Capricorn Energy PLC

Good morning, and thank you for attending our midyear 2025 results call. I am joined today by Eddie Ok, our CFO, who will walk through the financial and operations highlights as well as Geoff Probert, our COO, who will provide a review of ongoing operations and provide more detail on the progress made to improve our production sharing contracts in Egypt.

In addition, Nathan Piper, Director of Commercial, is also available for the Q&A session. Since myself, the new management team, Geoff, Eddie, Nathan and our entire Board joined the company beginning in 2023, we've made it very clear what our goals were.

We intended to improve upon the base business in Egypt, reduce overhead and scale down or eliminate all nonviable activities of the company. To do that, we set out with our JV partner in Egypt, Cheiron to negotiate a new consolidated production sharing contract for the 50-50 jointly held contracts.

That has been a major undertaking, and we announced earlier this year that we had achieved a major milestone with the government approval of those terms. Geoff will provide more detail on this process and outcome shortly.

For those of you that perhaps have not been paying attention to our journey over the past 2 years, I'll remind you that we have exited all noncore activities, and we reduced our G&A burden by approximately 80%, including our staffing contingent, effectively rightsized the organization. As well, the company returned over $600 million to investors through dividends and share buybacks.

Operationally, we have worked very hard to achieve technical alignment with our partner in Egypt, and we are very pleased with how that has progressed. Today, I can confidently state that Capricorn and Cheiron are working synergistically to improve the technical and financial results of the joint venture.

When this team, Capricorn 2.0 joined, we all recognized that the company needed to instill financial discipline, which included a measured approach to funding investments in Egypt, effectively a self-funding model. Although with the improved fiscal terms and payment schedules, this approach may not appear as relevant today as it was 2 years ago.

We do not intend to deviate from this mindset. With our initial goals principally achieved, we are turning our attention to increasing value for our shareholders.

Our intent is to do that through 3 principal activities: First, realizing on the improvement of the base business in Egypt. The improvements to fiscal terms and lengthening of contract life will open up significantly new resource for the joint venture to pursue and exploit.

Effectively, the amended contractual terms will allow the joint venture to pursue a very large existing resource base to have both reserves and production. Second, we, led by Nathan, our Director of Commercial, will continue to search for opportunities in the U.K.

North Sea to realize on our historic position there. We have a strict set of criteria we measure every North Sea opportunity against.

And although we have been deep into several processes, we have been unable to successfully conclude any of them. That's been either due to being outbid or the seller just effectively electing to retain the asset.

And the third activity that we'll look to add value is looking for synergistic asset deals or business to add to the portfolio. Ultimately, all of these will lead the company to return value to the shareholders.

Building business of scale and longevity. Over the past 2 years, the new Board, myself and the rest of the team have made a major effort to transform the culture, priorities and focus of Capricorn.

This wheel is meant to capture very simply how we are approaching this. We focus on the small details.

We finance the business and any new ventures conservatively. We approach every project with technical rigor and apply strict capital discipline and demand the same of our partners.

We approach the business strictly through a self-funding business model and new ventures initiated will require the application of a prudent approach to risk management. I'll let Geoff take the next slide.

Thanks, Randy, and good morning. You can see here on the graphic that we're on the last step of our journey to completing the consolidation of our 8, 50-50 concession agreements into a single extended and improved agreement.

Improvements in concession longevity and fiscal terms are a catalyst to increase Capricorn's reserves and production with value and cash flow enhanced by increased investment self-funded from Egypt. For EGPC, this increased and more importantly, sustained investment delivers great production over the long-term for Egypt, and has potential to be a true win-win for all stakeholders.

We continue to expect custom ratification in the near future, commencing investment consistent with the new terms in the second half of 2025 and expect new terms and commitments to apply to that investment. Back to you, Randy.

Thanks, Geoff. Now with many of our primary objectives having been achieved, our primary focus for myself and as well as Nathan is to get investors to recognize this value improvement.

On the back of an envelope, you can see that we have a base business in Egypt that fully supports our market value. Note that our debt in Egypt has been paid down materially over this year and will continue to be paid down over the coming year.

On top of that, we have the cash that resides in the parent company, a value improvement that will be realized upon ratification of our Egyptian-based business and the value that can be realized by future investment in the U.K. North Sea.

All of these combined leave us with a near-term potential of doubling our share value, and that's before we expand our operations either in Egypt or elsewhere. I'll now turn the presentation over to Eddie Ok, our CFO, to provide a review of the financial and operating highlights.

Thanks, Randy, and good morning, all. Production through the first half was in line with projections, and we continue to guide towards the midpoint of our published range of 17,000 to 21,000 BOE per day.

Our focus on higher-margin drilling continues to perform as liquids remain slightly above forecast at 43% of production. OpEx is continuing to trend upwards as the currency devaluation impact from last year works its way through our cost structure.

