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Horizon Oil to begin gas drilling program, offshore gulf of Thailand

Posted: 2 June 2005

Horizon Oil has farmed into a 25 per cent interest in two concessions, offshore Gulf of Thailand (GOT). Tana Exploration Company LLC, whose majority shareholder, TRT Holdings, Inc, is also a cornerstone investor in Horizon Oil, is also farming into a 25 per cent interest.

The interests will be earned from a subsidiary of Pearl Energy Ltd, a leading southeast Asian exploration and production company and operator of the project, by partially funding Pearl’s share of costs from a forthcoming gas exploitation drilling program.

The concessions are Block B12/32, which contains the partially appraised Bussabong gas discovery within a Petroleum Application Area (PAA) and Block B11/38, which contains the Chang Daeng gas discovery (see location map).

These discoveries are on a regional trend which includes the giant Pailin and Bongkot gas fields. The objective of the drilling program is to prove up sufficient gas reserves at Bussabong necessary to develop the field, and to further appraise Chang Daeng.

The program will include 2 tri-lateral wells on Bussabong (a total of 6 exploration/appraisal holes) and one well on Chang Daeng.

The Ensco-57 jack-up rig is currently in the prospect area and pre-loading in preparation for spudding the first Bussabong tri-lateral well later today. The full program, including rig moves, should take about 65 days to complete.

The farm-in agreement also provides for the participants to pursue further opportunities in the southern GOT in a defined Area of Mutual Interest (AMI), which offsets the farm-in acreage.

To enable Horizon Oil to participate in the drilling program, especially in the case of significant success, the Company has entered into an agreement with Macquarie Bank Limited (MBL) to make a placement of 26.7 million shares at $0.1125 to raise $3.0 million.

Placement to Macquarie Bank Limited

Horizon Oil entered into an agreement on 2 June 2005 to issue MBL 26,666,667 fully paid ordinary shares at $0.1125 per share, conditional upon receipt of shareholder approval before the issue is made. The issue price of $0.1125 per share represents a premium of 11 per cent to the volume weighted average price of the Company's ordinary shares sold on the ASX, calculated over the 5 day period on which sales were recorded before the date of the agreement. If approved by shareholders, the proposed placements will raise $3.0 million to supplement the Company's existing cash reserves of approximately $11.5 million.

The shares proposed to be issued will have the same terms as existing shares on issue and are proposed to be issued no later than 14 days after the date on which shareholder approval is granted.

MBL is a diversified international provider of financial and investment banking services. Subject to shareholder approval, the placement will be made to MBL's Metals and Energy Capital Division which provides debt and equity capital to the mining and upstream oil and gas industry globally.

Horizon Oil’s Chief Executive Officer, Brent Emmett, said: “This farm-in has the potential to deliver substantial value to Horizon Oil shareholders. It fits the Company’s strategic plan of participating in lower risk plays with a southeast Asian focus. We are comfortable with technical risk. The existing 4 wells at Bussabong and 2 wells at Chang Daeng have all found gas, which has been tested at rates of up to 21 million cubic feet per day.

“We have two capable and experienced partners in Pearl and Tana. Tana has been a highly successful Gulf of Mexico explorer and sees marked technical similarities between that area and the Gulf of Thailand -this increases our level of confidence.

“The concessions have several trillion cubic feet of upside gas potential in a market where demand is strong and solid prices are being paid. Services and fabrication capability are readily available in the region and there is abundant existing infrastructure in the prospect area, all of which augurs well for rapid development of reserves at a modest development cost. I expect that, given a successful drilling campaign, we could be into the market with significant gas production within 18 months.

“We regard the further joint exploration effort to be undertaken by the participants under the AMI to be very important as well. We believe there is scope to exploit a very large play indeed beyond the concessions which are being acquired in this farm-in.

"Finally, we are very pleased to have Macquarie Bank Limited as a new shareholder. They are a sophisticated investor in resource stocks and add strength and quality to the share register.”

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