Capricorn Energy: EPS Surges, Revenues Miss in 2024

Capricorn Energy PLC (LON:CNE) reported its full-year 2024 earnings on March 28, 2025, revealing a mixed performance that saw earnings per share (EPS) exceed analyst expectations while revenues fell short. The company's operational improvements in Egypt and financial discipline helped it achieve the upper end of production guidance, but revenue declines and ongoing challenges highlight the need for strategic adjustments.

Operational Performance in Egypt

Capricorn Energy's operational performance in Egypt for 2024 was marked by significant improvements. The company reported a working interest (WI) Egypt oil and gas production of 23,763 boepd, at the upper end of the guidance range of 20,000 - 24,000 boepd. This performance was driven by a liquids-focused strategy in development drilling, with 44% of the production comprising liquids. The average oil price was $79.3/boe, and the gas price was $2.9/mscf, contributing to revenues of $147m. Production costs were managed efficiently at $42m, equivalent to $4.8/boe on a WI basis, and capex on Egypt producing assets was $63m.



Financial Highlights

Capricorn Energy reported a net loss of US$12.6m for the year ended 31 December 2024, a significant improvement from the previous year's loss of US$102.1m. The company's EPS was $0.17, a notable improvement from the US$1.41 loss in FY 2023. Revenues declined to $147.8m from $201.0m in the previous year, missing analyst estimates by 3.3%. Despite the revenue decline, the company's EPS exceeded analyst expectations by 147%.

Strategic Adjustments and Opportunities

To enhance competitiveness and align with industry benchmarks, Capricorn Energy is considering several strategic adjustments:

1. Consolidation of Concession Agreements: The company is in the process of consolidating eight existing Egyptian concession agreements into a single integrated agreement. This move is expected to support increased production and reserves through enhanced activity levels and strengthened returns. As Randy Neely, Chief Executive, stated, "A new concession agreement would include the commercial terms and additional investment that would support increased production and reserves, through enhanced activity levels, and strengthened returns, to the benefit of all parties."

2. Diversification and M&A Opportunities: Capricorn Energy is evaluating M&A opportunities in the UK North Sea and MENA region. This diversification strategy aims to deliver consistent shareholder returns and expand the company's operational base. As Neely mentioned, "Growth and diversification of operations and cash flows will be a key focus for 2025. Our goal is to ultimately deliver consistent shareholder returns and we are evaluating M&A opportunities in the UK North Sea and MENA region, through a strict set of financial and strategic criteria, to facilitate this."

3. Operational Efficiency: Continuing to focus on operational efficiency, as evidenced by the $4.8/boe production costs, will be crucial. The company can further optimize its production processes and reduce costs to remain competitive in the industry.

4. Exploration and Development: The company has commenced exploration drilling in Egypt with the spudding of WEF-1X, the first of up to six wells. This ongoing exploration and development will help in discovering new reserves and maintaining production levels.

Risks and Challenges

Despite the opportunities, Capricorn Energy faces several risks and challenges:

1. Revenue Decline: The company's revenue has been declining at an average rate of 5.4% per year, which is a concern when compared to the industry's performance. The Oil and Gas industry saw earnings growing at 23.5% annually, while Capricorn Energy's earnings have been declining at an average annual rate of -14%.

2. Financial Commitments: The new concession agreement may require additional investment from Capricorn Energy. While this could lead to increased production and reserves, it also represents a financial risk if the expected returns do not materialize.

3. Regulatory and Political Risks: Changes in regulatory policies or political instability in Egypt could affect the outcome of the negotiations. Any adverse changes could lead to unfavorable terms or even the failure to reach an agreement, which would negatively impact Capricorn Energy's operations and financial performance.

4. Dependency on Partner: The success of the amendment also depends on the cooperation of Cheiron Oil and Gas Limited, Capricorn's operating partner. Any disagreements or lack of alignment between the two companies could hinder the progress of the amendment and affect the overall outcome.

Outlook for 2025

Looking ahead, Capricorn Energy has guided production in 2025 in the range of 17-21,000 boepd, with 39% of which is forecast to be liquids. Capex guidance is set at $85m - $95m, and operating costs are forecast to be $5-7/boe. The company is also expected to complete a new concession agreement, consolidating the eight existing concession agreements into a single, integrated agreement in preparation for final approval by the Egyptian competent authorities.



In conclusion, Capricorn Energy's 2024 earnings report highlights a mixed performance with EPS exceeding expectations while revenues lagging behind. The company's focus on operational efficiency and strategic adjustments, such as the consolidation of concession agreements and diversification through M&A opportunities, positions it for potential growth. However, the company must navigate the risks and challenges associated with these initiatives to realize their full potential.