Capricorn says $104m of Egypt receivables ‘overdue’

Edinburgh-based oil and gas firm Capricorn Energy said on Monday that $104 million of its $145 million “trade receivables” in Egypt is “overdue.”

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.

Capricorn shares are down 66% so far this year, reducing the firm’s stock market value to around £265 million.

The firm’s new executive leadership is in the process of paying out $575 million of “excess funds” to shareholders. Capricorn said that at the end of May it had $317 million of cash — with net cash at $191 million after debt of $126 million.

In an AGM statement, Capricorn CEO Randy Neely said all the company’s assets outside of Egypt “are in the process of either being divested or relinquished in as timely a manner as possible.”

Neely said: “To date, we have exited Mauritania and have progressed the potential sales process of our UK North Sea business …”

Neely updated shareholders on the “significant return of capital targeting US$575m via a US$450m special dividend paid in May, a further special dividend in Q4 2023 of US$100m based upon certain factors, and a share buyback of at least US$25m over the next twelve months, which is underway …

“At the end of May we had US$317m cash (net cash US$191m after debt of US$126m), US$145m trade receivables in Egypt (US$104m is overdue) and US$65m of trade payables and accruals …

“The business in Egypt has solid assets and a committed team who will collectively continue to work on a number of priorities over the coming months with a focus on streamlining the organisation, exiting international operations, improving relationships with our partners and the Government in Egypt, amending our contracts in Egypt and developing our strategy to maximise shareholder value with a focus on shareholder returns …

“Our strategic review continues but we have achieved a good level of progress in a short time.

“We expect the review to be completed in September and will provide details on our conclusions accordingly.

“Our collective experience and strong relationships in the Egyptian oil and gas industry positions us well to maximise value for our shareholders.”

Capricorn chair Craig van der Laan said: “There has been major progress at Capricorn in the five months since the shareholders of the company overwhelmingly supported the election of a new board in February.

“The strategy of Capricorn has fundamentally shifted to deliver shareholder value by focusing on our promising Egyptian business, exiting high-risk exploration, returning significant excess cash to shareholders and reducing the excessive legacy cost base.

“In Randy Neely, we have found a new CEO who brings deep experience of operating in Egypt and creating significant value there …

The return of shareholders’ capital which is surplus to the requirements of the company is also a pressing priority.

“We paid US$450m in a special dividend in May and are committed to returning a further conditional US$100m dividend as quickly as possible.

“We have guided Q4 2023 for this return, taking into account the various factors laid out in the Full Year Results statement in April.

“As I outlined on 27 April, the factors which enable us to release that additional amount are not conditions each of which must independently be met to enable the release of the additional US$100m, rather, they are factors to which the board will have regard as to the timing of the release of that amount.

“The board remains confident of our ability to release that amount and looks to do so at the earliest point in time.

It remains our intention to release further surplus capital moving forward, in addition to that already announced.

“This includes a contingent payment from the sale of our Senegal business due following first oil, which we intend to release in full to shareholders as soon as practicable after it is received.

“The release of the Senegal payment to shareholders is independent of, and in addition to, the US$100m already announced.

“The precise scale and timing of the Senegal payment will become clear later this year or early 2024, and we will keep shareholders updated on any developments.

“We will also provide updates on the variable UK contingent payments, which are due to be received in annual instalments to Q1 2026, and will review the opportunity for further distributions in respect of these amounts.”

Capricorn also announced it appointed Hesham Mekawi as non-executive deputy chairman. Mekawi is an Egyptian national, resident in Cairo, and long-time former Regional President of BP North Africa.

Van der Laan said Mekawi will be focused, within the overall board governance framework, “on supporting and working in close collaboration with Randy Neely, Capricorn’s CEO, in his efforts to address the group’s priorities in Egypt, and to support Randy in the development and implementation of strategies for key stakeholder engagement, advocacy and representation of the board in Egypt.”