Oil and Gas Exploration in Africa


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Horn Petroleum Second Quarter of 2013 Financial and Operating Results


VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug. 28, 2013) - Horn Petroleum Corporation (TSX VENTURE:HRN) ("Horn" or the "Company") is pleased to announce its financial and operating results for the three and six months ended June 30, 2013.

  • During the six months ended June 30, 2013, Horn increased its investment in intangible exploration assets by $1.7 million. The majority of the costs incurred during the first six months of 2013 related to Production Sharing Agreement ("PSA") related expenditures and general and administrative costs.
  • Efforts are currently focused on making preparations for a seismic acquisition campaign in the Dharoor Valley area 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 well locations. The Company continues to purse efforts to drill an exploration well in the Nugaal Valley block and is working with the Puntland government to move this project forward.
  • Horn continues to investigate potential joint venture partnerships and is reviewing new venture opportunities in the region.
  • As at June 30, 2013, the Company had cash of $5.4 million and working capital of $5.1 million as compared to cash of $9.5 million and working capital of $4.4 million at December 31, 2012.

Horn President and CEO, 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."

Second Quarter 2013 Financial and Operating Highlights
Consolidated Statement of Net Income (Loss) and Comprehensive Income (Loss)
(Thousands of United States Dollars)

 Three monthsThree monthsSix monthsSix months
 June 30, 2013June 30, 2012June 30, 2013June 30, 2012
Operating expenses    
 Stock-based compensation$ 140$ 189$ 270$ 368
 Management fees221224445449
 Office and general51579690
 Professional fees26424282
 Stock exchange and filing fees27354350
Finance expense25-5114,504
Finance income(200)(13,037)(3,837)(432)
Net income (loss) and comprehensive income (loss) attributable to common shareholders(290)12,4902,890(15,111)
Net income (loss) per share    
 Basic$ 0.00$ 0.15$ 0.03$ (0.19)
 Diluted$ 0.00$ 0.15$ 0.03$ (0.19)
Weighted average number of shares outstanding for the purpose of calculating earnings per share    

Operating expenses decreased $0.1 million and for each the three and six months ended June 30, 2013 due mainly to a reduction in stock option expenses. The reduction in stock option expenses can be attributed to a reduction in the remaining life of the stock options.

Financial income and expense for the three and six months ended June 30, 2013 and 2012 is made up of the following items:

 Three monthsThree monthsSix monthsSix months
 June 30, 2013June 30, 2012June 30, 2013June 30, 2012
Fair market value adjustment - warrants$ (197)$ (12,895)$ (3,830)$ 14,504
Interest and other income(3)(9)(7)(45)
Foreign exchange (gain) loss25(133)51(387)
Financial income$ (200)$ (13,037)$ (3,837)$ (432)
Financial expense$ 25$ -$ 51$ 14,504

The fair market value of the warrant liability decreased in the first and second quarter of 2013 resulting in a gain in the statement of operations as a result of a decrease in the volatility of the Company's share price combined with a reduction in the remaining life of the stock options.

The foreign exchange gains and losses are the direct result of changes in the value of the Canadian dollar in comparison to the US dollar. The Company's cash holdings are primarily in US and Canadian currency.

Consolidated Balance Sheets
(Thousands United States Dollars)

 June 30,December 31,
Current assets  
 Cash and cash equivalents$ 5,436$ 9,545
 Accounts receivable267596
 Prepaid expenses19109
Long-term assets  
 Intangible exploration assets89,00687,302
Total assets$ 94,728$ 97,552
Current liabilities  
 Accounts payable and accrued liabilities$ 587$ 2,741
 Current portion of warrants103,080
Long-term liabilities  
Total liabilities8936,877
Equity attributable to common shareholders  
 Share capital86,49486,494
 Contributed surplus2,7912,521
 Retained earnings4,5501,660
Total equity attributable to common shareholders93,83590,675
Total liabilities and equity attributable to common shareholders$ 94,728$ 97,552

The decrease in total assets from December 31, 2012 to June 30, 2013 is the result of a decrease in cash and cash equivalents which is due to operating expenditures and the settlement of accounts payables and accrued liabilities. The increase in net working capital from December 31, 2012 to June 30, 2013 is mainly due to the $3.0 million decrease in current portion of warrant liabilities resulting from the revaluation of warrant liability.

