REG - Capricorn Energy PLC - Full Year Results Announcement
28/03/2024 07:15
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240328:nRSb6712Ia&default-theme=true
RNS Number : 6712I Capricorn Energy PLC 28 March 2024
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
28 March 2024
CAPRICORN ENERGY PLC ("Capricorn" or "the Company")
Full Year Results Announcement for the year ended 31 December 2023 and
announcement of proposed $50m special dividend
(Unless otherwise stated, all dollar amounts ($) refer to US dollars)
Randy Neely, Chief Executive, Capricorn Energy PLC said:
"In the last year, the renewed Board executed multiple strategic initiatives
to transform Capricorn: cost reduction programmes, focusing the corporate
opportunities portfolio on Egypt and changes to the culture of the business,
which we continue to push through. Alongside this strategic refresh, the Board
made returning capital to shareholders a core business objective, returning
~$568m in 2023. Additionally, I am delighted to announce that we are proposing
a $50m special dividend to be paid in Q2 2024, subject to shareholder
approval.
Significant progress was made in 2023 in exiting our non-Egypt exploration
licences in Mexico, Mauritania and Suriname. We settled our remaining earnout
considerations due from Waldorf Production Ltd (Waldorf) in exchange for a
$72.5m payment and 25% working interest (WI) in the Columbus gas field
(subject to completion), maintaining an ongoing presence in the UK North Sea.
There remains the potential of a contingent payment from Woodside Energy's
(Woodside) Sangomar Field Development in Senegal.
We remain committed to the potential of our Egypt assets and believe that
Egypt is a strong jurisdiction for oil and gas companies to do business. In
2023, the Company's receivables balance increased materially, however,
throughout my twelve years working in Egypt, and looking further back, the
Government of Egypt has always honoured its financial obligations to
international investors. Our relationships with both our joint venture
partner, Cheiron, and the Egyptian General Petroleum Corporation (EGPC)
continue to build upon a strong foundation as we manage the Egyptian portfolio
through a cooperative and collaborative approach. Additionally, the Company
continues to engage with EGPC regarding a potential amendment to the terms of
our Production Sharing Contracts (PSCs) - a key catalyst in unlocking value
from our Egypt assets.
Looking ahead, we are actively working with our partner to maximise the
potential of our Egyptian portfolio and progress amendments to the PSCs that
support increased investment and strengthened returns. We are confident that
the receivables position will improve in the coming months, supported by the
Q1 2024 announcements of the UAE investment deal on the Egyptian north coast
and the International Monetary Fund loan, as well as financial support package
pledges from the EU and World Bank. We are also pleased to announce that
Capricorn received payment of $30m from EGPC this week, further demonstrating
the improving fiscal landscape. By focusing on production and development
opportunities to provide sustainable, best in class returns, and deepening our
relationships with our Partner and the Egyptian Government, our renewed team
will ensure that Capricorn advances confidently and successfully in 2024 and
beyond."
Strategic Highlights
Ø Delivery on our shareholder return commitment set out in the strategic
review, with ~$568m paid to shareholders in 2023 and a further planned
dividend payment of $50m in Q2 2024, accompanied by a share consolidation,
subject to shareholder approval
Ø Ongoing $25m share buyback programme - ~$21m repurchased to date, with
progress limited by reduced trading volumes
Ø Corporate focus on maximising value from the Egypt portfolio
Ø Full exit of non-core exploration positions in Mauritania, Mexico and
Suriname
Ø Appointment of Randy Neely as Chief Executive Officer and Director
Ø Right sized the organisation with 80% UK headcount reduction
Ø Revised agreement with Waldorf relating to the Company's disposal of its
Catcher and Kraken interests, with Capricorn now to receive $72.5m over the 12
months following the settlement date and Waldorf's 25% WI in the Columbus gas
field in the UK North Sea, subject to completion. *
Operational Highlights
Ø WI Egypt oil and gas production 30,044 boepd, comprising 47% liquids; net
entitlement sales volumes 12,161 boepd
Ø 23 additional wells were put on production adding ~6300 bopd and ~16 mmscfd
Ø Of the 29 development wells drilled, 25 targeted liquids production,
reflecting the execution of a liquids focused strategy
Ø In total nine near field exploitation (NFE) wells were drilled, seven of
which were successful, adding developed producing reserves of ~1 mmboe
Ø Exploration drilling in the first half of 2023 was unsuccessful with three
wells drilled
Ø Operating costs per boe of $5.4 on a WI basis
Ø Making progress with opportunistic investments to decarbonise and reduce
operating costs.
Financial Highlights
Ø Revenues of $201m with average oil price of $81.2/bbl and gas price of
$2.9/mmscf; production costs of $60m
Ø $49m exploration capex and general exploration costs; $15m in Egypt and
$34m across legacy international portfolio
Ø $91m capex on Egypt producing assets
Ø Net cash inflow of $32m from Egypt operations
Ø Group net cash of $76m; comprising $190m cash and $114m debt
Ø Receivables of $169m, after expected credit loss adjustments
Ø Gross G&A of $75m inclusive of restructuring costs
Ø $48m contingent payment received in December related to the disposition of
the Company's legacy UK North Sea assets with a further $24.5m to be received
over the next 10 months
Ø Group cash expenditure on oil and gas assets $88m; $43m exploration,
including general costs, and $44m producing assets
Ø Operating loss of $87m from continuing operations
Ø Combined impairment charge of $44m on Egypt producing assets and related
goodwill
Ø Loss after tax of $144m.
2024 Outlook
Ø Post-year end appointment of Eddie Ok as CFO and Geoff Probert as COO
Ø The Company remains committed to aligning investment in Egypt with funds
available in country - an update on 2024 guidance and budget is expected to be
provided once the Company has clarity on accessible funds generated in country
Ø Production in 2024 is guided in the range of 20-24,000 boepd, 48% of which
is forecast to be liquids
Ø Operating costs forecast to be stable at $7-$9/boe influenced by liquids
processing volume and absolute production levels
Ø The Company continues to focus on costs with gross G&A expected to
reach a year end run rate of <$20m per year, net of remaining restructuring
costs
Ø On the Alam El Shawish (AESW) concession (20% working interest), Capricorn
was voted into a 2024 work programme by the joint venture, with a
corresponding net capital exposure of $4.3m
Ø The Company is currently committed to spend a further net ~$10m in 2024
comprised of up to five non-operated exploration wells, including activity to
de-risk the Abu Roash F unconventional play. Capricorn intends to seek at
least a partial deferment of these expenditures into 2025
Ø The Company is working with the Operator in Egypt to amend the EGPC
concession terms and secure extensions to support increased investment and
strengthened returns
Ø Capricorn expects to complete the acquisition of a 25% WI in the Columbus
gas condensate field in Q2 2024*
Ø The Company is currently seeking to defer amounts due under its remaining
contingent obligations related to the acquisition of its Egyptian assets.
*In the event that the acquisition does not complete by the longstop date,
Capricorn will receive a payment of $7m.
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
("MAR"). Upon the publication of this announcement via Regulatory Information
Service ("RIS"), this inside information is now considered to be in the public
domain. The person responsible for arranging the release of this announcement
on behalf of Capricorn is Paul Ervine, Company Secretary.
Enquiries to:
Analysts / Investors
Nathan Piper, Commercial Director Tel: 0131 475 3000
Media
Diana Milford, Corporate Affairs
Tel: 0131 475 3000
Billy Clegg/Owen Roberts, Camarco Tel: 020 3757 4980
Presentation
The results presentation slides will be available on the website from 09:00 UK
time.
Analyst conference call
You can listen to the results presentation by dialling in to a conference call
at 11:45 UK time using the below dial-in-details. Analysts who wish to ask a
question should use the conference call facility.
Dial-in Details:
United Kingdom (Local): +44 (0)330 551 0200
Access code: Quote 'Capricorn-Full Year' when prompted by operator
Webcast
There will be a live audio webcast of the results presentation available to
view on the website (www.capricornenergy.com (http://www.capricornenergy.com)
) at 12:00 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.
The LEI of Capricorn is 213800ZJEUQ8ZOC9AL24
Corporate overview
Following the renewal of the Board in Q1 2023, led by Chair Craig van der
Laan, Capricorn immediately began a strategic review which resulted in five
key priorities that governed activity for the year: capital returns, cost
savings scale back of non-core operations, maximisation of value from Egypt
and a comprehensive company culture change.
During the period, ~$568m in capital was successfully returned to
shareholders; the majority of Capricorn's positions outside Egypt were exited;
and a culture change focused on shareholder value and capital discipline is
progressing through the organisation.
Egypt remains an attractive sector for oil and gas companies to operate, with
a government that is open to constructive relationships with the industry.
Capricorn is committed to building out the business by developing accretive
opportunities within its portfolio to create a compelling value proposition to
investors, establishing ourselves as a returns-focused, agile energy company
targeting consistent capital returns.
To drive further change within the Company, Randy Neely was brought in as CEO,
bringing with him extensive experience of running a low-cost, effective
business in Egypt and creating value in country. Post-period, the Company has
welcomed Eddie Ok as CFO and Geoff Probert as COO.
Reserves
Capricorn engaged GLJ Ltd. (GLJ) to undertake an independent oil and gas
reserves evaluation on the Company's Egypt assets, to document the 2023 year
end reserves position. GLJ undertook a full review of the producing assets and
the inventory of new well opportunities to assess total proved developed
producing (PDP), total proved (1P), total proved plus probable (2P), and total
proved plus probable plus possible (3P) reserves. The reserves were prepared
in accordance with the latest SPE Petroleum Resources Management System (PRMS)
approved definitions of Reserves and Resources. GLJ based their evaluation
on information and data provided by Capricorn. The highlights of the reserves
report are summarised below:
· Relative to year end 2022, net entitlement interest 2P reserves
after 2023 production reduced by 13% to 19.4 mmboe
· Developed producing reserves additions in 2023 replaced 60% of
production with 47% of this addition occurring in the Badr El Din (BED) area
· 35% of the 2P reserves are categorised as undeveloped, reflecting
a decrease from year end 2022 due to the impact of activity deferment with
reduced rig activity in 2024 and an updated view of the new well inventory
with a reduction in locations
· The net present value of future net entitlement revenues,
discounted at 15% (NPV15) for the 2P basis is $267m.
2P Oil & Condensate reserves (mmbo) 2P Natural Gas (bcf) Reserves Total 2P Reserves Boe (mmboe)
Net WI Net Entitlement Net WI Net Entitlement Net WI Net Entitlement
20.4 7.8 167.8 65.0 50.4 19.4
Egypt Production
WI production in 2023 across the four main concession areas of Obaiyed
(Capricorn 50% WI), BED (Capricorn 50% WI), North East Abu Gharadig (Capricorn
26% WI) and AESW (Capricorn 20% WI) averaged 30,044 boepd (47% oil) for the
year. As previously disclosed, this was below the low end of the original 2023
guidance of 32-36,000 boepd, as a consequence of the delay in the delivery of
key projects at Teen and in the BED area, along with lower than expected
contributions from some new wells and four fewer wells than originally
forecast in 2023.
