HORIZON Energy is embarking on a “value engineering review process” following a recent fall in oil prices and costs, the group has said in its half year report.

Speaking after the release of the results, Horizon chief executive Brent Emmett said the company would focus on keeping its capital costs low in 2015-2016.

“We and our partners have reduced our capital expenditure quite significantly, and so really with a combination of our income being protected through hedging and reduce capital expenditure, we will actually be in quite a strong position in terms of our liquidity going into 2016,” he said.

“The big part of our focus in 2015 is on our undeveloped reserves and resources,” he said.

“We will be exerting a lot of effort in moving those projects forward in terms of planning so we can take advantage of the cost deflation we are seeing in capital costs.”

Horizon, along with joint venture partners Talisman Niugini, Osaka Gas and Diamond Gas, had completed development drilling activities on the Stanley fields after receiving a Petroleum Development Licence, PRL 10, over the area previously covered by Petroleum Retention Licence 4.

The value engineering process would ensure that project design, execution and timing were optimised, and that project cost estimates reflected the current spate of cost deflation.

Similar processes were in place at the Elevala/Ketu discoveries at PRL 21, Horizon said, with the group extending the duration of its project selection phase by two months in order to ensure that project cost estimates were in line with current market conditions.

At the same time, Horizon Oil and Osaka Gas are conducting a pre-feasibility study for a greenfield mid-scale LNG project for the Western Province project.

While a new feasibility study would assess several development options for the Elevala/Ketu discoveries, a scheme with a near shore plant at Daru Island was the leading concept at present, Horizon said.

Nonetheless, in the report, Horizon said it had taken note of the award of development and pipeline licences for the P’nyang field, to enable expansion of the PNG LNG project.

“Horizon Oil regards this development as a promising alternative commercialisation pathway for its substantiative gas resources in the Western province foreland,” the group said.

A new export pipeline connecting P’nyang to the PNG LNG system at Kutubu offered the potential for a gas aggregation project from the Stanley, Elevala/Tingu, Ketu, Ubuntu and P’nyang fields, the group said.

“The company intends to process planning for a greenfield LNG project at Daru Island as its base case,” Horizon said in the report.

“However, the opportunity to participate in a brownfield LNG development by way of aggregation of Horizon Oil’s gas fields with those of other operators will remain an attractive proposition.”

Horizon recorded a profit of US$73 million for the six months to 31 December – an improvement on the loss of US$47,000 in the same period in 2013.

This improvement came despite a 17.9 per cent dip in revenue to US$53.1 million, due to a decrease in sales from the Block 22/12 field in China, as well as falling oil prices.

However, this fall was also offset by a full six month’s production being included from the Maari/Manaia fields offshore New Zealand, which was shut for much of the comparative period.

Gross profit from the two projects was at US$22.3 million for the half, up from US$15 million the previous year.