(Alliance News) - Capricorn Energy PLC said on Tuesday its new Egyptian assets were exceeding production expectations, and it plans to return a substantial Indian tax refund to shareholders.
Formerly known as Cairn Energy, the Edinburgh-based oil and gas exploration company said revenue for its Egyptian assets in the final quarter of 2021 totalled USD56 million, since the assets were acquired back in late September from Royal Dutch Shell PLC.
The Western Desert assets in Egypt had increased production by around 8% since being acquired. The assets averaged 36,300 barrels of oil equivalent per day over the period, net to Capricorn's working interest. This was within the guidance range of 33,000-38,000 boepd for working interest production announced in March.
Capricorn predicts production in the coming year to average 37,000-43,000 boepd, with growth throughout the year to finish above the top end of the guidance range.
The production ramp-up will be achieved by adding three drilling rigs in the first half of 2022, with up to 40 new production or injection wells scheduled to be drilled over the year, Capricorn said.
Production costs in Egypt were around USD6 per barrels of oil equivalent on a working interest basis over the period, and are forecast to be reduced to between USD4.5-USD5.5 per barrel going forward.
Following a tax refund from the Indian government, the energy company plans to return up to USD700 million to shareholders. USD500 million will be returned as a tender offer, with the remaining of up to USD200 million returned by way of an ongoing share repurchase programme.
The company had promised the USD700 million capital return back in September, after resolved its dispute with the Indian government over a USD1.06 billion tax refund that the then-Cairn had taken to international arbitration.
With the tax refund and active management of its asset portfolio over the past few years, Capricorn said it is in a good position to continue a differentiated business model; returning value to shareholders whilst generating sustainable cashflow and growth.
Capricorn shares were up 6.8% to 199.40 pence each in London on Tuesday morning.
Capricorn also expects a earn-out consideration cash payment of around USD76 million from Waldorf Production Ltd in the second quarter of the year.
This follows the sale of its interest in UK North Sea production to Waldorf, and the assets achieving production at the upper end of guidance. Further uncapped earn-out considerations will run until 2025, if the assets meet minimum production volumes.
Capricorn predicts total capital expenditure for 2022 to total around USD200 million, with around half budgeted for development of its Egyptian assets, and the other half allocated to exploration in Egypt, UK and Mexico.
"We are actively pursuing opportunities to grow our producing asset base within our strict capital allocation criteria," said Chief Executive Simon Thomas. "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."
By Elizabeth Winter; elizabethwinter@alliancenews.com
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Capricorn Energy PLC (CNE)