Drilling activity at the end of 2023 continued to be focused on the Abu Roash
reservoir targets in the BED concession, where a campaign of step-out and
delineation wells saw positive results. These fields have been the focus of
field development studies undertaken by Capricorn to optimise further
development activity and waterflood strategy. The complex distribution of the
Abu Roash reservoir sands and their dynamic behaviour is now better understood
and consequently these important fields in the BED concession will remain the
focus of development activity following the resumption of drilling.
A number of facilities projects were completed towards the end of 2023 at BED,
Teen and Karam. These projects focused on optimising gas production with
compression and low-pressure production optimisation, with production impact
continuing to be assessed in Q1 2024. There are no further major projects
planned in 2024.
Egypt Exploration
Capricorn is in the process of transferring operatorship, however retains
participation in three exploration concessions in the Western Desert. The
Company continues to work with our partner to negotiate with EGPC for an
extension to the concession timelines, allowing a partial deferment of some of
this exploration activity into at least 2025.
Notwithstanding seeking a partial deferment, once the Company has clarity on
the availability of funds from Egypt operations, exploration activity is
expected to include: i) up to three wells in the West El Fayium concession to
meet the original minimum work obligation, including a component to de-risk
and develop our understanding of the emerging unconventional Abu Roash F
formation; ii) a well in the South East Horus concession and fulfilment of the
minimum work obligation; and iii) drilling activity commencing towards the end
of 2024 in the North Um Baraka concession, where there is a remaining two well
commitment.
UK Production
In December 2023, Capricorn agreed to acquire Waldorf's 25% non-operated WI in
the Columbus gas field located in the UK Central North Sea in Q1 2024. The
interest will be transferred into an existing Capricorn UK subsidiary and
should deliver consistent cash flows from a 1 January 2024 effective date,
with approximately 80% of production exposed to the UK gas price. In addition,
the acquisition of the Columbus field allows the Company to maintain its
presence in the UK North Sea where it has been active over the last decade
through continuous exploration and production activities. Columbus is expected
to provide ~400 boepd from completion of the deal, expected to conclude in Q2
2024.
Non-core Portfolio
Mexico
Capricorn has interests in two blocks in the Gulf of Mexico, as non-Operator
in Block 7 (Capricorn 30% WI) and Block 10 (Capricorn 15% WI). The Company has
issued notices of withdrawal on these licences and expects to have formally
withdrawn by the end of Q2 2024.
Senegal
On 13 February 2024, Capricorn noted Woodside's announcement confirming the
arrival of the FPSO facility for Woodside's Sangomar Field development
offshore Senegal and its intention to continue to target First Production for
mid-2024. As defined in the sale and purchase agreement, Capricorn may become
entitled to a contingent payment of either $25m or $50m if the average Brent
oil price during the first six months of production exceeds the $55 per barrel
or $60 per barrel thresholds and first oil is achieved in the first half of
2024. If first oil is achieved prior to 30 June 2024, the contingent payment
would be due in early 2025 once the average oil price has been determined and
there has been 30 days of continuous production. First oil is defined as the
first continuous 72-hour period of production from the Sangomar Field during
which at least a total of 30,000 barrels is produced for sale.
In either case, no additional payment will be due from Woodside if the average
Brent price is less than or equal to $55 per barrel or if first oil is
achieved later than H1 2024.
As previously noted, a tax audit is taking place with respect to Capricorn's
disposal of its interests in the Sangomar Field offshore Senegal. The tax
process is ongoing with respect to real estate capital gains tax (~$10m plus
interest and penalties) and registration duties (~$25m plus interest and
penalties). The Company's position remains that no tax is payable. A payment
demand for the full amount (~$45m) was received by Woodside in March 2024 from
the Senegalese tax authorities.
Capricorn remains committed to returning any proceeds of any contingent
payment to its shareholders.
Outlook
Capricorn is working with its Partner in Egypt to ensure the appropriate scale
of rig fleet is deployed to enable effective exploitation of the asset base,
in alignment with our strategic review commitments. Drilling activity in Egypt
is expected to be lower in 2024 in the absence of a plan to reduce the
Company's Egyptian receivables. This will support the delivery of the most
efficient drilling campaign to optimise reservoir management and better align
capital activity to accessible funds generated in country. While timing
uncertainty around collections continues, the Company is managing its Egyptian
business obligations and expects to collect the amount outstanding in full.
In the absence of development drilling in our 50% WI concessions, average
production is expected to decline by 20-30% over the year to a range of
20-24,000 boepd. Once there is clarity around an EGPC payment plan, Capricorn
will be able to provide an approved budget to define its 2024 capex, opex and
production guidance.
The Company is currently committed to an exploration capex spend of ~ $10m in
2024 comprising up to five non-operated exploration wells, including activity
to de-risk the potentially extensive Abu Roash F unconventional play. At
this time the Company is working with the Operator to seek at least a partial
deferment of these expenditures into 2025 from EGPC.
Capricorn is currently seeking a commercial resolution to contingent amounts
due under its remaining obligations to the seller on the acquisition of its
Egyptian assets.
The Company expects to complete the acquisition of 25% WI in the Columbus gas
condensate field in Q2 2024.
Principal risks and uncertainties
Managing Capricorn's key risks and associated opportunities are essential to
the Company's long-term success and sustainability. Capricorn's risk
management framework provides a systematic process for the identification and
management of the key risks and opportunities which may affect the delivery of
the Group's strategic objectives. Key performance indicators (KPIs) are set
annually and determining the level of risk the business is willing to accept
in the pursuit of these objectives is a fundamental component of Capricorn's
risk management framework.
Overall responsibility for the system of risk management and internal control
and reviewing the effectiveness of such systems rests with the Board.
Principal risks are presented at each Board meeting and at least once a year
the Board undertakes a risk workshop to review the Group's principal and
emerging risks. This integrated approach to risk management has been and
continues to be critical to the delivery of strategic objectives.
Responding to changing risks during 2023
Capricorn has assessed the principal risks and uncertainties at the end of
2023. The principal risks are:
· Increasing EGPC receivables balance
· Volatile oil and gas prices
· Failure to replace long-term reserves and resources
· Underperformance on Egypt assets
· Political and fiscal uncertainties
· Lack of adherence to health, safety, environment and security
policies
· Future challenges and costs as markets transition to Net Zero
· Breach of Group Code of Ethics
Within the Group's risk assessment framework, emerging risks are considered as
part of the identification phase. These are risks that cannot yet be fully
assessed, risks that are known but are not likely to have an impact for
several years, or risks which are unknown but could have implications for the
business moving forward.
Egypt continues to be the focus of the discussions and work continues to
identify potential known and emerging threats and opportunities which could
impact on Capricorn's ability to grow the Egypt business both organically and
inorganically.
Financial Review
Key production statistics
Year Year
ended ended
31 December 31 December 2022
2023
Production - net WI share (boepd) 30,044 34,228
Sales volumes - net EI oil (boepd) 5,367 5,028
Sales volume - net EI gas (mscfd) 38,049 44,468
Average price per bbl ($) 81.2 98.8
Revenue from production ($m) 199.9 228.9
Average production costs per boe ($) 5.4 5.7
Loss for the Period
Year
Year ended
ended 31 December
31 December 2022
2023 (restated)
$m $m
Loss from Egypt business operating segment (60.4) (41.2)
Loss from other Group continuing operations (82.2) (135.2)
Loss/(Profit) from discontinued operations (1.4) 109.3
Loss after taxation (144.0) (67.1)
Change in Accounting Policy - Intangible exploration/appraisal assets
Following completion of the Group's strategic review in 2023, Capricorn has
changed its policy for accounting for non-well specific general exploration
costs. Previously such costs were capitalised and allocated to future
exploration wells and would either remain capitalised or be charged to the
Income Statement dependent upon the success of the well. Now, all non-well
specific exploration costs are charged to the Income Statements as they are
incurred.
The directors believe that this policy provides a clearer understanding of the
performance of the Group in any given period as Capricorn moves from an
exploration-led business to one focused on maximising value from its producing
assets.
Egypt Business Operating Segment Results
In Egypt, total revenue was $199.9m. $159.1m was generated on sale of
liquids with an average price of $81.2 per bbl on net entitlement volumes of
1,959,000 bbls. Gas revenue was $40.8m from volumes of 13,887,800 mscf at
the contracted rate of $2.9 per mscf.
Cost of sales in the year were $59.6m, including inventory movements.
Production costs decreased slightly to $5.4 per boe, on a working interest
production over the year, while depletion charges were $120.4m, at a weighted
average rate of $22.8 per boe across the concessions. Expected credit loss
adjustments for the year were $9.0m, reflecting the increased ageing of trade
receivables in Egypt.
Capricorn records other income on additional production that is notionally
allocated to the Group to cover tax due on profits from the concessions.
This is offset by an equal and opposite tax charge. In the current period,
the value of this income and notional tax gross-up is $54.1m.
At the year end, the Egypt assets were tested for impairment, with impairment
recorded on producing assets of $29.1m and goodwill of $14.6m. Related
deferred tax credits were $6.6m. Further details are provided below.
A fair value loss of $8.0m on the mark-to-market valuation of deferred
consideration due relating to the 2021 business combination was recorded in
the year. Capricorn, with our partner Cheiron, are in discussions with the
seller regarding settlement of the $25.0m due in 2024 and one further payment
of up to $25.0m is due in 2025.
Net finance costs in Egypt of $17.3m, includes loan interest and charges and
the total tax charge on Egypt operations for the year is $40.5m, being the tax
gross-up charge of $54.1m offset by deferred tax credits on asset temporary
differences.
Results from Other Continuing operations
The loss on other continuing operations of $81.8m includes unsuccessful
exploration costs of $17.9m and general exploration costs of $16.2m. $26.3m
of this cost related to operations in Mexico where the Group concluded its
exploration programme, in early 2023, with the drilling of the Yatzil well.
General exploration costs also include costs in Mauritania, Suriname and the
UK as the Group moved away from its previous focus on international
exploration.
Net finance income of $13.8m includes interest earned on cash and cash
equivalents of $19.9m offset by finance charges and foreign exchange losses of
$6.1m.
Capricorn recorded a $4.0m impairment on assets held-for-sale relating to an
investment held in India.
