Capricorn Energy to pay out last of India cash as special dividend

Capricorn Energy (CNE) is in a strange place. The board is throwing its cash piles at investors while radically shrinking its business. It is producing some oil and gas from Egyptian assets, but has handed over operational duties to a joint venture partner. Given the changed circumstances of the business, it is cutting its UK headcount by 80 per cent, leaving 30 people at HQ and 50 in the company overall. 

This limbo is the result of the $1bn (£810mn) award from the Indian government for expropriating the old Cairn India assets. The drama before that agreement included Capricorn, the renamed Cairn, threatening to take possession of Air India planes and taking control of an Indian diplomat’s residence in Paris. Once it got its hands on the cash, the board tried two mergers with suitors that failed in the face of shareholder outrage. 

In the past year, therefore, the company has been a cash-return asset. It handed shareholders $450mn, or 115p a share, in May and will pay another 56p a share next month. Buying in now at 166p would mean a quick 34 per cent yield. But that might be the last dividend for some time. Meanwhile, the company is now in a brawl with a new government: Egypt. The arrangement there is to sell directly to the national oil company, which owes $113mn. 

“The streamlining of the business is welcome, but the value driver for shareholders remains the lack of resolution of the Egypt receivables position,” said Stifel analyst Chris Wheaton. He forecasts Ebitdax of $114mn for the full year and $161mn in 2024. Egypt capex was $49mn in the first half. 

The shares climbed 7 per cent on 14 September following the special dividend announcement. Egypt paying out could also boost the shares. But that is too much of a punt for us. Hold. 

Last IC View: Hold, 226p, 27 Apr 2023