Contingent and Prospective Resources to the Lachowice field, which at 10,561 acres represents approximately 1.5% of the total lands to be held under the concessions (see Table 1 below). The reserves and resources assigned are subject to significant risks. Please refer to the Risks section at the end of this press release.