Consolidated Statement of Cash Flows
(Thousands United States Dollars)

 Three monthsThree monthsSix monthsSix months
 June 30, 2013June 30, 2012June 30, 2013June 30, 2012
Cash flows provided by (used in):    
 Net income (loss) for the period$ (290)$ 12,490$ 2,890$ (15,111)
  Item not affecting cash:    
  Stock-based compensation140189270368
  Fair market value adjustment - warrants(197)(12,895)(3,830)14,504
  Unrealized foreign exchange (gain) loss256551(361)
  Changes in non-cash operating working capital392459(35)
  Intangible exploration expenditures(391)(13,523)(1,704)(20,990)
  Changes in non-cash investing working capital(736)1,100(1,794)823
  Common shares issued-16,748-16,773
  Advances from related party221207465535
  Payments to related party(221)(133)(465)(766)
  Repayment of an advance issued to a related party---1,488
 Effect of exchange rate changes on cash and cash equivalents denominated in foreign currency(25)(65)(51)361
Increase (decrease) in cash and cash equivalents(1,435)4,207(4,109)(2,411)
Cash and cash equivalents, beginning of the period$ 6,871$ 20,996$ 9,545$ 27,614
Cash and cash equivalents, end of the period$ 5,436$ 25,203$ 5,436$ 25,203
 Supplementary information:    
  Interest paidNilNilNilNil
  Income taxes paidNilNilNilNil

The decrease in cash in three and six months ended June 30, 2013 is mainly the result of intangible exploration expenditures, operating expenses and the settlement of accounts payable and accrued liabilities.

Consolidated Statement of Equity
(United States Dollars)

 June 30,June 30,
Share capital:  
 Balance, beginning of period$ 86,494$ 75,782
 Private placement, net of issue costs-8,979
 Exercise of warrants-1,331
 Exercise of options-150
 Balance, end of period86,49486,242
Contributed surplus:  
 Balance, beginning of period$ 2,521$ 646
 Exercise of warrants-1,148
 Stock-based compensation270368
 Exercise of options-(33)
 Balance, end of period2,7912,129
Earnings (deficit):  
 Balance, beginning of period$ 1,660$ (1,319)
 Net income (loss) for the period2,890(15,111)
 Balance, end of period4,550(16,430)
 Equity attributable to common shareholders$ 93,835$ 71,941

The Company's consolidated financial statements, notes to the financial statements, management's discussion and analysis for the three and six months ended June 30, 2013 and the 2012 Annual Information Form have been filed on SEDAR (www.sedar.com) and are available on the Company's website (www.hornpetroleum.com).


Based on the encouragement provided by the Shabeel wells, the Company and its partners entered the next exploration period in both the Dharoor Valley and Nugaal Valley PSAs which carry a commitment to drill one well in each block within an additional three year term ending October 2015. The current operational plan is to contract a seismic crew to acquire additional data in the Dharoor Valley block and to hold discussions with the Puntland Government regarding drill ready prospects in the Nugaal Valley block. The focus of the Dharoor Valley block seismic program will be to delineate new structural prospects for the upcoming drilling campaign.

Horn has been in discussions with potential joint venture partners and also is reviewing new venture opportunities in the region. Somalia is going through an unprecedented period in its history with a real opportunity for all stakeholders to assist in the rebuilding of the country. The first internationally recognized Federal government took power in 2012 following over 20 years of transitional or no government. The Company actively engages with a range of governments and organizations, domestic and international, around how Somalia can best develop a stable Federal state including the institutions and systems it needs to properly manage its natural resources.

Horn holds a 60% working interest in the Dharoor and Nugaal Valley blocks and is the operator. The other partners in the blocks are Range Resources (20%) and Red Emperor (20%). Africa Oil Corporation holds an approximate 45% equity interest in Horn.

Horn Petroleum Corporation is a Canadian oil and gas company with assets in Puntland, Somalia. The Corporation holds a 60% interest and operatorship in the Dharoor and Nugaal blocks encompassing a Jurassic Rift Basin on trend and analogous to the large oil fields in Yemen. The Corporation's shares are listed on the TSX Venture Exchange under the symbol "HRN".


David Grellman, President and CEO


Certain statements made and information contained herein constitute "forward-looking information" (within the meaning of applicable Canadian securities legislation). Such statements and information (together, "forward looking statements") relate to future events or the Company's future performance, business prospects or opportunities. Forward-looking statements include, but are not limited to, statements with respect to estimates of reserves and or resources, future production levels, future capital expenditures and their allocation to exploration and development activities, future drilling and other exploration and development activities, ultimate recovery of reserves or resources and dates by which certain areas will be explored, developed or reach expected operating capacity, that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.

All statements other than statements of historical fact may be forward-looking statements. Statements concerning proven and probable reserves and resource estimates may also be deemed to constitute forward-looking statements and reflect conclusions that are based on certain assumptions that the reserves and resources can be economically exploited. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "seek", "anticipate", "plan", "continue", "estimate", "expect, "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions) are not statements of historical fact and may be "forward-looking statements". Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. The Company does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by applicable laws. These forward-looking statements involve risks and uncertainties relating to, among other things, changes in oil prices, results of exploration and development activities, uninsured risks, regulatory changes, defects in title, availability of materials and equipment, timeliness of government or other regulatory approvals, actual performance of facilities, availability of financing on reasonable terms, availability of third party service providers, equipment and processes relative to specifications and expectations and unanticipated environmental impacts on operations. Actual results may differ materially from those expressed or implied by such forward-looking statements.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Horn Petroleum Corporation
Sophia Shane
Corporate Development
(604) 689-7842
(604) 689-4250 (FAX)