This is being exacerbated by declining production against a large fixed cost base, but we continue to work with the operator to ensure that costs are being controlled to the greatest extent possible. We slightly reduced our capital guidance as scheduling is going to push back some current year activity into the following year, but we remain on track to deliver the bulk of our development drilling in the second half.

Next slide, please. As can be seen from our cash waterfall, the contingent consideration collected in the half has offset the slow pace of collections from EGPC.

In the second half to date, collections have improved, and we're anticipating the collection of at least $90 million in the second half, which will help offset scheduled repayments of our outstanding debt. Up next, Goeff is going to take you through an operational overview of the remainder of the year.

Thanks, Eddie. I'm going to very briefly highlight our first half 2025 Egypt operational focus, give a snapshot of where we expect to invest in '26 and look at our reserves and resources are trending, particularly in the context of the new agreement.

This map shows our focus on liquids development and production, particularly in the BED, Abu Roash G reservoir area, and that was all in the first half of 2025. While new agreement has been finalized, we also drilled 3 wells to fulfill our legacy commitments on the 3 pure exploration concessions acquired as part of the Egypt acquisition in 2021.

Those exploration commitments are now satisfied with a minor on spend of $750,000 on NUMB. Our joint venture with Cheiron, the operator has elected to further evaluate commerciality of 2 of these wells, and we expect those results later this month.

You can also see here that the hatched areas indicated concessions that we expect to form the new consolidation agreements closely the prime contiguous land added for further development and exploration on trend. Next slide.

This slide illustrates our expected 4 rig development drilling schedule, 4 rigs to reflect improved agreement terms encouraging us to invest in a longer list of economic wells. Alongside optimization of development well sequence, we continue to work with our JV partner Cheiron to also prioritize non-rig production generation, reinstating shutting wells, identifying additional perforation opportunities on bypass pay.

Next slide. This last slide on reserves encapsulates the rationale behind Capricorn negotiating an extended and improved integrated concession agreement on our 50-50 concessions.

We expect our ability to replace reserves and extend their life to be materially improved by the extended concession period and improved concession economic terms. We also expect the concession improvement will also impact our risk appetite to chase near-field exploration potential on our newly extended land and our existing land and to develop and mature our portfolio of resources.

Capricorn has been working with opportunity hopper on the 50-50 new concession agreement acreage, not just near-term development options, but also contingent and prospective resources. We expect this work will help to underpin future reserve and resource bookings and may also direct and prioritize productive drilling activity.

You can see here that internally, we've identified a working interest around 350 million barrels of oil equivalent unrisked best estimate contingent resources to mature. Near-term license extensions resulting from an approved integrated concession potentially support the early conversion of up to a working interest nearly 20 million barrels oil equivalent to reserves, with further reclassifications anticipated, all underpinned by 5-year investment plans.

Once approved, we expect to rapidly move to drill wells to exploit those reserves additions. Thanks for your time and attention.

Now I'm passing over to Randy to wrap up.

Yes. Thanks, Goeff.

I trust that those of you that have been following the Capricorn story since this team took over will agree that we have had a strong record of delivering on company objectives. To summarize, we set out to improve the Egyptian business by making it both long-term sustainable and a platform for growth.

We are very near the confirmation of that objective with ratification occurring in the near future. The new PSC will provide a catalyst for increases in reserves for investment and value improvements.

Additionally, we are seeing and hearing reasons to be optimistic about the future reduction of our outstanding receivables and a more stable, consistent payment plan from EGPC. And while we have been slower than we hoped to be to deliver or realize an embedded value for us to reinvest in the U.K.

North Sea, we remain steadfast in our goal to achieve this objective. Beyond our current operations in Egypt and our near-term goal of expansion in the U.K.

North Sea, we are actively looking for synergistic opportunities in the areas of our capabilities and credibility that we have in Capricorn and our team. Well, that's it for our formal presentation.

Thank you very much for dialing in, and we'll now take questions from analysts online.

A couple of questions for you. Just firstly, on the improved trade receivable position and the payment plan.

You've already received $37 million since the midyear and the release mentioned today a $50 million payment being due in October. Just wondering if it's reasonable to think that Capricorn is on track to collect more in H2 than the minimum $90 million you referred to.

And then second question is just wondering about the updated competent persons report you plan to publish once the new concession term is ratified. Should we expect that to include revised 2P production and CapEx profile?

Are you simply just going to apply the assumptions you used in July CPR to the new concession terms?

I'll take the AR question. Yes, you're right.

We've received $37 million to date, and we're expecting a $50 million bullet here in the near term. We're remaining conservative about our collections assumptions.

But yes, if all goes according to plan, we should be collecting in excess of that with a material reduction in our receivables possible by the end of the year.

And Goeff here, I'll pick up the other question, James, on CPR revision. When we issue that CPR, yes, it will be the midyear actually to understand.