Discontinued Operations
Settlement of earnout consideration due on disposal of UK Producing assets
Following the settlement agreement with Waldorf, Capricorn received an
immediate payment of $48.0m with a further $2.0m due in April 2024, matching
the ~$50m that was due for 2023 production. Capricorn will further receive
$22.5m in January 2025 and Waldorf's 25% WI in the Columbus gas field in the
UK North Sea (subject to completion). Adding the fair value of Columbus
brings total consideration to $79.5m before expected credit loss
adjustments. The transaction recorded a loss of $1.7m compared to the fair
value of the remaining earnout at the date of the transaction but brings
certainty to the further receivables due, as well as continuing the Group's
operating activities in the UK.
Prior to the settlement of the earnout, Capricorn recorded a year-to-date fair
value loss of $10.4m on mark-to-market valuations of the remaining
consideration due, bringing total losses in the year to $12.1m. This was
offset by interest income of $2.3m on the 2022 earnout payment received in
March 2023, a refund of past production costs of $4.3m from joint venture
audit settlements and a deferred tax credit of $4.1m, with consideration from
the settlement of the earnout now expected to be sheltered in full by
available tax losses. This resulted in a net loss from discontinued
operations of $1.4m over the year.
Across all segments, gross administration charges were $74.9m, including
$16.5m of redundancy costs following the reduction in Group headcount, $6.7m
of depreciation and amortisation expenses, with a further $6.9m of costs
relating to the aborted transaction costs. Net administration costs reduce
to $61.9m after recharges and recoveries.
Contingent consideration on Senegal asset sale
Capricorn disposed of its interests in Senegal in 2020. Under the sale
agreement, Capricorn is due further consideration of up to $50m based on the
first oil date falling before 30 June 2024 and the prevailing oil price. No
revenue or asset has been recognised for this possible income.
Senegal tax assessment
As previously noted, a payment demand for Senegal taxes and duties was
received by Woodside in March 2024, including ~$45m with respect to the
Group's disposal of its interests in 2021. Capricorn believes that neither
claim is valid and is working with Woodside to defend the Group's position.
No provision has been made in the financial statements at the year end.
Net cash inflow for the Year
$m
Opening net cash as at 1 January 2023 596.9
Shareholder returns - Dividends and share re-purchase (561.0)
Net cash inflow from UK North Sea settlements 189.0
Net cash inflow from Egypt operations 32.3
Exploration expenditure - Egypt (12.2)
Exploration expenditure - other legacy assets (31.1)
Development expenditure - Egypt (44.2)
Deferred consideration - Egypt (25.0)
Pre-award costs and business development (1) (6.1)
Administration expenses, corporate assets, and office lease costs (47.9)
Net finance costs, equity and other movements (14.8)
Closing net cash as at 31 December 2023 75.9
(1) Cash outflows on business development of $5.1m not relating to pre-award
activities are reallocated from administration costs
Cash and cash equivalent balances at 31 December 2023 of $189.5m were offset
by borrowings in Egypt of $113.6m. Cash held inside of Egypt was $6.0m,
while the net debt of the Egypt business was $105.8m, including a prepaid
facility fee of $1.8m. Capricorn has committed not to inject further cash into
the Egypt business, other than to meet committed exploration spend and
deferred consideration payments, both covered by parent company guarantees.
Loan facilities are non-recourse to the Group's non-Egypt assets.
At the date of approval of the financial statements, Capricorn, together with
Cheiron, is seeking waivers from lenders for several potential events of
default under the facilities, all related to a lack of a payment plan from
EGPC to resolve the receivables position.
Restricted cash balances of $5.0m and $5.6m exist in the UK and Egypt
respectively. Egypt restricted cash may be used to fund non-operated
concessions in Egypt.
Loan repayments in the year were $48.3m. The facilities are subject to
biannual redetermination processes, with the September 2023 redetermination
resulting in an additional payment of $2.9m made early 2024.
Cash inflows from operations in Egypt of $32.3m can be reconciled to cash
flows from operations per the statutory cash flow as follows:
$m
Operating cash flow per statutory cash flow statement (39.9)
Non-GAAP Adjustments:
Discontinued operations - working capital settlements (4.3)
Pre-award and new venture costs reallocated 6.1
General exploration costs 26.9
Administration expenses 45.9
Other adjustments (2.4)
Net cash outflow from operations 32.3
Balance Sheet
The Group's net asset position at 31 December 2023 is summarised as follows:
$m
Exploration assets - Egypt 2.5
Development assets - Egypt 217.6
Other long-term assets (excluding deferred tax assets) 52.9
Working capital - non-Egypt 177.2
Cash and cash equivalents 183.5
Trade and other receivables and payables, and provisions (6.3)
Working capital - Egypt 7.3
Trade and other receivables and payables, and inventory 113.1
Net debt, including unamortised facility fees (105.8)
Asset held-for-sale 3.2
Lease liabilities (7.4)
Deferred consideration on business combination (44.8)
Net deferred tax liabilities (2.0)
Net assets 406.5
Exploration assets
Following the change in accounting policy, exploration assets of $2.5m at 31
December 2023 relate wholly to planned exploration wells in Egypt.
Development assets and goodwill
Capricorn has not approved any further drilling activity in Egypt and will not
do so until a payment plan has been agreed with EGPC. There are currently no
active rigs drilling on the Company's jointly held concessions, down from a
maximum of six during 2023.
This cessation of drilling operations has led to a downgrade of booked 2P
reserves at the year end, which is in turn an indicator that the Group's
assets may be subject to impairment. Subsequent impairment tests performed
indicated a net impairment of $22.5m across two concession areas in Egypt, and
after adjusting for deferred tax credits, resulted in a headline impairment
charge of $29.1m against producing assets. Impairment tests conducted on
goodwill allocated to the Egypt business unit resulted in a further impairment
charge of $14.6m.
The impairment tests performed compare the carrying value of the Group's
assets against their recoverable value based on net present value model based
on future production profiles. Capricorn's base-case assumes that a payment
plan will be agreed and operations will commence with a three-rig campaign
mid-year 2024, with an increase in collections commencing January 2025. Other
key assumptions include a payment plan that settles revenue six months from
production, a long-term oil price of $65 flat, a discount rate of 15% and a
voluntary cost of carbon based on the appropriate IEA scenario. Any
degradation in these assumptions could lead to further impairment charges, and
sensitivity analysis is included in note 2.8 to the financial statements,
showing the impact of changes to these assumptions.
Post impairment, the carrying value of the Group's development/producing
assets in Egypt is $217.6m and with remaining goodwill of $10.8m.
Other long-term assets
Non-oil and gas property, plant and equipment and intangible assets at the
year end totalled $14.5m include $6.8m relating to unamortised carbon credits
and $6.8m of right-of-use assets, During the year the Company took possession
of two floors office space in Edinburgh previously proposed for new head
office space. Following the strategic review, this move was cancelled, and
the lease for one floor was cancelled in 2023 with the other sublet in early
2024.
Other long-term receivables include the $22.5m due from Waldorf in 2025,
adjusted for expected credit losses as required under IFRS.
Working capital
Working capital outside of Egypt includes residual balances from the Group's
previous international exploration activities together with funding of
corporate activities
Egypt trade receivables at the year end were $168.7m, an increase of $71.9m
across the period. $143.1m of this amount was overdue. Capricorn continues
to engage with EGPC and Ministry of Petroleum & Mineral Resources in Egypt
to address the receivables position.
Net working capital liabilities across the Egypt concessions were $66.3m.
This includes additional creditors and accruals of $26.8m which were adjusted
by way of a prior year restatement in the Group balance sheet. In 2022,
Capricorn processed an opening cost adjustment of $29.2m reducing joint
venture credits and development/producing assets relating to accruals that
could not be supported by the Joint Venture billings statements received from
the operator. After further investigation following access to the Bapetco
source accounting records, Capricorn concluded that these balances should have
remained on the balance sheet and had been reversed in error in the prior
year. This prior year restatement also leads to a change in the 2022 depletion
charge.
Equity movements
Shareholder returns and share premium cancellation
Across 2023 Capricorn returned $560m to shareholders by way of dividends of
$541.1m and $18.9m share re-purchase. Ahead of the two dividends, the Group
converted $450m and $100m respectively into £, fixing the returns in pence
per share. Exchange rate movements from the date of conversion to the date
of settlement resulted in the total $ equivalent of dividend payments of $541m
recorded in the financial statements. The Company undertook two share
consolidations at the same time as paying the dividends. A share premium
cancellation in advance of the returns completed in January 2023.
