31 July 2007 The Manager, Company Announcements Australian Stock Exchange Limited Exchange Centre 20 Bridge Street Sydney NSW 2000

REPORT ON FOURTH QUARTER ACTIVITIES – 30 JUNE 2007

AUSTRALIAN STOCK EXCHANGE LISTING RULE 5.1

KEY ACTIVITIES � Maari field development 49% complete overall at end June; wellhead platform and

FPSO 62% and 73% complete respectively

� Wei 6-12S field development plan progressing; engagement with CNOOC underway

� Rig selected for November 2007 start on 4+2 well exploration drilling program on Block

22/12

� Seismic vessel contracted and preparing to begin shooting on Blocks G10/48 and

G11/48; rig contracted by operator to start 5 well exploration drilling program in

March 2008 EXPLORATION AND DEVELOPMENT ACTIVITY

NEW ZEALAND

PMP 38160 and PEP 38413, Offshore Taranaki Basin, Maari Field (Horizon Oil interest: 10%)

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The Maari development project was 49% complete overall at the end of June. The key components, the wellhead platform (WHP) and FPSO, were 62% and 73% complete respectively. The photographs below illustrate the progress that has been made on the FPSO Raroa, procurement for the development drilling program and the WHP. It has become increasingly clear that the most likely arrival time of the Ensco 107 jack-up rig is April 2008. The rig is now underway from Vietnam to New Zealand, where it will work for another operator before becoming available for the Maari development drilling program. The later than initially scheduled arrival date of the Ensco 107 has allowed the Maari joint venture to postpone the sailaway timing of the WHP to coordinate better with the anticipated rig movement. Successful discussions have been held with Dockwise, the company contracted to dry tow the WHP to New Zealand, to achieve the later timing. This has the effect of adding certainty to the transportation / installation process and allows a higher level of completion of work on the WHP before sailaway (that otherwise would have been performed during installation). This certainty is achieved without affecting the date for commencement of steady state production, which is driven by timing of the rig. Steady state production is now set for July 2008. There is an increase in cost associated with deferring the WHP sailaway and also an increase in the forecast development drilling cost, with 90% of the goods and services now tendered. Horizon Oil’s share of forecast capital expenditure to completion now stands at US$45.7 million, excluding contingencies. This compares with the original budget at the time of Financial Investment Decision in October 2005 of US$36.5 million and a subsequent revised forecast of US$41.9 million. The Horizon Oil share of the growth in capital expenditure before first oil will be covered by the cost overrun facility with Bank of Scotland International.

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CHINA

Block 22/12, Beibu Gulf (Horizon Oil interest: 30%)

During the quarter, planning work continued on the Wei 6-12S development and preparation for the exploration drilling program of 4 firm plus 2 optional wells later in the year began. Field work for the environmental impact study for the development has been completed and a report is being prepared. A metocean study has also been completed and work on the mooring analysis for the storage vessel has commenced. These studies, together with the previously completed reserves report and ongoing preliminary design and costing of the development facilities, will be incorporated in a field development plan to be submitted to the China National Offshore Oil Corporation (CNOOC) and eventually Chinese Government authorities for approval. A period of engagement over the remainder of the year with CNOOC, who have a right to participate at their cost in up to 51% of the development project, is anticipated. The expectation is that agreement on the development scheme will be reached during this period, allowing detailed engineering design and construction to commence. A letter of intent has been entered into with Premium Drilling for the Murmanskaya jack-up rig, which is anticipated to be available in November 2007. Well planning and purchase of long lead items for the drilling program has begun. Geological and geophysical interpretation to high-grade four prospects, plus back-up, from the prospect inventory for drilling is ongoing.

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Block 24/05, Lei Dong Basin (Horizon Oil interest: 100%)

The Company is still awaiting approvals from the relevant Chinese Government authorities in respect of converting its Memorandum of Understanding regarding Block 24/05 to a conventional Petroleum Contract. UNITED STATES

Bayou Choctaw (Horizon Oil interest: 19.8% surrounding the salt-dome; 14.0 – 28.5% north

of the salt-dome)

The field operator, CLK Energy, is undergoing a re-capitalisation which should be completed shortly. It is expected that this will allow the exploitation drilling program, for which several well locations have been selected, to resume. The field is currently producing in the range of 35 – 40 bopd.

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PAPUA NEW GUINEA

PRL 4 (Stanley - Horizon Oil interest: 27.95%)

PRL 5 (Elevala / Ketu – Horizon Oil interest: 10.36%)

Horizon Oil has previously advised that it is in discussions with PNG Sustainable Energy Limited (PNG SEL) regarding commercialisation of the Stanley gas discovery in PRL 4. The plan is to supply gas to PNG SEL, who will generate power at the Stanley location for domestic and industrial users in western Papua New Guinea. This venture is now progressing to the next step, with planning underway to record a 40 km seismic survey over the Stanley feature to better define the resource size. The joint venture operator, Austral Pacific, is in discussions with two seismic crews, who are currently working in Papua New Guinea and are expected to be available to record the PRL 4 survey in September 2007. In PRL 5, the success achieved in reprocessing 120 km of existing seismic over the Elevala discovery has led to the decision to process a further 232 km on the Licence area.

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THAILAND

G10/48 and G11/48, Gulf of Thailand (Horizon Oil interest: 25%)

The SMNG vessel Professor Polshkov has been contracted to record a large 2D seismic program of 2,500 km in Block G10/48 and 3,000 km in G11/48. The vessel is expected to begin recording in August 2007. The aim of the survey is to firm up 3 prospects in G10/48 and 2 prospects in G11/48 for drilling, beginning in March 2008. The map above indicates leads that have been mapped on existing seismic data and which will be detailed by the new survey. Drilling will test two proven play types. Targets in G10/48 lie at the southern end of the prolific Pattani Trough. This is gas prone in the centre of the trough, but has been proved to be prospective for oil at the northern and southern ends where source rocks are shallower and less mature. Block G11/48 is expected to contain targets on trend with the large gas fields that have been discovered at the northern end of the Malay Basin, some of which are already on production. The operator, Pearl Energy, has a rig under long term contract, which will be used to drill the wells.

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EXPENDITURE SUMMARY The following table summarises the expenditure incurred in the quarter in respect of the activities set out in this report-:

Exploration and Development US$’000

PMP 38160 (Maari), offshore New Zealand 5,179

Block 22/12 (Beibu Gulf), offshore China 353

Block 24/05 (Lei Dong), offshore China -

Block G10/48 and G11/48, Gulf of Thailand 123

Oil & Gas Properties

Bayou Choctaw 19

Cash on hand at 30 June 2007 19,835

Yours faithfully,

Michael Sheridan Chief Financial Officer & Company Secretary

For further information please contact: Michael Sheridan Telephone: (+612) 9332 5000 Facsimile: (+612) 9332 5050 Email: exploration@horizonoil.com.au Or visit www.horizonoil.com.au

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