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Capricorn Energy shares jump as Egyptian assets outperform forecasts

Capricorn Energy shares jump as production of newly acquired Egyptian oil and gas assets outperforms forecasts

  • Edinburgh-based Capricorn Energy was renamed from Cairn Energy last month
  • The company has vowed to pay back $700 million from a tax refund to investors
  • Oil price recently hit seven-year high after falling sharply in early 2020



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Shares of Capricorn Energy rose nearly 5 percent on Tuesday as oil and gas company FTSE 250 revealed that production at its recently acquired facilities in Egypt exceeded forecasts.

The Edinburgh-based group said its Western Desert Assets have pumped out an average of about 36,300 barrels of oil equivalent per day from when it completed its acquisition of Shell in September to the end of 2021.

It now expects to deliver an average of 37,000 to 43,000 barrels per day by 2022, production will increase throughout the year and exit rates will exceed the top end of its forecast range.

Forecast: Capricorn Energy expects to deliver an average of 37,000 to 43,000 barrels per day from its Western Desert Assets in Egypt by 2022, compared to 36,000 at the end of last year

Forecast: Capricorn Energy expects to deliver an average of 37,000 to 43,000 barrels per day from its Western Desert Assets in Egypt by 2022, compared to 36,000 at the end of last year

The company has set aside about $90 million to $110 million for production and development on its Egyptian assets this year, with about a third of that amount set aside for exploration purposes.

It hopes to spend about $40 million more on UK infrastructure-led exploration projects, primarily at the Jaws and Diadem wells in the North Sea, and has allocated an additional $30 million to $35 million for exploration in other countries, such as Mexico.

Chief executive Simon Thomson said: “We are very encouraged by the first operational performance of our newly acquired Western Desert Assets in Egypt, with production growth exceeding expectations. We look forward to accelerating the assets’ cash flows while reducing their emissions profile.

“We are actively seeking opportunities to grow our producing asset base within our strict capital allocation criteria.”

In addition, the company said it should earn an estimated $76 million (£56 million) windfall in the second quarter from the sale of its £334 million stake in the Catcher and Kraken fields in the North Sea to Waldorf Production.

Capricorn, known until last month as Cairn Energy, noted that total production from the Catcher and Kraken sites was about 18,300 barrels per day, which was against the high end of the previous guideline.

Share Value: Capricorn's stock price plummeted in March 2020 before recovering to pre-pandemic levels, although it remains well below its early peak in the past decade

Share Value: Capricorn's stock price plummeted in March 2020 before recovering to pre-pandemic levels, although it remains well below its early peak in the past decade

Share Value: Capricorn’s stock price plummeted in March 2020 before recovering to pre-pandemic levels, although it remains well below its early peak in the past decade

Further bonus payments from this sale are expected between this year and 2025, depending on the achievement of specific production volumes from these sites and the average price of Brent crude.

After falling sharply in March 2020 following a price war between Russia and Saudi Arabia, the rise of Covid-19 and the imposition of travel restrictions, oil prices have steadily recovered over the past year, reaching their highest level in seven years.

Capricorn’s stock price also plummeted in March 2020 before finally rebounding to pre-pandemic levels, though it remains well below its early peak in the past decade. It rose 4.5 percent to 196.3p by mid-afternoon Tuesday.

However, the company will soon receive a $1.06 billion refund from the Indian government’s tax authorities and plans to return up to $700 million of this proceeds to its shareholders.

Subject to investor approval, $500 million of this amount will be delivered through a stock offer, while up to $200 million will be returned in the form of a share repurchase program.

“With a strong balance sheet and financial flexibility, Capricorn enters 2022 positioned to deliver another significant return of capital to shareholders as the company has taken all required steps to enable payment of the Indian tax refund,” Thomas added.

Capricorn Energy’s announcement comes a few days after research revealed that private equity funds bought £11.9 billion from European oil and gas companies by 2021, despite mounting concerns about climate change.

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