Capricorn Energy PLC
Group Income Statement
For the year ended 31 December 2023
2023 2022
(restated)
Note $m $m
Continuing operations
Revenue 2.1 201.0 229.6
Other income 2.1 54.1 54.8
Cost of sales 2.1 (59.6) (71.2)
Depletion charge 2.3 (120.4) (131.3)
Gross profit 75.1 81.9
General exploration costs (26.9) (48.7)
Unsuccessful exploration well costs 2.2 (20.5) (57.8)
Impairment of property, plant & equipment - development/producing assets 2.3 (29.1) (42.6)
Impairment of goodwill 2.4 (14.6) -
Expected credit loss adjustment on revenue receivable (9.0) -
Pre-award costs (1.1) (9.2)
Other operating income 0.6 5.8
Administrative and other expenses 4.2 (61.9) (65.0)
Operating loss (87.4) (135.6)
Fair value loss - deferred consideration on business combinations 3.4 (8.0) (12.7)
Gain on financial assets at fair value through profit or loss 0.8 2.3
Impairment of an asset held-for-sale (4.0) -
Finance income 4.3 21.8 15.7
Finance costs 4.4 (25.3) (18.2)
Loss before tax from continuing operations (102.1) (148.5)
Taxation
Tax charge 5.1 (40.5) (27.9)
Loss from continuing operations (142.6) (176.4)
(Loss)/Profit from discontinued operations 6.1 (1.4) 109.3
Loss for the year attributable to equity holders of the Parent (144.0) (67.1)
Loss per share for loss from continuing operations:
Loss per ordinary share - basic and diluted ($) 4.5 (0.74) (0.49)
Loss per share for loss attributable to equity holders of the Parent:
Loss per ordinary share - basic diluted ($) 4.5 (0.75) (0.19)
Group Statement of Comprehensive Income
For the year ended 31 December 2023
2023 2022
(restated)
$m $m
Loss for the year attributable to equity holders of the Parent (144.0) (67.1)
Other Comprehensive Income/(Expense) - items that may be recycled to the
Income Statement
Currency translation differences 5.1 (16.7)
Other Comprehensive Income/(Expense) for the year 5.1 (16.7)
Total Comprehensive Income/(Expense) for the year attributable to equity
holders of
the Parent (138.9) (83.8)
Total Comprehensive Expense)/Income from:
Continuing operations (137.5) (193.1)
Discontinued operations (1.4) 109.3
(138.9) (83.8)
Capricorn Energy PLC
Group Balance Sheet
As at 31 December 2023
2023 2022
Note $m (restated)
$m
Non-current assets
Intangible exploration/appraisal assets 2.2 2.5 1.0
Property, plant & equipment - development/producing assets 2.3 217.6 275.8
Goodwill 2.4 10.8 25.4
Other property, plant & equipment and intangible assets 14.5 14.1
Other long-term receivables 27.6 -
Financial assets at fair value through profit or loss 3.4 - 96.2
Deferred tax asset 5.2 7.6 8.7
280.6 421.2
Current assets 189.5 756.8
Cash and cash equivalents 3.1
Inventory 8.3 8.1
Trade and other receivables 3.3 186.0 142.5
Financial assets at fair value through profit or loss 3.4 - 134.4
383.8 1,041.8
Asset held-for-sale 3.2 -
Total assets 667.6 1,463.0
Current liabilities 15.4 25.4
Loans and borrowings 3.2
Lease liabilities 1.0 1.9
Deferred consideration on business combinations 3.4 25.0 25.0
Trade and other payables 3.5 82.0 84.9
123.4 137.2
Non-current liabilities 96.4 133.2
Loans and borrowings 3.2
Lease liabilities 6.4 2.4
Provisions - well abandonment 5.5 3.4
Deferred consideration on business combinations 3.4 19.8 36.8
Deferred tax liabilities 5.2 9.6 28.4
137.7 204.2
Total liabilities 261.1 341.4
Net assets 406.5 1,121.6
Equity attributable to equity holders of the Parent 7.6 8.0
Called-up share capital
Share premium 0.8 495.4
Shares held by ESOP/SIP Trusts (6.3) (15.3)
Foreign currency translation (85.7) (90.8)
Merger and capital reserves 45.9 45.5
Retained earnings 444.2 678.8
Total equity 406.5 1,121.6
Capricorn Energy PLC
Group Statement of Cash Flows
For the year ended 31 December 2023
2023 2022
Note $m (restated)
$m
Cash flows from operating activities:
Loss before tax from continuing operations (102.1) (148.5)
(Loss)/Profit before tax from discontinued operations 6.1 (5.5) 113.4
Loss before tax including discontinued operations (107.6) (35.1)
Adjustments for non-cash income and expense and non-operating cash flows:
Other income - tax entitlement volumes (54.1) (54.8)
Unsuccessful exploration well costs 20.5 57.8
Depreciation, depletion and amortisation 127.1 137.1
Impairment of goodwill 14.6 -
Impairment of property, plant & equipment - development/producing assets 29.1 42.6
Expected credit loss adjustment on revenue receivable 9.0 -
Share-based payments charge 2.5 10.5
Fair value loss - deferred consideration on business combinations 8.0 12.7
Gain on financial assets at fair value through profit or loss - continuing (0.8)
operations
Loss/(Gain) on financial assets at fair value through profit or loss - 10.4 (112.7)
discontinued operations
Impairment of an asset held-for-sale 4.0 -
Loss on disposal of a financial asset - discontinued operations 1.7 -
Finance income (21.8) (15.7)
Finance costs 25.3 18.2
Adjustments to operating cash flows for movements in current assets and
liabilities:
(0.2) 2.7
Inventory movement
Trade and other receivables movement 3.3 (69.0) (38.7)
Trade and other payables movement 3.5 (38.6) (9.8)
Net cash flows (used in)/from operating activities (39.9) 14.8
Cash flows from investing activities: - 1,056.0
Exceptional income - India tax refund
Expenditure on intangible exploration/appraisal assets (16.4) (46.2)
Expenditure on property, plant & equipment - development/producing assets (44.2) (62.2)
Expenditure on other property, plant & equipment and intangible assets (0.3) (11.7)
Deferred consideration received - discontinued operations 182.4 75.7
Consideration paid for assets acquired through business combination - (3.2)
Deferred consideration paid on business combination (25.0) (20.9)
Proceeds on disposal of financial assets - 12.8
Tax paid on investing activities - (0.2)
Interest received and other finance income 24.3 12.5
Net cash flows from investing activities 120.8 1,012.6
3.2 (48.3) (21.5)
Cash flows from financing activities:
Repayment of borrowings
Lease payments (2.2) (2.5)
Dividends paid 7.1 (542.1) -
Share repurchase (18.9) (528.6)
Other interest and charges (16.0) (11.7)
Proceeds from issue of shares 0.8 4.5
Cost of shares purchased (19.5) (19.8)
Net cash flows used in financing activities (646.2) (579.6)
Net (decrease)/increase in cash and cash equivalents (565.3) 447.8
Opening cash and cash equivalents at beginning of year 756.8 314.1
Foreign exchange differences (2.0) (5.1)
Closing cash and cash equivalents 3.1 189.5 756.8
Capricorn Energy PLC
Group Statement of Changes in Equity
For the year ended 31 December 2023
Equity share Shares held by Foreign Merger Retained Total
capital and ESOP/ Currency translation and capital earnings equity
share SIP Trusts reserves (restated) (restated)
premium
$m $m $m $m $m $m
At 1 January 2022 503.5 (17.5) (74.1) 40.9 1,345.8 1,798.6
Restatement - - - - (76.9) (76.9)
At 1 January 2022 - restated 503.5 (17.5) (74.1) 40.9 1,268.9 1,721.7
Loss for the year - - - - (67.1) (67.1)
Currency translation difference - - (16.7) - - (16.7)
Total comprehensive expense - - (16.7) - (67.1) (83.8)
Share-based payments - - - - 10.5 10.5
Exercise of employee share options 4.5 - - - - 4.5
Share repurchase (4.6) - - 4.6 (511.5) (511.5)
Cost of shares purchased - (19.8) - - - (19.8)
Cost of shares vesting - 22.0 - - (22.0) -
At 31 December 2022 503.4 (15.3) (90.8) 45.5 678.8 1,121.6
Loss for the year - - - - (144.0) (144.0)
Currency translation differences - - 5.1 - - 5.1
Total comprehensive income/(expense) - - 5.1 - (144.0) (138.9)
Dividends paid - - - - (541.1) (541.1)
Share repurchase (0.4) - - 0.4 (18.9) (18.9)
Share-based payments - - - - 2.5 2.5
Exercise of employee share options 0.8 - - - - 0.8
Share premium cancelled (495.4) - - - 495.4 -
Cost of shares cancelled - (19.5) - - - (19.5)
Cost of shares vesting - 28.5 - - (28.5) -
At 31 December 2023 8.4 (6.3) (85.7) 45.9 444.2 406.5
Section 1 - Basis of Preparation
1.1 Significant Accounting Policies
a) Basis of preparation
The consolidated Financial Statements of Capricorn Energy PLC ('Capricorn' or
'the Group') for the year ended 31 December 2023 were authorised for issue in
accordance with a resolution of the Directors on 27 March 2024. Capricorn is a
limited company incorporated and domiciled in the United Kingdom whose shares
are publicly traded. The registered office is located at 50 Lothian Road,
Edinburgh, Scotland, EH3 9BY. The registered company number is SC226712.
Capricorn prepares its Financial Statements on a historical cost basis, unless
accounting standards require an alternate measurement basis. Where there are
assets and liabilities calculated on a different basis, this fact is disclosed
either in the relevant accounting policy or in the notes to the Financial
Statements. The Financial Statements comply with the Companies Act 2006 as
applicable to companies using UK-adopted International Financial Reporting
Standards ('IFRS').
During the current period, the Company changed its accounting policy for
intangible exploration/appraisal assets as detailed in note 1.3. Comparative
information has been restated to reflect this change in policy. All other
accounting policies have been applied consistently across all periods
disclosed.
The Group's Financial Statements are prepared on a going concern basis.
b) Accounting standards
The Financial Statements of Capricorn has been prepared in accordance with
UK-adopted International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those standards.
During the year, no new standards or amendments to standards were adopted that
had a material impact on Capricorn's results or Financial Statement
disclosures.
There are no new standards or amendments issued by the IASB and endorsed under
the Companies Act, which have yet to be adopted by the Group that will
materially impact the Group's Financial Statements.
c) Annual report and accounts
Full accounts are due to be made available on the Company's website in April
2024 and will be available at the Company's registered office, 50 Lothian
Road, Edinburgh, EH3 9BY. The Annual General Meeting is due to be held on
Thursday 23 May 2024 at 11am.
1.2 Going Concern
The Directors have considered the factors relevant to support a statement of
going concern. In assessing whether the going concern assumption is
appropriate, the Board considered the Group cash flow forecasts under various
scenarios, identifying risks and mitigating factors. Along with base-case
assumptions, a downside scenario run includes a return to lower oil prices,
with a 10% reduction to the forward curve over 2024 and an oil price of $60
per bbl from 2025 onward, a 10% reduction in forecast production and further
delays in settlement of Egypt trade receivables. An oil-price crash scenario
assumes a fall in the oil price to $40 per bbl in Q1 2024 with a recovery of
$65 per bbl by the end of 2024. Under both scenarios the Group has sufficient
cash headroom to continue to operate as a going concern. All scenarios assume
a minimum return of $50m to shareholders in 2024.
As the Directors will not commit to investing further funds into the Egypt
business, separate cash flow forecasts have been run for
Capricorn Egypt Limited, the Egypt asset-holding subsidiary and the remaining
Capricorn Energy PLC Group. Capricorn Egypt is a party to the Junior and
Senior borrowing facilities entered in connection with the Group's Egypt
assets, however these facilities are non-recourse to the rest of the Capricorn
Group.
Under all scenarios run, the Capricorn Group would continue to operate as a
going concern with sufficient cash balances, allowing the Group to meet its
current and contracted commitments outside Egypt as and when they fall due for
a period of at least 12 months from the date of signing these Financial
Statements.
In addition, Capricorn Egypt Limited is forecast to have sufficient resources
to meet its contractual obligations as they fall due across all three
scenarios, though headroom is limited at certain points across the going
concern period. If any unforeseen changes in assumptions were to adversely
impact the subsidiary, and with no further injection of funds from the parent,
it may not be able to meet all debt repayments that fall due in the period
which could result in lenders taking control of the assets. While the assets
would then be heavily impaired to expected recoverable amounts, the remaining
Capricorn Energy PLC Group would be unaffected and would continue as a going
concern.
Further, under the terms of the borrowing facilities, Capricorn Egypt Limited
jointly and severally guarantee the performance of the
obligations of the joint venture counterparty. Should the counterparty fail to
meet its repayment obligations, the lender could enforce this guarantee,
though other routes to recovery would be more likely. Though considered
remote, a default by the counterparty could also result in the lenders
assuming control of the Egypt subsidiary to recover amounts due. Again, the
remaining Capricorn Energy PLC Group would be unaffected and would continue as
a going concern.
The Board and Audit Committee assessments of risk and mitigants to the Group's
operational existence beyond this 12-month period is included in the Viability
Statement.
