REG - Capricorn Energy PLC - Pre-close update

Capricorn EnergyAnnouncement

25/01/2024 07:15

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RNS Number : 8977A  Capricorn Energy PLC  25 January 2024

FOR IMMEDIATE RELEASE                                                                                    ​  25 January 2024

 

 

CAPRICORN ENERGY PLC ("Capricorn" or "the Company")

 

 

Pre-close update

 

 

In advance of announcing its full-year results for the year to 31 December
2023 on 14 March 2024, Capricorn provides the following update on operations
and trading performance together with guidance for 2024. This information is
unaudited and subject to further review.

 

Randy Neely, Chief Executive, Capricorn PLC said:

"Capricorn enters 2024 having made significant progress on the key commitments
set out in our strategic review: returning significant funds to shareholders,
right-sizing the organisation, exiting non-core businesses and maximising the
value of the Company's remaining assets.

 

We continue to work to maximise the potential of our assets in Egypt, focusing
on production optimisation and development opportunities to provide the best
returns, and on deepening our relationships with our Partner, EGPC and the
Egyptian Government. However, the pace at which this can be achieved must
reflect the availability of funds generated in country.

 

We successfully amended our UK North Sea contingent payment arrangement late
in the year with Waldorf Production UK, resulting in the key achievements of
accelerated cash receipts and the acquisition of a cash flow generative
non-operated asset in the UK Central North Sea.

 

Following the year end we also added deep financial and operational talent to
our executive team with the appointment this month of Geoff Probert as COO,
and Eddie Ok, who has agreed to take up the role of CFO."

 

Corporate and Finance Highlights

Ø Financial performance for the year ended 31 December 2023

o  Revenues of $202m; provisional entitlement sales volumes of 4.4 mmboe (47%
liquids), production costs of $59m ($5.4/boe) with average oil price of
$85.3boe and gas price of $2.95/mmscf

o  Capex of ~$120m

o  Net cash outflows of $5m from Egypt operations, post capex

o  Group net cash of $76m; comprising $190m cash and $114m debt

o  Receivables of $173m after expected credit loss adjustments

o  Gross G&A of ~$70m inclusive of restructuring costs

Ø Delivery on our shareholder return commitment set out in the strategic
review, with $550m paid to shareholders in 2023

Ø Solid progress with ongoing $25m share buyback programme with ~$18m
repurchased at the end of 2023. Pace of the buyback is limited by reduced
trading volumes

Ø $48m payment received in December in settlement of UK contingent payment
with a further $24.5m to be received over the next 12 months

Ø Confirmation of Senegal FPSO sailing late December, an important milestone
with respect to Capricorn's potential entitlement to a contingent payment of
between US$25m and US$50m if first oil is achieved in the first half of 2024
and the average Brent oil price during the first six months of production
exceeds the $55/bbl or $60/bbl thresholds contained in the sale and purchase
agreement

Ø $240k ($100k from Capricorn) social investment programme delivered in
partnership with EGPC, the Al Orman Association and supported by the Egyptian
Ministry

Ø MSCI classification upgraded from AA to AAA status

Ø Exited legacy non-core exploration positions in Mauritania, Mexico and
Suriname

 

Operational update

Ø FY 2023 WI Production of 30,222 boepd (47% liquids)

Ø Teen and Badr El Din (BED) LLP projects are now complete and beginning to
ramp up

 

Outlook

Ø 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. At this time,
drilling activity in Egypt is expected to be lower in 2024. 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

Ø Once there is clarity around availability of funds in country, Capricorn
will be able to provide an approved budget to define its 2024 capex, opex and
production guidance. In the absence of development drilling, average
production is expected to decline by 20-30% over the year

Ø The Company is currently committed to spend ~ $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 intends to seek at least a partial deferment of these expenditures
into 2025 from EGPC

Ø Capricorn expects to complete acquisition of 25% WI in the Columbus gas
condensate field in Q1/24

Ø The Company is currently seeking to defer amounts due under its remaining
obligations on the acquisition of its Egyptian assets

 

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 Alam El Shawish West (Capricorn 20% WI) averaged 30,222 boepd (47%
oil) for the year. As previously disclosed, this was below the low end of the
original FY23 32-36,000 boepd guidance, largely impacted by the timing of the
delivery of key projects at Teen and in the BED area, along with lower than
expected contributions from new wells.

