Release Date: September 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Capricorn Energy PLC (CRNCY, Financial) has returned over $600 million to shareholders through dividends and share buybacks, with plans to continue returns, including amounts from the Senegal contingent receipt expected in early 2025.
- The company has improved its predictability of operating results and cash collections, collecting over $90 million in the first half of the year and an additional $20 million subsequently.
- Capricorn Energy PLC (CRNCY) is on target to achieve an approximate 80% reduction in G&A costs from 2022 to 2025, contributing to a more predictable base of operations.
- The company is actively working to improve production sharing contracts in Egypt, which could promote investment and growth in production.
- Capricorn Energy PLC (CRNCY) has identified potential value in North Sea assets, aiming to leverage its position and capabilities to unlock value from its legacy operations in the UK.
Negative Points
- The company faces challenges with the devaluation of the Egyptian pound, which has led to lower-than-forecast OpEx savings that may be inflated away through increasing input costs.
- Capricorn Energy PLC (CRNCY) has not yet finalized negotiations to amend and extend production sharing contracts in Egypt, which are crucial for incentivizing further investment.
- The market capitalization of Capricorn implies that its Egyptian business is heavily risked, despite the company asserting that Egypt has never defaulted on its oil and gas debts.
- There are tax challenges being advanced by the Senegalese government, which may result in reductions to the potential distributable amount from the Sangomar $50 million payment.
- The company is still in the process of exiting non-core activities, such as its operations in Mexico, which may involve additional costs and efforts to ensure a full and tidy exit.
Q & A Highlights
Q: Can you provide more details on the North Sea assets you're considering, particularly in terms of hydrocarbon types and production levels?
A: We are being very selective, looking for developed assets that don't require immediate capital investment. We're targeting assets producing around 5,000 to 10,000 BOE per day, which would generate sufficient cash flow and leverage our legacy position in the UK. - Randy Neely, CEO
Q: What makes the current Egyptian PSC terms challenging for producers, and how does Capricorn plan to address this?
A: The PSC terms are outdated, with some contracts being 40-50 years old. We aim to consolidate contracts and improve terms to incentivize production, as current terms don't support the higher costs and technology needed for brownfield developments. The government is open to discussions to incentivize production. - Randy Neely, CEO
Q: With the ongoing negotiations for improved PSC terms in Egypt, how should we view your current spending there?
A: Current spending is aimed at maintaining production. Improved terms would allow sustained investment and production over a longer period, focusing on increasing recoveries rather than significantly boosting production levels. - Randy Neely, CEO
Q: Regarding the PSC renegotiation timeline in Egypt, how realistic is the 12 to 24 months estimate?
A: While it took longer initially as pioneers, the process is now more understood and motivated by Egypt's energy needs. We expect a more streamlined negotiation this time, with other companies also negotiating without impacting our process. - Randy Neely, CEO
Q: How are you addressing the receivables situation in Egypt, and is there a formal payment plan?
A: Currently, there is no formal payment plan, but the new minister is focused on improving the situation. We expect continued payments and a reduction in receivables, with optimism for further improvements. - Eddie Ok, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