Section 1 - Basis of Preparation (continued)
1.3 Restatement of Comparative Information
Accounting Policy Change
A change in policy from a successful efforts-based accounting policy to a pure successful efforts accounting policy for oil and gas assets has been adopted from 1 January 2023, with retrospective application. Under the revised policy, all non-well specific exploration costs, previously capitalised within exploration assets, are now charged directly to the Income Statement as incurred. The Directors believe that the revised policy gives a clearer understanding of the performance of the Group in any given period as the new policy is more closely aligned to the general capitalisation requirement of the IFRS framework, by only capitalising costs associated within exploration assets that directly relate to commercial discoveries of hydrocarbons. In addition, costs associated with Near Field Exploration (NFE) wells, which are appraisal wells within the existing development areas, are now capitalised immediately within development/producing assets, given that, if successful they start producing immediately. The Directors believe these changes will provide more reliable and relevant information on the Group's financial performance in a period and more importantly the value of exploration assets held at the balance sheet date.
The result of the change in accounting policy is that going forward, only costs of commercially successful exploration wells in Egypt projects are expected to be capitalised within exploration assets given the change in the Group's future strategy to focus on maximising value from these assets. The policy change has been applied retrospectively and restatement of the intangible exploration/appraisal assets, Income Statement, Balance Sheet, and Statement of Cash Flows including the comparative periods is presented in the tables below.
Adjustments recognised on adoption from successful efforts-based to a pure successful efforts-based costs policy. A reconciliation of the change to intangible exploration/appraisal assets is as follows:
Intangible Exploration/ Accounting policy change Intangible Exploration/
Appraisal assets $m Appraisal assets
old policy new policy
$m $m
Cost (88.5) 29.4
At 1 January 2022 117.9
Additions 90.4 (53.0) 37.4
Unsuccessful exploration costs (113.1) 47.3 (65.8)
At 31 December 2022 95.2 (94.2) 1.0
Additions 57.1 (35.1) 22.0
Unsuccessful exploration costs (109.3) 88.8 (20.5)
At 31 December 2023 43.0 (40.5) 2.5
(11.6) 8.0
Impairment
At 1 January 2022 19.6
Unsuccessful exploration costs (19.6) 11.6 (8.0)
At 31 December 2022 and 31 December 2023 - - -
Net book value
At 31 December 2021 98.3 (76.9) 21.4
At 31 December 2022 95.2 (94.2) 1.0
At 31 December 2023 43.0 (40.5) 2.5
Of the $40.5m accounting policy adjustment $28.0m relates to the expensing of general exploration costs relating to Mauritania, Suriname and in the UK as well as non-well costs in Egypt in the current and prior years. The remaining $12.5m is due to the reallocation of NFE costs into development/producing assets.
Section 1 - Basis of Preparation (continued)
1.3 Restatement of Comparative Information (continued)
Prior Year Restatement
At 31 December 2022, Capricorn reversed accruals of $29.2m relating to opening balances recognised on acquisition of the Group's Egypt development/producing assets. The seller had provided insufficient information to allow the reconciliation of opening balances to subsequent costs and the operator had declined to perform such an exercise. With no supporting evidence to continue to accrue these opening costs, the amounts were reversed as a cost adjustment against property, plant & equipment - development/producing assets.
Early in 2024 and in light of concerns that accounts payable balances may be understated, Capricorn were able to access the underlying accounting records of Bapetco who maintain the gross accounting records of the joint operations on behalf of the operator. The subsequent reconciliations performed by Capricorn of those Bapetco gross numbers to the working interest working capital balances recorded in Capricorn's accounting records, identified an under accrual equivalent to the amounts reversed opening balance cost adjustment processed in 2022.
The 2022 adjustment has therefore been reversed resulting in an increase to the prior year carrying value of property, plant & equipment - development/producing assets and an increase in working capital balances relating to joint operations equal to the $29.2m. The increase in the carrying value of assets had a subsequent impact on the 2022 depletion charge for the prior year and the related deferred tax credit, though there was no material impact on the prior year impairment charge, which remains unchanged.
1.3.1 Group Income Statement Accounting Policy Changes and Prior
Year Restatement
For the year ended 31 December 2023:
Note Accounting
Income Statement (extract) Year ended policy change Year ended
31 December $m 31 December 2023
2023 (restated)
$m
$m
Continuing operations
General exploration costs - (26.9) (26.9)
Unsuccessful exploration well costs 2.2 (109.3) 88.8 (20.5)
Impairment of property, plant & equipment - development/producing assets 2.3 (25.0) (4.1) (29.1)
Impairment of goodwill 2.4 (11.7) (2.9) (14.6)
Operating loss (142.3) 54.9 (87.4)
Loss before taxation from continuing operations (157.0) 54.9 (102.1)
Tax charge 5.2 (33.8) (6.7) (40.5)
Loss from continuing operations (190.8) 48.2 (142.6)
Both basic and diluted earnings per share increased by $0.25 per share for the period ended 31 December 2023.
For the year ended 31 December 2022:
Income Statement (extract) Note Year ended Prior year restatement Year ended
31 December 2022 $m 31 December 2022
As originally presented (restated)
$m Accounting $m
policy change
$m
Continuing operations
Depletion charge (124.1) - (7.2) (131.3)
Gross Profit 89.1 - (7.2) 81.9
General exploration costs - (48.7) - (48.7)
Unsuccessful exploration well costs 2.2 (93.5) 35.7 - (57.8)
Operating loss (115.4) (13.0) (7.2) (135.6)
Loss before taxation from continuing operations (128.3) (13.0) (7.2) (148.5)
Tax charge 5.2 (32.0) 1.3 2.8 (27.9)
Loss from continuing operations (160.3) (11.7) (4.4) (176.4)
Both basic and diluted earnings per share decreased by $0.03 per share for the year ended 31 December 2022.
Section 1 - Basis of Preparation (continued)
1.3 Restatement of Comparative Information (continued)
1.3.2 Group Balance Sheet Accounting Policy Change and Prior Year
Restatement
As at 31 December 2023:
Balance Sheet (extract) Accounting policy change
At $m At
31 December 31 December 2023
2023 (restated)
$m $m
Non-current Assets
Intangible exploration/appraisal assets 43.0 (40.5) 2.5
Property, plant & equipment - development/producing assets 209.2 8.4 217.6
Goodwill 13.7 (2.9) 10.8
Deferred tax asset 9.3 (1.7) 7.6
275.2 (36.7) 238.5
Non-current liabilities
Deferred tax liabilities (5.9) (3.7) (9.6)
Net assets 446.9 (40.4) 406.5
Equity
Retained earnings 484.6 (40.4) 444.2
Total equity 446.9 (40.4) 406.5
As at 31 December 2022:
At Accounting policy change Prior Year Restatement
Balance Sheet (extract) 31 December 2022 $m $m
As originally presented At
$m 31 December 2022
(restated)
$m
Non-current assets
Intangible exploration/appraisal assets 95.2 (94.2) - 1.0
Property, plant & equipment - development/producing assets 249.5 4.3 22.0 275.8
Deferred tax assets 7.1 0.5 1.1 8.7
351.8 (89.4) 23.1 285.5
Current liabilities
Trade and other payables (55.7) - (29.2) (84.9)
Non-current liabilities Deferred tax liabilities
(30.9) 0.8 1.7 (28.4)
(86.6) 0.8 (27.5) (113.3)
Net assets 1,214.6 (88.6) (4.4) 1,121.6
Equity 771.8 (88.6) (4.4) 678.8
Retained earnings
Total equity 1,214.6 (88.6) (4.4) 1,121.6
Section 1 - Basis of Preparation (continued)
1.3 Restatement of Comparative Information (continued)
1.3.3 Group Statement of Cash Flows Accounting Policy Change and
Prior Year Restatement
For the year ended 31 December 2023:
Statement of Cash Flows (extract) Accounting
Year ended policy Year ended
31 December 2023 change 31 December 2023
$m $m (restated)
$m
Cash Flows from operating activities:
Loss before taxation from continuing operations (157.0) 54.9 (102.1)
Adjustments for non-cash income and expense and non-operating cash flows:
Impairment of property, plant & equipment - development/producing assets 25.0 4.1 29.1
Impairment of goodwill 11.7 2.9 14.6
Unsuccessful exploration costs 109.3 (88.8) 20.5
Net cash flows used in operating activities (13.0) (26.9) (39.9)
Cash flows from investing activities:
Expenditure in intangible exploration/appraisal assets (43.3) 26.9 (16.4)
Net cash flows from investing activities 93.9 26.9 120.8
Net decrease in cash and cash equivalent (565.3) - (565.3)
As at 31 December 2022:
Statement of Cash Flows (extract) Year ended Accounting policy change Prior Year Restatement 31 December 2022
31 December $m $m (restated)
2022 $m
As originally
presented
$m
Cash flows from operating activities:
Loss before taxation from continuing operations (128.3) (13.0) (7.2) (148.5)
Adjustments for non-cash income and expense and non-operating cash flows:
Depreciation, depletion and amortisation 129.9 - 7.2 137.1
Unsuccessful exploration costs 93.5 (35.7) - 57.8
Net cash flows from operating activities 63.5 (48.7) - 14.8
Cash flows from investing activities:
Expenditure in intangible exploration/appraisal assets (94.9) 48.7 - (46.2)
Net cash flows used in investing activities 963.9 48.7 - 1,012.6
Net increase in cash and cash equivalent 447.8 - - 447.8
Section 2 - Oil and Gas Assets and Operations
2.1 Gross Profit: Revenue and Cost of Sales
Year ended Year ended
31 December 31 December
2023 (restated)
2022
$m $m
Oil sales 159.1 181.4
Gas sales 40.8 47.5
Revenue from oil and gas sales
199.9 228.9
Royalty income 1.1 0.7
Total revenue 201.0 229.6
Other Income - Tax entitlement volumes 54.1 54.8
Other Income
54.1 54.8
Production costs and inventory movements
(59.6) (71.2)
Cost of sales (59.6) (71.2)
Depletion (note 2.3) (120.4) (131.3)
Gross profit 75.1 81.9
Revenue
Capricorn receives oil and gas revenue from eight producing concessions in
Egypt, based on an entitlement interest. Payment terms are within 30 days from
the date of the invoice for oil sales and 45 days from the date of the invoice
for gas sales.
Oil and gas revenue in Egypt for the year ended 31 December 2023 was $199.9m
(2022: $228.9m), from net entitlement production of 4.4 mmboe (2022: 4.7
mmboe) of which ~45% (2022: ~39%) was liquids. Oil sales averaged $81.2/boe
(2022: $98.8/boe) and with gas sales fixed at $2.9/mcf (2022: $2.9/mcf). Other
income represents tax paid on Capricorn's behalf by EGPC.
