Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Karoon Energy Ltd (KRNGF) reported an increase in annual production to 10.4 million BOEs, with sales revenue rising to USD 776 million, marking a 13% to 14% increase from 2023.
• The company ended the year in a strong financial position with net debt of less than $10 million and liquidity of $681 million.
• Karoon Energy Ltd (KRNGF) paid its first-ever dividend and announced a $25 million on-market share buyback, with plans for a further $75 million buyback in 2025.
• The exploration program at the Hu that field delivered two to three discoveries, with potential development options being investigated.
• The company has formalized its capital returns policy, focusing on strict capital allocation to grow shareholder returns.

Negative Points

• Karoon Energy Ltd (KRNGF) failed to meet its production targets, leading to a decline in share price.
• Safety performance was below expectations, with incidents reported that did not meet the company's standards.
• Production at the Bauna field was significantly below 2023 levels due to operational issues, resulting in missed revenues of over $50 million.
• Transportation costs increased significantly, impacting overall profitability.
• The company faced delays in bringing new wells online at the Hu that field, affecting production levels.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with KRNGF.

Q: Can you elaborate on the strategic review and its implications for Karoon Energy's future operations? A: Julian Bowie, CEO and Managing Director, explained that the strategic review confirmed a focus on strict capital allocation to enhance shareholder returns. The company aims to prioritize safe, reliable, and low-cost operations in core assets like Bauna and Patola. Projects such as NEON and new discoveries must meet strict economic hurdles and will be evaluated against capital returns and balance sheet capacity.

Q: What were the main challenges faced in 2024, and how is the company addressing them? A: Julian Bowie noted that 2024 was challenging due to not meeting production targets and subpar safety performance. The company is addressing these issues by focusing on maintenance and operational improvements, particularly at the Bauna FPSO, and enhancing safety protocols.

Q: How did Karoon Energy's financial performance in 2024 compare to the previous year? A: Ray, CFO, highlighted that production increased to 10.4 million BOEs, with sales revenue rising to USD 776 million, up 13-14% from 2023. Underlying NPAT improved slightly to USD 214 million. The company ended the year with a strong financial position, having net debt of less than USD 10 million and liquidity of USD 681 million.

Q: What are the future plans for the NEON project and new discoveries? A: Marco, Head of Brazil Operations, stated that the NEON project is progressing into the select phase, with potential development options being investigated. The company expects one of the new discoveries to reach FID by early 2026, with drilling planned for the second half of 2025 and early 2026.

Q: Can you provide details on the capital returns policy and shareholder returns? A: Julian Bowie mentioned that Karoon Energy formalized its capital returns policy, paying its first-ever dividend and announcing share buybacks. The dividends represent a payout ratio of 23% of 2024 underlying NPAT, and the company plans to buy back a further USD 75 million of shares in 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.