It will include revised CapEx profile deductions for production. It will be a full update.

A question for me also on working capital, but trying to look forward a bit further. What provisions in the license renegotiation has there been for working capital recovery?

Because my concern when you start drilling and exploiting some of that upside resource potential is, you've got to start really putting CapEx in the ground first, then your production goes up, then you get the cash flow. Well, then you actually sell the oil, then at some point in the future, you get the cash flow.

So there could be quite a significant working capital burn at least to start with unless Egypt are prompted in paying those receivables back because with the higher CapEx as well as the higher OpEx, then your receivables amount is going to start building quite quickly unless you get those regular repayments. Could you talk about how you've tried to mitigate those risks in the license renegotiation?

And secondly, what that means for potential timing of dividend payouts because I still see your priorities as being first pay down -- first, you've got to keep investing in the drilling. Secondly, you've got to pay down the debt remaining in Egypt and then possibly shareholders could start to get some more cash back.

So I'm interested in that implication for your future dividend payments.

Chris, I'll take that. Yes.

So we've got obviously a material investment sort of obligation opportunity in Egypt as a result of the modernized concession agreement and one that we're happy to deliver on given the economic return that's represented by that investment. Just keep in mind, we're still producing 20,000 barrels of oil equivalent per day in Egypt with the corresponding build in cost pools, profit oil, profit gas as well as our existing receivables position.

And as you folks have seen historically, we're managing the business quite carefully with respect to invested dollars against realized dollars out. And so that philosophy is not going to change going forward.

Part of the overriding imperative on this deal has to be that our shareholders realize a return. Now based off of historical decisions, historical investments, we've got a fairly really weighted debt burden hanging over this asset base.

But we plan on honoring those debt commitments with repayments of that debt coming up over the next couple of years as well as delivering on these capital investments. And to your point, yes, after that, and as always, our overriding concern is going to be on shareholder value and how do we deliver that value in the asset base to the shareholders over time.

Jack, I may just add one thing. That is the -- background to negotiations create, let's say, a more investable concession agreement and bond agreements and that creates relevance.

I mean the whole purpose is not just to create value for the shareholders also to get paid. By improving the terms, we have an investable set of concessions where before, frankly, that it was a pretty weak place to be.

Each we pays those who have the capacity to invest. And by that, I mean the places they can invest economically.

So it's a bit of a symbiotic outcome for both we invest, we get great production, we get paid so that we can invest and we generate returns. They do accept that part of it.

In terms of the overall commitments we have to make in terms of investment, the terms are -- if you look at our historical investment profile in Egypt on a working interest basis, they're quite modest. It's spread over a number of years -- if there happens to be a short-term problem around payments for a while, we can just dial back investments, while that happens and dial those investments back up again in the future.

So we're pretty confident that this structure and the new concession agreement will generate the right opportunities for us to invest and be paid at the same time.

Okay. Just to be clear, the concession doesn't include -- the revised concession agreement doesn't include a sort of contractual basis for this is how receivables will be paid and this is sort of [indiscernible]...

Yes. I'll take it.

Yes. So Chris, that's in there already.

Like, those terms are in the existing contracts. So...

Right. They are totally fine.

Yes. What the situation is Egypt sometimes struggles to keep up payments just because of their own fiscal issues and where they're prioritized.

But we're seeing -- we're seeing that mindset change. And that's because Egypt is short energy and they've struggled to sort of keep the production moving in the right direction given the local demand.

And so that's what we're seeing change over the past 18, 24 months as they're moving into more reprioritizing IOC payments in order to at least maintain production rather than things slip off or go to other jurisdictions.

So actually, I didn't quite hear that.

I don't anticipate a significant change in the overall proportion. We recorded rather a 42%, 43% liquids in the last half, and we anticipate that continuing going forward.

It might now just a little bit, but it's not going to increase significantly in the next 6 months.

So obviously, the rate and sustainability, so the pressure drop if there is the reservoir during the testing phase there are -- as is often the case in these Western Desert reservoirs or wells, there are multiple potential pay zones. We have to look at productivity, we have to look at sustainability.

And we have to look at the distance to the nearest infrastructure. These wells are reasonably close to nearby infrastructure, but that doesn't make them seldom.

So yes, that's pretty much how we look at the wells. In terms of the next steps, we take the data, we will evaluate it and with our partner, the operator Cheiron, we'll make a proposal if we see economic value to do so to complete and hook up those wells into nearby production facilities.

Sure. It's in the release.

If you take a look at what our historic production is and the forecast going forward against what our projected collections are that you should be able to back into that number pretty quickly. And like I said, it's going to be a conservative estimate for the year-end, but that's what we're guiding towards.

Thanks, Kelly. I just want to say thanks, everyone, for dialing in or listening in, afterwards, and we look forward to speaking to many of you live over the coming weeks.

Have a great day.