Production costs over the period were $59.6m (2022: $71.2m), or $5.4/boe
(2022: $5.7/boe) (on a working interest ("WI") basis).
Section 2 - Oil and Gas Assets and Operations (continued)
2.2 Intangible Exploration/Appraisal Assets
Egypt (restated) Mexico (restated) UK Total (restated)
$m $m (restated) $m
$m
Cost
At 1 January 2022 - 25.2 4.2 29.4
Additions - 1.2 36.2 37.4
Unsuccessful exploration costs - (25.4) (40.4) (65.8)
At 31 December 2022 - 1.0 - 1.0
Additions 5.1 15.0 1.9 22.0
Unsuccessful exploration costs (2.6) (16.0) (1.9) (20.5)
At 31 December 2023 2.5 - - 2.5
Impairment
At 1 January 2022 - 8.0 - 8.0
Unsuccessful exploration costs - (8.0) - (8.0)
At 31 December 2022 and 31 December 2023 - - - -
Net book value
At 31 December 2021 - 17.2 4.2 21.4
At 31 December 2022 - 1.0 - 1.0
At 31 December 2023 2.5 - - 2.5
A change in policy from a successful efforts-based accounting policy to a pure
successful efforts accounting policy for oil and gas assets has been adopted
from 1 January 2023. As a result of the accounting policy change, the figures
for 2022 period have been restated. For more details, see note 1.3.
Additions to intangible exploration/appraisal assets were funded through cash
and working capital.
Egypt
Additions in Egypt of $5.1m relate to direct costs on future exploration wells
in the South-East Horus concession area. Additions and unsuccessful efforts of
$2.6m relates to drilling costs of unsuccessful wells in SAS concession area.
Mexico
In Mexico additions for the year of $15.0m relate to Block 7 drilling costs,
where the Yatzil well completed in 2023 and was unsuccessful. The total
drilling costs of $16.0m was recognised as unsuccessful exploration costs in
2023.
UK
The additions of $1.9m relate to costs incurred of $0.2m and an increase of
$1.7m in relation to further estimated Tybalt well abandonment costs. Prior
year additions and unsuccessful exploration costs relate to the Jaws and
Diadem wells completed in that year.
Section 2 - Oil and Gas Assets and Operations (continued)
2.3 Property, Plant & Equipment - Development/Producing Assets
Egypt (restated)
$m
Cost
At 1 January 2022 405.1
Additions 75.8
At 31 December 2022 480.9
Additions 91.3
At 31 December 2023 572.2
Depletion and impairment
At 1 January 2022 31.2
Depletion charge 131.3
Impairment 42.6
At 31 December 2022 205.1
Depletion charge 120.4
Impairment 29.1
At 31 December 2023 354.6
Net book value
At 31 December 2021 373.9
At 31 December 2022 275.8
At 31 December 2023 217.6
Egypt
Capricorn acquired its development/producing assets in Egypt through a
business combination in 2021. Subsequent expenditure on development activities
across the concessions totaled $177.7m up to 2023 year-end. The 2022 other
cost adjustments of $29.2m credited to development assets has been removed as
a prior year restatement. See note 1.3.
Additions have been funded through cash and working capital.
Depletion of $120.4m (2022: $131.3m) was charged to the Income Statement based
on entitlement interest production during the year. The costs for depletion
include future capital costs-to-complete consistent with the life-of-field
reserve estimates used in the calculation.
Impairment review
The Group's development/producing assets in Egypt were reviewed for indicators
of impairment. Impairment reviews are conducted
by combining concessions into four concession areas. Indicators were
identified where a pause in development drilling activity has
resulted in downgrades to reserves volumes booked. Subsequent impairment tests
identified an impairment of $29.1m across the
AESW and NEAG concession areas. Prior year impairment of $42.6m across the
AESW and Obaiyed concession areas resulted from poor performance from wells
drilled in the period and a subsequent reserves downgrade.
2.4 Goodwill
Egypt
$m
At 1 January 2022 and 31 December 2022 25.4
Impairment (14.6)
10.8
At 31 December 2023
Goodwill arose on the acquisition of the Western Desert assets in Egypt in
2021. Goodwill has been tested for impairment at 31 December 2023 and an
impairment of $14.6m was recorded as a result of reserves downgrades at the
year-end.
Section 3 - Working Capital, Financial Instruments and Long-term Liabilities
3.1 Cash and Cash Equivalents
At At
31 December 31 December
2023 2022
$m $m
Cash at bank 12.8 63.4
Bank deposit less than three months 20.0 298.0
Money market funds 156.7 395.4
189.5 756.8
At 31 December 2023, $10.6m (2022: $52.5m) of cash and cash equivalents are
restricted and not available for immediate ordinary business use. This
includes $5.6m (2022: $43.5m) of cash and cash equivalents in Egypt.
3.2 Loans and Borrowings
Year ended Year ended
31 December 31 December
2023 2022
Reconciliation of opening and closing liabilities to cash flow movements: $m $m
Opening liabilities 158.6 177.0
Loan repayments disclosed in the Cash Flow Statement:
Senior Debt Facility (48.3) (21.5)
Non-cash movements:
Accrued debt facility interest 0.6 2.2
Amortisation of debt arrangement fees 0.9 0.9
111.8 158.6
Closing liabilities
Amounts due less than one year 15.4 25.4
Amount due greater than one year 96.4 133.2
Closing liabilities 111.8 158.6
Capricorn Egypt Debt Facilities
In September 2021, Capricorn Egypt Limited entered into a $325.0m Senior Debt
Facility and an $80.0m Junior Debt Facility jointly with Cheiron, the joint
operation partner in Egypt, to finance the acquisition of the Egyptian Western
Desert Portfolio. The facility commitments are split 50:50 with Cheiron.
Facility commitments began amortising in September 2022 and the maximum
drawdown available to Capricorn at 31 December 2023 was $73.6m (2022: $119.9m)
for the Senior Debt Facility and $40.0m (2022: $40.0m) for the Junior Debt
Facility.
At the date of approval of these financial statements, Capricorn and Cheiron
are seeking waivers from the lenders for potential events of default under the
facilities, all related to a lack of a payment plan from EGPC for resolving
the trade receivables position.
Section 3 - Working Capital, Financial Instruments and Long-term Liabilities (continued)
3.3 Trade and Other receivables
At At
31 December 31 December
2023 2022
$m $m
Trade receivables 168.5 96.9
Other receivables 11.0 19.6
Prepayments 1.5 5.3
Joint operation receivables 5.0 20.7
186.0 142.5
Trade receivables relate to the Group's producing assets in Egypt. Capricorn
remains in discussions with EGPC and the operator to manage the receivables
position and Capricorn will not commit to further investment in Egypt until a
payment plan is agreed. At 31 December 2023, the expected credit loss
adjustment offsetting receivables has increased to $9.0m (2022: $1.0m).
Trade receivables are initially recorded at fair value, adjusting for expected
credit losses, and subsequently measured at amortised cost. Revenue is
recognised at the point in time where title passes to the customer and payment
becomes unconditional. The fair value measurement of revenue for oil and gas
sales in Egypt includes adjustments to invoiced quantities for expected
entitlement share adjustments.
Other receivables balance of $11.0m (2022: $19.6m) includes interventure
receivables of $1.4m (2022: $9.1m), VAT recoverable in the UK and Mexico of
$3.6m (2022: $4.4m), money market interest receivable of $0.6m (2022: $3.3m)
and earnout receivable of $2.0m (2022: $nil).
Reconciliation of opening and closing receivables to operating cash flow Year ended Year ended
movements:
31 December 31 December
2023 2022
$m $m
Opening trade and other receivables 142.5 1,211.2
Closing trade and other receivables (186.0) (142.5)
Decrease/(Increase) in trade and other receivables (43.5) 1,068.7
Foreign exchange (1.2) (17.3)
India tax refund received - (1,056.0)
Decrease in joint operation receivables relating to investing activities (18.5) (27.7)
Decrease in other receivables relating to investing activities (4.2) (8.7)
(Decrease)/Increase in prepayments relating to investing activities (2.2) 0.6
(Decrease)/Increase in prepayments and other receivables relating to financing (1.4) 1.7
activities
Trade and other receivables recognised on earnout disposal of the UK assets 2.0 -
Trade and other receivables cash flow movement (69.0) (38.7)
The movements in joint operation receivables relating to investing activities
relate to the Group's share of the receivables of joint operations in respect
of exploration, appraisal and development activities.
Section 3 - Working Capital, Financial Instruments and Long-term Liabilities (continued)
3.4 Financial Assets and Financial Liabilities at Fair Value Through Profit or Loss
At At
31 December 31 December
2023 2022
Financial assets $m $m
Non-current assets
Financial assets at fair value through profit or loss - earnout consideration - 89.7
Financial assets at fair value through profit or loss - non-listed investment - 6.5
fund
- 96.2
Current assets
Financial assets at fair value through profit or loss - earnout consideration - 134.4
- 134.4
Financial assets at fair value through profit or loss - Earnout consideration
On 18 December 2023, Capricorn reached a settlement agreement with Waldorf Petroleum whereby all future earnout consideration due to Capricorn was settled by an immediate payment of $48.0m, a further $2.0m to be received on 1 April 2024, $22.5m to be received on 3 January 2025 and the transfer of Waldorf's 25% WI share in the Columbus producing asset in the UK North Sea to Capricorn. The transfer of Columbus is subject to approval from the NSTA. The settlement agreement provides for an additional payment of $7.0m should the necessary approvals not be received. There is therefore no financial asset at fair value through profit to loss in relation to the earnout consideration at 31 December 2023. Details of the loss on disposal of the financial assets can be found in note 6.1.
On 31 March 2023, Capricorn received $136.7m in full settlement of the 2022 earnout consideration due with interest from 1 January 2023 of $2.3m. See note 6.1 for further detail.
Financial assets at fair value through profit or loss - Listed equity investments
In 2021, Capricorn invested $6.9m into a non-listed trust in India and with a minimum investment period of five years, this is recorded as a non-current financial asset and measured at fair value. In 2023, the Group entered into an agreement to release Capricorn from the minimum investment period and dispose of its investment for $3.2m and the asset is now reclassified as an asset held-for-sale at the balance sheet date, after testing for impairment.
In March 2022, the Group sold its remaining shareholding in Vedanta, listed in India, for INR968m ($12.8m).
