Karoon Energy Q2 2024 Report: Production Down, Revenue Up, and New Share Buyback
KAR (KAR) Share Update July 2024 Wednesday 24th
Karoon Energy Announces Q2 2024 Performance and New Share Buyback
Karoon Energy Ltd. (ASX: KAR) has released its second quarter report for 2024, highlighting a decrease in production but an increase in revenue. The company also announced a new share buyback program.
Instant Summary:
- Q2 2024 production was 2.14 MMboe, down 27% from the previous quarter.
- Sales revenue increased by 8% to US$212.8 million.
- New capital returns policy to pay 20-40% of NPAT as dividends or share buybacks.
- US$25 million share buyback launched.
- Delays in regulatory approvals may impact SPS-88 well intervention.
- Who Dat East well discovered hydrocarbons; Who Dat South drilling expected in Q3 2024.
- Two safety incidents reported during the quarter.
Production and Revenue
Karoon Energy's second quarter of 2024 saw production decrease by 27% to 2.14 million barrels of oil equivalent (MMboe) on a Net Revenue Interest (NRI) basis. This decline was primarily due to a scheduled three-week maintenance outage at Baúna. Despite the lower production, sales revenue increased by 8% to US$212.8 million, thanks to higher sales volumes and better oil price realizations.
Sales volumes for the quarter were 2.73 MMboe, aligning with the timing of Baúna liftings. The average realized price for Baúna oil was US$82.55 per barrel, an 8% increase from the previous quarter.
Capital Returns Policy and Share Buyback
Karoon has finalized its capital returns policy, which includes paying 20-40% of underlying Net Profit After Tax (NPAT) to shareholders through dividends or share buybacks, subject to market conditions and Board approval. This policy will be applied starting from the 2024 half-year results.
In addition, the Board has launched a US$25 million share buyback, believing that the current share price does not accurately reflect the company's underlying asset value. This buyback aims to add value to the remaining shares.
Operational Highlights
During the quarter, Karoon faced delays in receiving regulatory approvals and finalizing contracts for the SPS-88 well intervention, which may not occur in Q3 2024 as planned. However, efforts are ongoing to enable the activity as soon as possible.
The Who Dat East well was successfully drilled, discovering hydrocarbons with a total net pay thickness of 45 meters. The well was suspended as a potential future producer, pending further evaluation. The Who Dat South exploration well is expected to commence drilling in Q3 2024, subject to regulatory approvals and the drillship schedule.
Safety and Environmental Incidents
Two recordable personal safety incidents occurred during the quarter, including one Lost Time Injury and one medical treatment case. Additionally, a Tier 2 Process Safety Event was reported due to a gas release from one of the FPSO's gas compressors, which has been taken offline for inspection and repair.
Financial Summary
Karoon's net debt position improved to US$67.8 million as of 30 June 2024, with cash and cash equivalents totaling US$282.2 million and US$350 million in drawn debt. The company also accessed the US 144A bond market, issuing US$350 million in high-yield bonds, which lengthens its debt maturity profile and supplements its Reserve Based Lending facility.
Future Outlook
Looking ahead, Karoon plans to continue its focus on improving production reliability and safety. The company is also evaluating potential production optimization opportunities at the Who Dat Joint Venture and assessing the commercial viability of the Who Dat East discovery.
The announcement of a share buyback and the new capital returns policy is likely to positively impact investor sentiment, as it demonstrates the company's commitment to returning value to shareholders. However, the production decline and safety incidents may raise concerns about operational efficiency and risk management. Overall, the mixed results could lead to a cautious but optimistic market reaction.
Investor Reaction:
Analysts have noted that the share buyback and capital returns policy are positive steps for shareholder value. However, some investors may be concerned about the production decline and safety incidents. The company's efforts to improve reliability and safety will be closely watched in the coming quarters.
Conclusion:
Investors should keep an eye on Karoon's upcoming first half results briefing on 28 August 2024 for further updates. The company's strategic initiatives and operational improvements will be crucial in maintaining investor confidence and driving future growth.