Capricorn shares fall despite $575m payout, new CEO

Shares of Edinburgh-based oil and gas firm Capricorn Energy fell about 6% on Thursday despite news from the firm that it plans $575 million in shareholder payouts under a new CEO.

Randy Neely, former CEO of Egypt-focused operator TransGlobe Energy Corporation, will join Capricorn as CEO on June 1, 2023. Interim CEO Chris Cox will leave the business after a handover period.

Capricorn, formerly called Cairn Energy, has endured a tumultuous recent history, with two aborted merger deals and a revolt by shareholders that ousted the company’s former executive leadership.

The firm said it plans to commit $450 million to a special dividend to be paid to shareholders in May, a further $100 million special dividend in the fourth quarter and a share buyback of at least $25 million.

Capricorn also announced results for 2022.

Last month, Capricorn announced it would “need a substantially reduced headcount in the UK” as it focused its operations “primarily on Egypt” and would be reviewing its UK office space requirements.

On Thursday, Capricorn said: “On 23 March 2023 we announced a material cost cutting exercise across Capricorn. We have commenced an employee consultation process which is anticipated to reduce the UK workforce by ~70% to c.40 people to better reflect the go forward needs of the business.

“This will create a new, leaner organisation to support the Egypt assets and result in a total global organisation of c.70 employees.

“Ongoing staff costs will be reduced by more than 50% while still retaining the necessary capability and headcount to safely and efficiently achieve our goals.

“In 2023, there will be costs associated with this restructuring which are expected to be offset by in-year savings, with the full annualised benefit of the cost reduction to be seen in 2024.

With fewer people, we will require much less office space and ancillary services.

“Capricorn will be moving out of its current office on Lothian Road, Edinburgh as planned but will not be moving into the new offices in Edinburgh which were outlined in last year’s annual report.

“The search for smaller, lower cost alternative office space in Edinburgh is now underway. Significantly smaller, low-cost premises will also be found in London for those limited activities which need to take place there.

The board has also reviewed its external consulting arrangements with a view to reducing costs and having a fresh start, ruling a line under the events of the last 12 months and presenting a new face to the market.

“We have therefore appointed Bank of America as corporate broker and financial adviser to replace four other banking advisers, and on the communications side, Camarco.

These cost saving initiatives are expected to realise identified total gross G&A savings of at least US$35m, representing a >50% reduction on 2022 gross G&A. These savings will be fully realised in 2024.

Opportunities for further savings will continue to be pursued, with costs to be aligned to activity on an ongoing basis.”

Capricorn Energy chair Craig van der Laan said: I was appointed chair of Capricorn in February 2023, alongside five other new members of Capricorn’s board following a public campaign by a number of shareholders.

“The overwhelming shareholder vote in favour of the new board appointments underscored the expectations for change.

“Consistent with those expectations, we immediately commenced a strategy review after appointment.

“Today, 85 days later, we are pleased to report our initial findings, which include five areas of decisive strategic action.

“These include a decision to make a material return of capital to shareholders; a significant cost reduction as part of a broader plan to preserve shareholder cash; the curtailment of expensive exploration activities outside of near field activity in Egypt; plans to improve the Egypt business; and a drive for a culture change across the company.

“As we take the next actions in our review, I am pleased to announce that Capricorn will benefit from the leadership of Randy Neely, a highly accomplished industry figure with extensive experience of successful operations in Egypt, who will join the business as chief executive on 1 June 2023.

“Our review of strategy continues, and I look forward to updating shareholders on our medium to long term findings in the months ahead.

“I would like to be very clear on our intention in the near term, and on an ongoing basis, to return all excess capital to our shareholders.

As we look to enact positive change in the business, I am grateful for the support that we have been given by our new colleagues as we execute our strategy for the benefit of all of our shareholders.”