Capricorn Energy cash pile to go to shareholders

Like a mule with a spinning wheel, the former Capricorn Energy (CNE) board had seemed unable to fix on a use for its significant cash pile. That $757mn (£607mn) in cash came after years of arbitration with the Indian government. After paying out some of the $1.06bn award (or tax refund, in official parlance) to shareholders, the previous Capricorn leadership thought it had found an easy fix for its overabundance of cash: hand it to Tullow Oil (TLW) in a merger. Shareholders rejected this, and also stopped a buyout by Israeli company NewMed Energy (IS:NWMD) in February. 

Now, the new board has decided to just hand the rest of the cash to shareholders and shrink its oil and gas production aspirations. Chair Craig van der Laan said this was “decisive strategic action”. “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”, he added. Investors were not hugely excited about the plan, sending Capricorn’s share price down 6 per cent. 

The payouts will begin next month, with a special dividend of 115p paid on 23 May (the ex-dividend date is 12 May), worth $450mn all up, and another $100mn payout towards the end of the year. 

Capricorn does remain a sizeable oil and gas company – production for 2023 is guided at 32,000-36,000 barrels of oil equivalent per day, with $155mn-$175mn in capital spending already allocated. Former TransGlobe Energy boss Randy Neely has been appointed as chief executive. 

Jefferies forecasts an operating profit of $11mn for this year, compared with a loss of $115mn last year, driven by $94mn in unsuccessful exploration costs and a $43mn impairment. Those buying in for the special payout should consider the likely direction of travel of the share price once that $450mn leaves the balance sheet. Hold. 

Last IC View: Hold, 254p, 29 Sep 2022