Independent energy firm Capricorn Energy reported that production growth was “ahead of expectations” this morning, with acquisition driving value.
2021 production following completion of the acquisition in September, averaged 36,300 boepd net to Capricorn’s working interest, with production from the Egyptian assets increasing eight per cent up to 31 December 2021.
For this year, Capricorn’s working interest production is anticipated to average 37,000-43,000 boepd with production growing throughout the year and 2022 exit rates forecast to exceed the top end of guidance range.
Uncapped further earn-out consideration will be payable in respect of calendar years 2022 to 2025, based on meeting minimum production volumes and average oil prices.
The firm has concluded all necessary steps under the rules of the India Taxation (Amendment) Act 2021 required for payment by the Government of India of a tax refund of approximately INR 79bn (£785m). Payment is expected to be made in early 2022.
On top of this, Capricorn announced completion of the sale of its UK North Sea production interests to Waldorf Production in November 2021.
Estimated 2021 annual production from these interests was approximately 18,300 bopd, towards the upper end of original guidance of 16,000 – 19,000 bopd. Under earn-out provisions, based on 2021 production levels and average oil prices, a payment of $76m (£56m) is due to be made by Waldorf to Capricorn in the second quarter.
Group net cash at year end was $133m (£99m), comprising $314m (£233m) cash and $181m (£134m) debt drawn to fund the Egypt acquisition.
Current estimates of 2022 capital expenditure total approximately $200m (£148m).
With the tax refund from the Indian government due and active management of the asset portfolio in recent years, Capricorn is well positioned to continue delivery of its differentiated business model of returning value to shareholders whilst building sustainable cashflow generation and growth.
As previously announced, Capricorn plans to return up to $700m of the India tax refund proceeds to shareholders. Having consulted with shareholders on the capital return options, Capricorn has determined that, to provide flexibility to its shareholders, $500m will be returned by way of tender offer, whereby shareholders will be invited to tender some or all of their shareholding for purchase on terms that will be set out in a Circular to be posted to shareholders.
It is intended that the remaining sum of up to $200m will be returned by way of an ongoing share repurchase programme to provide a continuing value-accretive return of capital to shareholders. Each of these returns is subject to shareholder approval.
On 15 November, it was announced that the Company would commence a buyback programme of an initial amount of up to £20m out of the planned $200m programme. This was due to end on 31 January 2022 and has now been extended to run until the end of February 2022.
Simon Thomson, Chief Executive, Capricorn Energy said: “We are very encouraged by the initial operating performance of our newly acquired Western Desert Assets in Egypt, with production growth ahead of expectations. We look forward to accelerating cash flows from the assets whilst reducing their emissions profile”.
“We are actively pursuing opportunities to grow our producing asset base within our strict capital allocation criteria”.
With balance sheet strength and financial flexibility, Capricorn enters 2022 positioned to make another significant capital return to shareholders with the company having concluded all required steps to enable payment of the India tax refund.”