Horn Petroleum Second Quarter of 2013 Financial and Operating Results

Horn Petroleum Second Quarter of 2013 Financial and Operating Results 
VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 08/28/13 -- 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)
 
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                                     Three      Three        Six        Six
                                    months     months     months     months
                                     ended      ended      ended      ended
                                   June 30,   June 30,   June 30,   June 30,
                                      2013       2012       2013       2012
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Operating expenses                                                         
  Stock-based compensation           $ 140      $ 189      $ 270      $ 368
  Management fees                      221        224        445        449
  Office and general                    51         57         96         90
  Professional fees                     26         42         42         82
  Stock exchange and filing                                                
   fees                                 27         35         43         50
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                                       465        547        896      1,039
Finance expense                         25          -         51     14,504
Finance income                        (200)   (13,037)    (3,837)      (432)
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Net income (loss) and                                                      
 comprehensive income (loss)                                               
 attributable to common                                                    
 shareholders                         (290)    12,490      2,890    (15,111)
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Net income (loss) per share                                                
  Basic                             $ 0.00     $ 0.15     $ 0.03    $ (0.19)
  Diluted                           $ 0.00     $ 0.15     $ 0.03    $ (0.19)
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Weighted average number of                                                 
 shares outstanding for the                                                
 purpose of calculating                                                    
 earnings per share                                                        
  Basic                         96,849,316 81,205,032 96,849,316 78,431,617
  Diluted                       96,849,316 82,396,036 96,861,449 78,431,617
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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: 


 
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                                     Three      Three        Six        Six
                                    months     months     months     months
                                     ended      ended      ended      ended
                                   June 30,   June 30,   June 30,   June 30,
                                      2013       2012       2013       2012
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Fair market value adjustment -                                             
 warrants                           $ (197) $ (12,895)  $ (3,830)  $ 14,504
Interest and other income               (3)        (9)        (7)       (45)
Foreign exchange (gain) loss            25       (133)        51       (387)
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Financial income                    $ (200) $ (13,037)  $ (3,837)    $ (432)
Financial expense                     $ 25        $ -       $ 51   $ 14,504
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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)
 
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                                                         June 30,  December
                                                            2013   31, 2012
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ASSETS                                                                     
                                                                           
Current assets                                                             
  Cash and cash equivalents                              $ 5,436    $ 9,545
  Accounts receivable                                        267        596
  Prepaid expenses                                            19        109
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                                                           5,722     10,250
Long-term assets                                                           
  Intangible exploration assets                           89,006     87,302
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                                                          89,006     87,302
                                                                           
Total assets                                            $ 94,728   $ 97,552
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LIABILITIES AND EQUITY ATTRIBUTABLE TO COMMON                              
 SHAREHOLDERS                                                              
                                                                           
Current liabilities                                                        
  Accounts payable and accrued liabilities                 $ 587    $ 2,741
  Current portion of warrants                                 10      3,080
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                                                             597      5,821
                                                                           
Long-term liabilities                                                      
  Warrants                                                   296      1,056
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                                                             296      1,056
                                                                           
Total liabilities                                            893      6,877
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Equity attributable to common shareholders                                 
  Share capital                                           86,494     86,494
  Contributed surplus                                      2,791      2,521
  Retained earnings                                        4,550      1,660
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Total equity attributable to common shareholders          93,835     90,675
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Total liabilities and equity attributable to common                        
 shareholders                                           $ 94,728   $ 97,552
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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)
 
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                                     Three      Three        Six        Six
                                    months     months     months     months
                                     ended      ended      ended      ended
                                   June 30,   June 30,   June 30,   June 30,
                                      2013       2012       2013       2012
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Cash flows provided by (used                                               
 in):                                                                      
                                                                           
Operations:                                                                
  Net income (loss) for the                                                
   period                           $ (290)  $ 12,490    $ 2,890  $ (15,111)
    Item not affecting cash:                                               
    Stock-based compensation           140        189        270        368
    Fair market value                                                      
     adjustment - warrants            (197)   (12,895)    (3,830)    14,504
    Unrealized foreign exchange                                            
     (gain) loss                        25         65         51       (361)
    Changes in non-cash                                                    
     operating working capital          39         24         59        (35)
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                                      (283)      (127)      (560)      (635)
Investing:                                                                 
    Intangible exploration                                                 
     expenditures                     (391)   (13,523)    (1,704)   (20,990)
    Changes in non-cash                                                    
     investing working capital        (736)     1,100     (1,794)       823
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                                    (1,127)   (12,423)    (3,498)   (20,167)
Financing:                                                                 
    Common shares issued                 -     16,748          -     16,773
    Advances from related party        221        207        465        535
    Payments to related party         (221)      (133)      (465)      (766)
    Repayment of an advance                                                
     issued to a related party           -          -          -      1,488
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                                         -     16,822          -     18,030
  Effect of exchange rate                                                  
   changes on cash and cash                                                
   equivalents denominated in                                              
   foreign currency                    (25)       (65)       (51)       361
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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
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Cash and cash equivalents, end                                             
 of the period                     $ 5,436   $ 25,203    $ 5,436   $ 25,203
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  Supplementary information:                                               
    Interest paid                      Nil        Nil        Nil        Nil
    Income taxes paid                  Nil        Nil        Nil        Nil
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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)
 
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                                                         June 30,   June 30,
                                                            2013       2012
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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
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  Balance, end of period                                  86,494     86,242
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Contributed surplus:                                                       
  Balance, beginning of period                           $ 2,521      $ 646
  Exercise of warrants                                         -      1,148
  Stock-based compensation                                   270        368
  Exercise of options                                          -        (33)
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  Balance, end of period                                   2,791      2,129
  -------------------------------------------------------------------------
                                                                           
Earnings (deficit):                                                        
  Balance, beginning of period                           $ 1,660   $ (1,319)
  Net income (loss) for the period                         2,890    (15,111)
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  Balance, end of period                                   4,550    (16,430)
  -------------------------------------------------------------------------
                                                                           
  Equity attributable to common shareholders            $ 93,835   $ 71,941
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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). 
Outlook 
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". 
ON BEHALF OF THE BOARD 
David Grellman, President and CEO 
FORWARD LOOKING INFORMATION 
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.
Contacts:
Horn Petroleum Corporation
Sophia Shane
Corporate Development
(604) 689-7842
(604) 689-4250 (FAX)
hornpetroleum@namdo.com
www.hornpetroleum.com