At At
31 December 31 December
2023 2022
Financial liabilities $m $m
Non-current liabilities
Financial liabilities at fair value through profit or loss - deferred (19.8) (49.1)
consideration on business combination
(19.8) (49.1)
Current liabilities
Financial liabilities at fair value through profit or loss - deferred (25.0) (25.0)
consideration on business combination
(25.0) (25.0)
Financial liabilities at fair value through profit or loss - deferred consideration on business combination
Deferred consideration is due to Shell following the Egypt business
combination in 2021. Amounts due are determined by the average annual dated
Brent oil price for each year up to 2024, with a maximum $50.0m due for each
year, split 50:50 between Capricorn and Cheiron, if the average price exceeds
$75/bbl. The full $25.0m was payable in respect of 2022 and was settled in
January 2023. Capricorn and Cheiron are in discussions with Shell regarding
settlement of the $25m due for the 2023.
The fair value of the liability in respect of remaining years is based on
third-party mark-to-market valuations. During the year, the Group made a loss
of $8.0m (2022: $12.7m) on fair value movements increasing the liability.
Section 3 - Working Capital, Financial Instruments and Long-term Liabilities (continued)
3.5 Trade and Other Payables
At At
31 December 31 December
2023 2022
(restated)
$m $m
Trade payables 0.3 1.5
Other taxation and social security 0.5 1.9
Accruals and other payables 7.9 21.6
Joint operation payables 73.3 30.7
82.0 55.7
Joint operation payables include $6.4m (2022: $18.3m) and $66.9m (2022:
$41.6m) relating to exploration/appraisal asset and development/producing
asset costs respectively.
At At
31 December 31 December
2023 2022
(restated)
Reconciliation of opening and closing payables to operating cash flow $m $m
movements:
Opening trade and other payables (84.9) (152.2)
Closing trade and other payables 82.0 84.9
Decrease in trade and other payables (2.9) (67.3)
Foreign exchange 1.6 3.4
Decrease in trade payables relating to investing activities 0.7 0.5
(Increase)/Decrease in joint operation payables relating to investing (38.1) 32.4
activities
Decrease in accruals and other payables relating to investing activities - 3.0
Decrease/(Increase) in accruals and other payables relating to financing 0.1 (0.5)
activities
Decrease in accruals and other payables relating to other non-operating - 18.7
activities
Trade and other payables movement recorded in operating cash flows (38.6) (9.8)
Movements above for investing activities relate to exploration, appraisal and
development activities through the Group's joint operations. Movements
relating to production activities are included in amounts through operating
cash flows. The movement in accruals and other payables relating to other
non-operating activities is in relation to the share repurchase.
Section 4 - Income Statement Analysis
4.1 Segmental Analysis
The segment results for the year ended 31 December 2023 are as follows:
Other Capricorn Energy Group
$m
Other
Egypt Mexico Countries Total
$m $m $m $m
Revenue 199.9 - - 1.1 201.0
Other income 54.1 - - - 54.1
Cost of sales (59.6) - - - (59.6)
Depletion charges (120.4) - - - (120.4)
Gross profit 74.0 - - 1.1 75.1
Pre-award costs (0.7) - - (0.4) (1.1)
General exploration costs (10.4) (10.3) (6.2) - (26.9)
Unsuccessful exploration costs (2.6) (16.0) (1.9) - (20.5)
Impairment of property, plant & equipment - development/producing assets (29.1) - - - (29.1)
Impairment of goodwill (14.6) - - - (14.6)
Expected credit loss adjustment on revenue receivable (9.0) - - - (9.0)
Other operating income - - - 0.6 0.6
Depreciation - purchased assets - - - (0.2) (0.2)
Amortisation - right-of-use assets (0.3) - - (2.3) (2.6)
Amortisation of other intangible assets - (0.3) - (3.6) (3.9)
Other administrative expenses (1.9) (2.9) (0.1) (50.3) (55.2)
Operating profit/(loss) 5.4 (29.5) (8.2) (55.1) (87.4)
Fair value loss - deferred consideration (8.0) - - - (8.0)
Gain on financial assets at fair value through profit or loss - - - 0.8 0.8
Impairment of an asset held-for-sale - - - (4.0) (4.0)
Interest income 0.4 - 0.1 19.9 20.4
Interest expense (15.0) - - (0.5) (15.5)
Other net finance (expense)/income (2.7) 1.7 (0.5) (6.9) (8.4)
Loss before tax from continuing operations (19.9) (27.8) (8.6) (45.8) (102.1)
Tax charge (40.5) - - - (40.5)
Loss for the year from continuing operations (60.4) (27.8) (8.6) (45.8) (142.6)
Loss from discontinued operations - - - (1.4) (1.4)
Loss attributable to equity holders of the Parent (60.4) (27.8) (8.6) (47.2) (144.0)
Balances as at 31 December 2023: Capital expenditure
96.4 15.0 1.9 1.9 115.2
Total assets 426.8 8.6 29.8 202.4 667.6
Total liabilities 237.2 5.2 5.9 12.8 261.1
Non-current assets 232.0 0.2 27.6 13.2 273.0
Revenue in the Egypt segment contains revenue generated from eight concessions
in the Western Desert, onshore The Arab Republic of Egypt. 93.5% ($183.0m) of
revenue related to sales to a single customer.
All transactions between segments are carried out on an arm's length basis.
Section 4 - Income Statement Analysis (continued)
4.1 Segmental Analysis (continued)
The segment results for the year ended 31 December 2022 were as follows:
Other Capricorn Energy Group
Egypt (restated) Mexico (restated) UK Other Countries (restated) $m Total (restated)
$m $m (restated) $m $m
$m
Revenue 228.9 - - - 0.7 229.6
Other income 54.8 - - - - 54.8
Cost of sales (71.2) - - - - (71.2)
Depletion charges (131.3) - - - - (131.3)
Gross profit 81.2 - - - 0.7 81.9
Pre-award costs (2.8) - (0.8) - (5.6) (9.2)
Unsuccessful exploration costs - (17.4) (40.4) - - (57.8)
General exploration costs (18.3) (10.1) (8.3) (12.0) - (48.7)
Impairment of property, plant & equipment - development/producing assets (42.6) - - - - (42.6)
Other operating income and expenses 4.0 - - - 1.8 5.8
Depreciation - purchased assets - - - - (0.3) (0.3)
Amortisation - right-of-use assets (0.1) (0.1) - - (1.8) (2.0)
Amortisation of other intangible assets - (0.3) - - (3.2) (3.5)
Other administrative expenses (0.8) (1.5) - - (56.9) (59.2)
Operating profit/(loss) 20.6 (29.4) (49.5) (12.0) (65.3) (135.6)
Fair value loss - deferred consideration (12.7) - - - - (12.7)
Gain on financial assets at fair value through profit or loss - - - - 2.3 2.3
Interest income 0.3 2.3 - - 12.4 15.0
Interest expense (13.2) - - - (0.2) (13.4)
Other net finance (expense)/income (8.5) 0.7 2.1 0.1 1.5 (4.1)
Loss before tax from continuing operations (13.5) (26.4) (47.4) (11.9) (49.3) (148.5)
Tax charge (27.7) - - - (0.2) (27.9)
Loss for the year from continuing operations (41.2) (26.4) (47.4) (11.9) (49.5) (176.4)
Profit from discontinued operations - - - - 109.3 109.3
(Loss)/Profit attributable to equity holders of the Parent (41.2) (26.4) (47.4) (11.9) 59.8 (67.1)
Balances as at 31 December 2022:
Capital expenditure 75.8 1.2 36.2 - 10.7 123.9
Total assets 478.8 21.3 226.5 0.1 736.3 1,463.0
Total liabilities 299.4 5.4 10.6 1.7 24.3 341.4
Non-current assets 302.9 1.5 - - 11.9 316.3
Revenue in the Egypt segment contains revenue generated from eight concessions
in the Western Desert, onshore The Arab Republic of Egypt. 90.8% ($207.7m) of
revenue related to sales to a single customer.
All transactions between the segments are carried out on an arm's length
basis.
Section 4 - Income Statement Analysis (continued)
4.2 Administrative and Other Expenses
Year ended Year ended
31 December 31 December
2023 2022
$m $m
Administrative expenses 55.0 40.8
Administrative expenses - Indian tax arbitration costs - 13.1
Other expenses - corporate transactions 6.9 11.1
61.9 65.0
Included within current-year corporate transactions are costs of $6.9m (2022:
$11.1m) relating to corporate transactions subsequently terminated.
4.3 Finance Income Year ended
31 December
2023 Year ended
$m 31 December
2022
$m
Bank and other interest receivable 21.8 15.0
Other finance income - 0.7
21.8 15.7
4.4 Finance Costs Year ended
31 December
2023 Year ended
$m 31 December
2022
$m
Loan interest 15.0 13.2
Facility fees amortisation 0.9 0.9
Other interest and finance charges and unwind of discount 1.7 1.5
Exchange loss 7.7 2.6
25.3 18.2
Loan interest of $15.0m (2022: $13.2m) was charged on the Egypt Junior and Senior Debt Facilities.
4.5 Loss per Ordinary Share
Basic and diluted loss per share are calculated using the following measures Year ended Year ended
of loss:
31 December 31 December
2023 2022
$m (restated)
$m
Loss and diluted loss after taxation from continuing operations (142.6) (176.4)
Loss and diluted loss attributable to equity holders of the Parent (144.0) (67.1)
The following reflects the share data used in the basic and diluted earnings
per share computations:
Number Number
of shares of shares
2023 2022
'000 '000
Weighted average number of shares 196,128 364,470
Less weighted average shares held by ESOP and SIP Trusts (2,777) (7,313)
Basic and diluted weighted average number of shares 193,351 357,157
Section 5 - Taxation
5.1 Tax Charge on (Loss)/Profit for the Year
Analysis of tax charge on Loss for the year
Year ended
Year ended 31 December 2022
31 December (restated)
2023 $m
$m
Current tax charge:
Overseas corporation tax - Egypt 54.1 54.8
Overseas corporation tax - India - 0.2
Total current tax charge on loss from continuing operations 54.1 55.0
Deferred tax credit:
Reversal of deferred tax credit on recognition of financial assets - UK - (0.1)
Deferred tax credit on intangible/tangible assets - Egypt (12.3) (36.6)
Deferred tax (credit)/charge on non-current assets - Egypt - adjustment (1.4) 9.6
Deferred tax credit from continuing operations (13.7) (27.1)
Total tax charge on loss from continuing operations 40.5 27.9
UK deferred tax (credit)/charge (4.1) 4.1
Total deferred tax (credit)/charge on (loss)/profit from discontinued (4.1) 4.1
operations
The current tax charge in Egypt of $54.1m (2022: $54.8m) is settled by EGPC on
the Group's behalf.
