Capricorn Energy 2021 was a transformational year

Capricorn Energy

Capricorn Energy plc (LON:CNE) have today provided full year results for the year ended 31st December 2021.

Simon Thomson, Chief Executive, Capricorn Energy said:

“2021 was a transformational year for Capricorn; we continued to successfully reshape our portfolio and achieved a positive resolution of our Indian tax dispute.

From the proceeds of asset sales and the Indian tax refund we have committed to nearly US$1 billion of capital returns to shareholders in 2021 and 2022. We acquired an attractive portfolio of low breakeven oil and gas production in Egypt, where we are already delivering production growth and emission reductions, and which has significant further opportunities for value creation. We also retain the balance sheet capacity to further expand the production base through value-accretive acquisitions.

We look forward to continuing to deliver our strategic aims in 2022 with a strong commitment to safety, social responsibility and our pathway to net zero carbon emissions by 2040.”

Strategic delivery:

  • Acquisition of Shell’s Western Desert production and exploration portfolio in Egypt with significant potential for production growth, operating efficiencies, exploration resources and decarbonisation
  • Retained balance sheet strength to enable further expansion of the producing asset base through investment and acquisition
  • Contingent payments receivable from recent asset sales:

o  US$76m additional consideration due in H1 2022 from UK sale;

o  further UK payments in subsequent four years dependent on oil price and production performance;

o  up to further US$100m receivable in 2023 or 2024 for Senegal sale dependent on oil price and first production timing

  • High-graded exploration portfolio now focused on shorter capital cycle, infrastructure-led opportunities
  • Portfolio resilience to energy transition scenarios: carbon reduction initiatives underway with a pathway to net zero by 2040 at the latest; portfolio value resilient under the IEA’s STEPS, SDS and NZE scenarios
  • Resolution of the Indian tax dispute, resulting in receipt of a tax refund of US$1.06bn
  • Almost US$1bn committed to shareholder capital returns: US$257m special dividend in Q1 2021 following completion of Senegal asset sale; following the Indian tax refund, US$500m tender offer to close in April 2022 and ongoing share buyback programme of up to US$200m

2021 Financial Highlights

  • Year-end Group cash of US$314m; net cash of US$133m after debt drawn to fund the Egypt acquisition of US$181m
  • Working interest Egypt oil and gas production of ~36,500 boepd, within guidance of 33,000-38,000 boepd; net entitlement production of 1.5mmboe
  • Revenues from Egypt production of US$56m: average realised oil price of US$77.8/bbl and gas price of US$2.9/mcf (average production cost US$6.0/boe)
  • Net cash generated from oil and gas production of US$185m
  • Net Group capital expenditure of US$66m
  • Operating loss of US$131m (2020 Restated: US$130m operating loss) from continuing operations
  • Profit after tax of US$895m (2020: Loss of US$394m), including India tax refund

2022 Outlook

  • Capital return of US$500m expected in Q2 2022 by way of tender offer to close in April, alongside ongoing share repurchase programme of up to US$200m, both subject to shareholder approval
  • Capricorn WI production to average 37,000-43,000 boepd with 2022 exit rates forecast to exceed top end of guidance range

o  Oil and condensate expected to comprise 35%-40% of production mix

  • Production costs forecast to be US$4.5 – US$5.5 boe
  • Current estimates of 2022 capital expenditure total approximately US$200m, including:

o  Egypt production and development expenditure of US$90-110m targeted at delivering substantial production growth during 2022

o  Egypt exploration expenditure of US$30-35m to sustain the resource base

o  UK infrastructure-led exploration expenditure of ~US$40m, predominantly on the Jaws and Diadem wells, with no further well commitments beyond 2022

o  Other international exploration of US$30-35m, principally in Mexico, with no further commitments beyond 2022 and any further investment contingent on farm-downs

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