27 Apr 2023
Full Year Results 2022 and Strategic Review Update
Full Year Results Announcement for the year ended 31 December 2022
Targeted US$575m return of capital over next 12 months: US$450m immediate special dividend, US$100m special dividend in Q4 2023 and share buyback of at least US$25m
Focus on significant opportunities in Egypt business, cost saving and curtailment of international exploration
Appointment of new Chief Executive
“I was appointed Chair of Capricorn in February 2023, alongside five other new members of Capricorn’s Board following a public campaign by a number of shareholders. The overwhelming shareholder vote in favour of the new Board appointments underscored the expectations for change. Consistent with those expectations, we immediately commenced a strategy review after appointment. Today, 85 days later, we are pleased to report our initial findings, which include five areas of decisive strategic action. These include a decision to make a material return of capital to shareholders; a significant cost reduction as part of a broader plan to preserve shareholder cash; the curtailment of expensive exploration activities outside of near field activity in Egypt; plans to improve the Egypt business; and a drive for a culture change across the Company.
“As we take the next actions in our review, I am pleased to announce that Capricorn will benefit from the leadership of Randy Neely, a highly accomplished industry figure with extensive experience of successful operations in Egypt, who will join the business as Chief Executive on 1 June 2023.
Our review of strategy continues, and I look forward to updating shareholders on our medium to long term findings in the months ahead. I would like to be very clear on our intention in the near term, and on an ongoing basis, to return all excess capital to our shareholders.
As we look to enact positive change in the business, I am grateful for the support that we have been given by our new colleagues as we execute our strategy for the benefit of all of our shareholders.”
Craig van der Laan
Chair, Capricorn Energy PLC
Strategic Review - Initial Findings
- Strategic review commenced on 1 February 2023
- Capital returns: the Board commits to return to shareholders all excess cash flow not required for our go forward core operational focus, resulting in a significant return of capital of approximately US$575m via a c.US$450m special dividend proposed to be paid in May 2023, a further special dividend in Q4 2023 of US$100m dependent upon certain conditions and a share buyback of at least US$25m over the next twelve months
- The US$100m special dividend in Q4 2023 is dependent upon a number of factors including: addressing our receivables position in Egypt; the outcome of conversations with stakeholders in Egypt around licence extensions and renegotiation of terms; actual oil and gas price outcomes for the remainder of 2023; and the conclusions of our strategic review as it relates to further cost actions and future investment in our Egypt business
- Cost saving programme initiated: identified and actioned initial gross G&A reduction of at least US$35m on a run rate basis; opportunities for further cost savings to be pursued, with costs to be aligned to activity on an ongoing basis to maximise cash
- Materially scale back all exploration spend outside Egypt and monetise, farm-down or exit all other exploration positions. A process has commenced for a potential sale of our UK assets
- Focusing on maximising value of Egypt by optimising investment, well selection and rig performance, continuing to focus on liquids production growth and, alongside partners, exploring options to enhance fiscal terms
- Appointment of new Chief Executive: Randy Neely, former President and CEO of Egypt-focused operator TransGlobe Energy Corporation to join Capricorn on 1 June 2023
- Strategic review continues with medium to longer term strategic outcomes to be presented in due course, with a Capital Markets Day to be held in Q4 2023
- Net zero by 2040: good progress on decarbonisation pathway, on track for 15% GHG equity emissions reduction by 2025
2022 Financial Highlights
- Working interest Egypt oil and gas production ~34,200 boepd, comprising 42% liquids and within revised guidance of 33,000-36,000 boepd; net entitlement sales volumes 4.7 mmboe
- Revenues from Egypt production US$229m: average realised oil price of US$98.8/bbl and gas price of US$2.9/mcf (average total production cost US$5.7/boe)
- Net cash generated from Egypt oil and gas production US$104m, comprising US$129m net cashflow generated during the year and deferred consideration and settlements paid US$24m
- Tax refund of US$1.06bn in Q1 2022 resulting from Indian tax dispute resolution
- US$529m returned to shareholders in H1 2022 via tender offer and share repurchase programme
- Year-end Group cash and cash equivalents US$757m; net cash US$597m after debt drawn to 31 December 2022 of US$160m
- Egypt trade receivables at 31 December 2022 US$97m
- Earnout consideration on the disposal of the UK Catcher and Kraken interests in relation to 2022 production and oil prices US$137m received in Q1 2023; US$77m production earnout in relation to 2021 production received in H1 2022
- Group capital expenditure on oil and gas assets US$162m
- Operating loss after tax US$160m from continuing operations
- Impairment charge of US$43m on Egypt producing assets
- Non-Egypt unsuccessful exploration costs of US$94m
- Profit of US$109m from discontinued operations from increase in value of earnout from sale of UK producing interests
- Loss after tax of US$51m
- The Board is confident in the outlook for the Group. We believe that over time we can deliver meaningful improvement and efficiencies to the way Capricorn is run to deliver good returns for shareholders. The next stage of our strategic review will seek to address this point
- Capricorn WI production to average 32,000-36,000 boepd, remaining broadly flat on 2022 and continuing to focus on liquids opportunities
- Oil and condensate production expected to average between 14,000 - 16,000 bopd on a WI basis, with gas expected to average 100 - 112 mmscf/d on a WI basis
- Operating costs forecast to be stable at US$5 - US$7/boe influenced by liquids processing volume and absolute production levels
- Current estimates of 2023 capital expenditure total approximately ~US$155-175m, including:
- Egypt production and development expenditure of US$100-120m, with five rigs in country focused on production and development drilling and influenced by the phasing of minor and major projects expenditure
- Egypt exploration expenditure of ~US$25m to sustain the resource base
- Committed non-Egypt exploration expenditure of up to US$30m, including costs associated with the Yatzil well in Mexico which was drilled in Q1 2023, with no further commitment wells in the international exploration portfolio outside Egypt
- Additional earnout consideration in respect of the Catcher and Kraken interests will be due in relation to production and oil prices in calendar years 2023 to 2025, subject to minimum production and oil price thresholds being met
Clare Mawdsley, Acting CFO / Nathan Piper, Commercial Director
Tel: 0131 475 3000
Jonathan Milne, Corporate Affairs
Tel: 0131 475 3000
Billy Clegg, Owen Roberts, Camarco
Tel: 020 3757 4980
The results presentation slides will be available on the website from 7:00am UK time.
Analyst conference call
You can listen to the results presentation by dialling in to a conference call at 08:45am UK time using the below dial-in-details. Analysts who wish to ask a question should use the conference call facility.
United Kingdom (Local): +44 (0)330 551 0200
Access code: Quote ‘Capricorn-Full Year’ when prompted by operator
There will be a live audio webcast of the results presentation available to view on the website (www.capricornenergy.com) at 08:45am UK time. This can be accessed on PC, Mac, iPad, iPhone, and Android mobile devices.
An 'on demand' version of the webcast will be available on the website as soon as possible after the event. This can be viewed on PC, Mac, iPad, iPhone, and Android mobile devices.
A transcript of the results presentation will be available on the website as soon as possible after the event.