HZN 2.25% 9.1¢ horizon oil limited

Low oil price good for HZN?

  1. 207 Posts.
    It may be an "extreme" theory, but current oil low prices are killing HZN competitors and evidently slowing oil/gas exploration-production activities while HZN is considerably protected from the ongoing oil price shock by its oil hedging trick.

    During the Sept Quarter, daily oil barrel production was about 3400 and, I think, it has remained steady during the Dec Quarter. Considering that HZN has hedged up to about 2700 barrels per day till March 2015 (see AGM presentation), this means that almost 80% of the current HZN oil production is being sold at $95.

    Furthermore, there are 2 other factors in favour of HZN to be highlighted:

    1) Beibu lower oil price ($4-5 discount) production is decreasing while Maari higher oil price ($4-5 premium) production is increasing.

    2) Lower oil prices are also a consequence of the stronger US$: this means that, while HZN is selling barrels at fixed $95, oil production costs in China and NZ have been decreasing and, therefore, profit margin on the 95$ barrel has been increasing.

    With more than 2000 barrels per day (almost 80% oil production) hedged till Jul 2015, HZN is well protected for other 2 quarters, exactly till when oil price will likely rebound as the effect of the ongoing oil exploration cuts will finally start bing felt.
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