 

Drilling activity at the end of 2023 was focused on the Abu Roash reservoir
targets in the Badr El Din concession, where continued step-out and
delineation wells have seen positive results. In both the BED15 and BEDC6
fields we saw reservoir net pay outcomes at the higher end of expectations,
also extending the limit of the fields. Incremental step-out drilling on these
fields is an area of success for Capricorn since acquisition. These wells will
now be tested ahead of coming online in Q1/24. Results will now be integrated
into field models to inform future development activity.

 

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
to be assessed in Q1/24. There are no major projects planned in 2024.

 

Egypt Exploration

Capricorn has a non-operated participation in three exploration concessions in
the Western Desert.  The Company is working with its Partner to negotiate
with EGPC an extension to the concession timeline, allowing a partial
deferment of some of this exploration activity into at least 2025.

 

Notwithstanding the intent to seek a partial deferment, once the Company has
clarity on the availability of funds from Egypt operations in 2024,
exploration activity is expected to include: i) up to three wells in the West
El Fayoum (WEF) concession in H1/24 to meet the original minimum work
obligation; ii) a work programme to de-risk and develop our understanding of
the emerging unconventional Abu Roash F formation; iii) a well in the South
East Horus concession  targeting the Rizk NW opportunity, a structure offset
from an existing field; and iv) drilling activity commencing towards the end
of 2024 in the North Um Baraka concession, where there is a two well
commitment. Prospect selection will follow the receipt of 3D seismic data in
early 2024.

 

UK North Sea Contingent Payment Settlement

In Q1/24, Capricorn expects to complete its acquisition of Waldorf's 25%
non-operated WI in the Columbus gas field located in the UK Central North
Sea. 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. As part
of the settlement, Capricorn received $48m in December with a further $24.5m
to be paid over the next 12 months. The Company continues to explore ways of
creating value for shareholders in the UK North Sea.

 

Senegalese Tax Authority Notice Update

Further to our announcement of 15 November 2023, the Senegalese Tax Authority
has now agreed that real estate capital gains tax ($14.5m including interest
and penalties originally claimed) was not due on the sale of our interests to
Woodside Energy. However, the tax process is ongoing with respect to the
matter of Senegalese registration duty ($29.3m including interest and
penalties). Capricorn's position remains that no Senegalese registration duty
is payable, based on analysis at the time of the transaction, and will
continue to vigorously defend its position on this matter.

 

CFO & COO Appointment

We have recently strengthened the executive team in 2024 by welcoming our new
Chief Operating Officer, Geoff Probert and Chief Financial Officer, Edward Ok.
These appointments bring deep industry experience and strong relationships in
Egypt, coupled with strategic, financial and operational leadership to drive
the delivery of profitable growth as the business evolves.

 

Ends

 

 

 

 

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: 0203 757 4980

 

 

Capricorn Energy

Capricorn is an Egypt-focused energy producer, with an attractive portfolio of
onshore exploration, development and production assets in the Western Desert.

 

For more information on Capricorn visit: https://www.capricornenergy.com
(https://www.capricornenergy.com)

 

 

Glossary

boe                         barrels of oil equivalent

boepd                     barrels of oil equivalent per day

bbl                          barrel of oil

FPSO                      floating production storage and
offloading vessel

k                             thousand

LLP                         low low pressure

m                            million

mmboe                   million barrels of oil equivalent

mmscf                    million standard cubic feet

WI                           working interest

All Financial figures are unaudited and displayed in US dollars.

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