{"id":59673,"date":"2012-03-19T12:41:02","date_gmt":"2012-03-19T01:41:02","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2012\/03\/19\/theres-more-upside-in-horizon-oil\/"},"modified":"2012-03-19T12:41:02","modified_gmt":"2012-03-19T01:41:02","slug":"theres-more-upside-in-horizon-oil","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2012\/03\/19\/theres-more-upside-in-horizon-oil\/","title":{"rendered":"There’s More Upside In Horizon Oil"},"content":{"rendered":"

\n\t – Horizon's look through valuation boosted by recent sale
\n\t – Transaction also positive for market's view on Stanley development
\n\t – Stockbrokers see other positive catalysts in coming months
\n\t – Buy ratings retained on Horizon<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tHorizon Oil ((HZN<\/span>)) has a number of assets in Papua New Guinea, including 50% and 45% stakes in PRL<\/span> 4 and PRL<\/span> 21 respectively. Macquarie had previously ascribed these stakes with a risked value of US$255 million.<\/p>\n

\n\tThis makes the recent sale of a stake in both blocks by Talisman significant. As Macquarie points out, Talisman has sold 10% and 7.5% stakes in PRL<\/span> 4 and PRL<\/span> 21 respectively for US$39.5 million and A$22.1 million. This gives a read-through value for Horizon's stake of US$331 million, a solid premium to Macquarie's previous estimate.<\/p>\n

\n\tIt is an even larger premium to the estimate of BA Merrill Lynch, which had valued the stakes of Horizon at around US$200 million. BA-ML estimates the sale price equates to a value for the Horizon stakes of around 30c<\/span> per share.<\/p>\n

\n\tThe deal is also positive for the market's view on commercialisation<\/span> of Horizon's Stanley gas project. Macquarie estimates the deal potentially values Stanley gas at US$65 million. With the Papua New Guinea cabinet approving plans for a Stanley gas-fired power station, gas commercialisation<\/span> options are progressing in the broker's view.<\/p>\n

\n\tA further positive for BA-ML is Horizon has mandated a bank consortium to provide $160 million in reserve based financing. While no deal has yet been done the broker suggests progress is being made, which significantly reduces the risk of a near-term equity raising. Macquarie agrees, expecting the reserves-based debt facility could be secured by the end of this month.<\/p>\n

\n\tLooking forward, the next catalyst for Horizon should be drilling results from Ketu-2<\/span>, which are expected by the middle of next month. Assuming the next round of results are encouraging, Macquarie see this as a positive with respect to de-risking the Tingu<\/span> project. <\/p>\n

\n\tIn early 2013 Horizon expects to commence production from the Beibu<\/span> development in China. This supports the market's expectation of earnings picking up from FY13<\/span>, as the FNArena<\/span> database shows consensus earnings per share (EPS) forecasts of 1.1c this year and 3.4c in 2013.<\/p>\n

\n\tThe database shows a consensus price target for Horizon of $0.47, with BA-ML the low mark with a target of $0.42 and Macquarie the most aggressive with a target of $0.55. Given the look through pricing indicated by the Talisman deal, Macquarie argues the market is ascribing limited value for the rest of Horizon's assets.<\/p>\n

\n\tThis appears overly harsh, as Maari<\/span> has been developed and is in production and Beibu<\/span> should be producing in the next year. This supports Macquarie's Outerform<\/span> rating, which is matched by the other three brokers in the FNArena<\/span> database to cover Horizon.<\/p>\n

\n\tShares in Horizon Oil today are slightly higher, trading up 0.5c at 31.5c as at 12.05pm. This compares to a range over the past 12 months of 16.5c to 42.5c. The current share price implies upside of almost 50% relative to the consensus price target in the FNArena<\/span> database.<\/p>\n

\n\t
\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

The sale of interests in blocks where Horizon holds significant stakes is a positive for valuation and sees brokers reiterate Buy recommendations.<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[6],"tags":[24],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/59673"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=59673"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/59673\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=59673"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=59673"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=59673"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}