Mr. David Grellman reports
HORN PETROLEUM THIRD QUARTER 2012 RESULTS
Horn Petroleum Corp. has released its results for the third quarter of 2012.
During the nine months ended Sept. 30, 2012, Horn increased its investment in intangible exploration assets by $30.0-million. The majority of the costs incurred during 2012 related to drilling the Shabeel-1 and Shabeel North-1 exploration wells in the Dharoor Valley block. The remaining expenditures are PSA-related expenditures and general and administrative costs. The company and its partners fulfilled the initial exploration period work commitments under the Dharoor Valley and Nugaal Valley PSAs with the drilling of the Shabeel wells.
While the company was disappointed that the first two exploration wells in Puntland (Somalia) did not flow oil, the company remains highly encouraged that all of the critical elements exist for oil accumulations. Horn recently completed demobilization of the drilling rig and associated equipment, and both well sites have been restored to original condition.
Horn and its partners have entered into the next exploration period in both the Dharoor Valley and Nugaal Valley PSAs, which each carry a commitment to drill one exploration well in each block by October, 2015.
Efforts are now focused on making preparations for a seismic acquisition campaign in the Dharoor PSA, which will include a regional seismic reconnaissance grid in the previously unexplored eastern portion of the basin, as well as prospect specific seismic to delineate a drilling candidate in the western portion of the basin, where an active petroleum system was confirmed by the recent drilling at the Shabeel-1 and Shabeel North-1 locations.
Operating expenses of $500,000 were recorded during the third quarter of 2012 ($1.6-million during the nine months ended Sept. 30, 2012). These were offset by finance income of $23.0-million during the third quarter of 2012 ($9.0-million during the nine months ended Sept. 30, 2012). Finance income primarily relates to fair market value adjustments of the company's warrant liabilities. These fair market value adjustments are performed as the company has an obligation to issue shares for a price (denominated in Canadian dollars) that is not fixed in the company's functional currency (U.S. dollars).
As at Sept. 30, 2012, the company had cash of $16.1-million and working capital of $12.4-million as compared with cash of $27.6-million and working capital of $25.9-million at Dec. 31, 2011. The company's liquidity and capital resource position has been reduced during 2012 primarily due to expenditures incurred on the drilling of the Shabeel-1 and Shabeel North-1 exploration wells offset partially by the non-brokered private placement, which raised $15.0-million (Canadian) in June, 2012.
Horn continues to investigate potential joint venture partnerships and also is reviewing new venture opportunities in the region.
The board has approved granting incentive stock options to buy 2.82 million shares to certain directors, officers and other eligible persons of the company. The options will have a three-year term and vesting provisions consistent with the existing outstanding options and will be priced at 32 cents per share (or the closing price on Nov. 21, 2012, if higher).
Horn president and chief executive officer, David Grellman, commented: "We remain very encouraged by the exploration potential of our Jurassic rift basins in Puntland. We have committed to the next exploration phase in both PSAs and plan to aggressively explore both areas to confirm this potential. We are also optimistic that the political progress in Somalia will continue and allow oil and gas exploration in the region to expand."
Horn holds a 60-per-cent working interest in the Dharoor and Nugaal Valley blocks and is the operator. The other partners in the blocks are Range Resources (20 per cent) and Red Emperor (20 per cent). Africa Oil Corp. holds an approximate 45-per-cent equity interest in Horn.