Factors affecting the tax charge for the year
A reconciliation of the income tax charge applicable to the (loss)/profit
before income tax to the UK statutory rate of income tax is as follows:
Year ended
Year ended 31 December 2022
31 December (restated)
2023 $m
$m
Loss before tax from continuing operations (102.1) (148.5)
Loss before tax multiplied by the UK statutory rate of corporation tax of (20.7) (28.2)
23.52% (2021: 19%)
Effect of:
Special tax rates and reliefs applying to oil and gas activities in the UK (1.1) (25.5)
Special tax rates and reliefs applying to oil and gas activities in Egypt 13.4 15.7
Impact on deferred tax of adjustments in respect of prior years - 9.8
Temporary differences not recognised 23.5 43.7
Disposal of financial assets at fair value through profit or loss - 0.2
Permanent items (non-taxable)/non-deductible 14.3 6.9
Group relief surrendered against profits/gains arising in discontinued 11.1 5.3
operations
Total tax charge on (loss)/profit from continuing operations 40.5 27.9
The reconciliation shown above has been based on the average UK statutory rate of corporation tax for 2023 of 23.52% (2022: 19%). The Finance Act 2023 was enacted on 11 July 2023 and increased the UK main rate of corporation tax from 19% to 25% with effect from
1 April 2023.
The applicable UK statutory corporation tax rate applying to North Sea oil and gas activities is currently 40% (2022: 40%). A temporary Energy (Oil and Gas) Profits Levy of 25% was legislated in July 2022, effective from 26 May 2022. A further increase to 35% from 1 January 2023 was substantively enacted in November 2022.
The applicable statutory tax rate applying to oil and gas activities in Egypt is currently 40.55% (2022: 40.55%).
Section 5 - Taxation (continued)
5.2 Deferred Tax Assets and Liabilities
Reconciliation of Movement in Deferred Tax Assets/(Liabilities):
Temporary difference in respect of non- current assets Other temporary differences
(restated) Losses (restated) $m Total (restated)
$m $m $m
Deferred tax assets
At 1 January 2022 - - - -
Deferred tax credit through the Income Statement - continuing operations 8.7 - - 8.7
At 31 December 2022 8.7 - - 8.7
Deferred tax charge through the Income Statement - continuing operations (1.1) - - (1.1)
At 31 December 2023 7.6 - - 7.6
Deferred tax liabilities
At 1 January 2022 (58.8) 16.2 (0.1) (42.7)
Deferred tax (charge)/credit through the Income Statement - continuing 34.5 (16.2) 0.1 18.4
operations
Deferred tax (charge)/credit through the Income Statement - discontinued - 9.1 (13.2) (28.4)
operations
At 31 December 2022 (24.3) 9.1 (13.2) (28.4)
Deferred tax credit through the Income Statement - continuing operations 14.8 - - 14.8
Deferred tax (charge)/credit through the Income Statement - discontinued
operations - (9.1) 13.2 4.1
At 31 December 2023 (9.6) - - (9.6)
Deferred tax assets analysed by country:
As at As at
31 December 31 December
2023 2022
$m (restated)
$m
Egypt 7.6 8.7
7.6 8.7
Deferred tax liabilities analysed by country:
As at At at
31 December 31 December
2022
2023 (restated)
$m $m
Egypt (9.6) (24.1)
UK - (4.1)
(9.6) (28.4)
Recognised deferred tax assets Egypt
Deferred tax assets of $7.6m (2022: $8.7m) have been recognised in respect of
Egypt oil and gas non-current assets temporary differences of $18.7m (2022:
$21.5m) on two concessions as future profits are expected to be available on
those concessions to recover the value of the assets.
At the balance sheet date the Group has $33.0m (2022: $24.7m) temporary
differences in respect of Egypt non-current assets and
$38.6m (2022: $27.4m) Egypt tax losses, which can be offset against future oil
and gas profits in Egypt. No deferred tax asset has been recognised in respect
of these temporary differences as it is not considered probable that these
amounts will be utilised in future periods.
Deferred tax liabilities Egypt
Deferred tax liabilities of $9.6m (2022: $28.4m) have been recognised across
six concessions in respect of taxable temporary differences of $39.7m (2022:
$66.0m) related to Egypt oil and gas non-current assets. No tax losses are
available to offset these taxable temporary differences.
Section 5 - Taxation (continued)
5.2 Deferred Tax Assets and Liabilities (continued)
UK
In 2022, a deferred tax liability of $4.1m was recognised in respect of
earnout consideration due in relation to the disposal of UK oil and gas
producing assets. Following settlement of the earnout in 2023 (see note 6.1)
the chargable gain arising has been fully sheltered by available tax losses
and no tax charge arises. The deferred tax liability has therefore been
reversed in full.
Unrecognised deferred tax assets
No deferred tax asset has been recognised on the following as it is not
considered probable that it will be utilised in future periods:
At 31 December At
2023 31 December
$m 2022
(restated)
$m
UK RFCT trading losses 244.6 278.0
UK SCT loss 253.1 274.1
UK other ring fence temporary differences 626.4 609.5
UK excess management expenses 414.6 354.9
UK non-trade deficits 79.6 80.6
UK temporary differences on share-based payments 34.0 39.5
UK disallowed tax interest expenses 11.3 19.9
UK temporary difference on financial asset held at fair value - 0.5
Egypt fixed asset temporary differences 20.9 24.7
Egypt ring fence corporation tax trading losses 29.7 27.4
Mexico tax losses and other temporary differences 251.3 196.5
Section 6 - Discontinued Operations
6.1 (Loss)/Profit from Discontinued Operations
Settlement of earnout consideration due
On 2 November 2021, Capricorn completed the sale of its interests in the UK
Catcher and Kraken producing assets to Waldorf Production Limited ("Waldorf").
Consideration under the agreement included contingent consideration ('earnout
consideration') dependent on oil prices from 2021 to the end of 2025 and
minimum production levels being achieved. The first annual payment of earnout
consideration of $75.8m due on 2021 production was received in 2022. The
second annual payment of $134.4m due on 2022 production was settled in March
2023.
On 18 December 2023, Capricorn entered into a settlement agreement with
Waldorf for the full and final settlement of the remaining earnout
consideration due. Under the agreement, Capricorn received an initial payment
of $48.0m in December 2023, with a further
$2.0m to be received at the end of Q1 2024. An additional payment of $22.5m is
due in early January 2025 and Capricorn will also receive Waldorf's 25%
non-operated WI in the Columbus gas field, subject to the necessary approvals.
As at 31 December 2023, the balance of
$7.0m has been recognised as a receivable for the Columbus asset.
At the date of the settlement agreement, the fair value of the earnout was
$79.3m, a fall of $10.4m across the year, reflecting oil price movements. With
combined proceeds from the settlement agreement of $77.6m, after adjusting for
expected credit losses of $1.9m, the Group recorded a loss on the settlement
of the earnout of $1.7m.
A breakdown of the total profit from discontinued operations is as follows: Year ended 31 December Year ended 31 December
2023 2022
$m $m
Cost of sales
Cost of sales - recovery of production costs 4.3 1.5
Operating profit 4.3 1.5
(Loss)/Gain on financial asset at fair value through profit or loss - earnout (10.4) 110.4
consideration
Loss on disposal of a financial asset (1.7) 1.5
Finance income 2.3 -
(5.5)
(Loss)/Profit before tax from discontinued operations 113.4
Tax credit/(charge) 4.1 (4.1)
(Loss)/Profit after tax from discontinued operations (1.4) 109.3
(Loss)/Earnings per share for (loss)/profit from discontinued operations 2023 2022
$ $
(Loss)/Profit per ordinary share - basic and diluted ($) (0.01) 0.31
An audit of the Kraken and Catcher joint operations for the period from
January 2019 to December 2020 resulted in a refund of production costs from
the operator of $4.3m and $1.5m, which has been credited to discontinued
operations in 2023 and 2022 respectively.
The fair value loss in 2023 is mainly due to lower oil prices in comparison to
2022 oil prices.
Section 6 - Discontinued Operations (continued)
6.2 Cash Flow Information for Discontinued Operations
Year ended Year ended
31 December 31 December
2023 2022
$m $m
Net cash flows from/(used in) operating activities 4.3 (9.6)
Net cash flows from investing activities 184.7 77.2
Net increase in cash and cash equivalents 189.0 67.6
2022 earnout of $134.4m and interest payment of $2.3m received in March 2023.
In December 2023, a further settlement of $48.0m was received following the
revised terms of the earnout with Waldorf (see note 6.1). 2021 earnout of
$75.7m and interest of $1.5m payment received in June 2022.
6.3 Discontinued Operations - Senegal Contingent Asset
In December 2020, Capricorn disposed of its entire 40% working interest in its
Senegal exploration and development assets.
Further deferred consideration of up to $50.0m is due, dependent on the timing
of first oil production from the assets and on the average Brent oil price
during the first six months of production. Assuming average Brent oil prices
remain above $60/bbl during the first six months of production, Capricorn will
receive $50.0m if first oil production is achieved by June 2024. No payment is
due if first oil production occurs after this time.
In accordance with IFRS 15, no amount is recognised at the balance sheet date
as there is no reasonable certainty that any revenue recorded would not
reverse in future periods.
6.4 Discontinued Operations - Senegal Contingent Liability
On 14 November 2023, Capricorn received notification that Woodside Energy
("Woodside") had received a notice from the Senegalese Tax Authority. The
notice from the Senegalese Tax Authority states that:
‒ Senegalese registration duty ($29.0m including interest and penalties)
should have been paid on the transfer (in December 2020) by Capricorn to
Woodside of its PSC interests offshore Senegal; and
‒ Senegalese real estate capital gains tax ($14.5m including interest and
penalties) should have been withheld by Woodside from the price paid to
Capricorn in respect of the sale of those PSC interests.
Under the terms of the sale agreement between Capricorn and Woodside,
Capricorn is responsible for any registration duty and for any capital gains
tax arising in connection with the sale of the PSC interests.
Capricorn's analysis remains that no Senegalese registration duty or capital
gains tax is payable, based on analysis at the time of the transaction.
Capricorn will continue to vigorously defend its position on this matter,
including exercising rights under the sale agreement to participate in the
defence of any such claim.
Glossary
bbl - Barrel of oil
BED - Badr El Din concession
boe - Barrels of oil equivalent
boepd - Barrels of oil equivalent per day
bopd - Barrels of oil per day
EI - Net entitlement interest
GAAP - Generally accepted accounting principles
G&A - General and administrative expenses
m - Million
mmboed - Millions of barrels of oil equivalent
mmscf - Million standard cubic feet
$ - US dollar
WI - Working Interest
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR JPMFTMTITMLIRecent news on Capricorn Energy
See all newsREG - Capricorn Energy PLC - Director/PDMR Shareholding
AnnouncementREG - Capricorn Energy PLC - Holding(s) in Company
AnnouncementREG - Capricorn Energy PLC Morgan Stanley - Holding(s) in Company
AnnouncementREG - Capricorn Energy PLC - Annual Report,AGM,Return of Cash,Board Changes
AnnouncementREG - Capricorn Energy PLC - Director/PDMR Shareholding
Announcement