Karoon Energy Ltd

ASX:KAR

Karoon Energy Ltd

ASX:KAR
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$1.395 (+3%)
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#89
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Forum Topics KAR KAR Pos. Div & Buy back

Pinned straw:
Arizona
Last edited 4 months ago

It will be interesting to see if the market feels that STAM has kicked a goal or is it not enough.


Nb: "Further details will be provided at our 2024 half year results, due to be released on 28 August 2024"



ASX RELEASE

25 July 2024 | ASX: KAR


Revised capital allocation framework and launch of US$25 million on-

market buyback

Karoon is pleased to announce a revised capital allocation framework that provides clear guidance for

shareholders on Karoon's approach to capital returns on a go forward basis.

Karoon's priority is to ensure safe and reliable operations. Karoon believes that this will maximise

shareholder value while maintaining a strong, flexible balance sheet to help fund value accretive

growth and capital returns to shareholders.


Karoon’s revised capital allocation framework includes the following principles:

- Investing in, and maximising value from, our existing assets.

- Pursuing growth opportunities that meet strict investment criteria and achieve material value

accretion for shareholders.

- Delivering annual capital returns to shareholders of 20-40% of underlying Net Profit After Tax

(NPAT)1 via cash dividends and/or share buybacks, subject to market conditions and Board

approval.

- Consideration of additional shareholder returns during periods of elevated oil prices and/or

where alternate, value accretive uses of excess cash are not identified.

The principles outlined above have been formalised into a capital returns policy which has been

approved by the Board.

Karoon intends to apply its capital returns policy from the 2024 half year results, based on underlying NPAT for the six months to 30 June 2024. This may provide an opportunity to distribute the value of Karoon’s franking credit balance to shareholders.


In addition to the implementation of the new capital returns policy from the 2024 half year results,

Karoon intends to undertake a US$25 million on-market share buyback (“Buy Back”) in accordance with 257B of the Corporations Act. Subject to regulatory constraints, the Company intends to commence implementing the Buy Back following the announcement of the quarterly results today, with the Buy Back being executed over the period through to 31 December 2024. The number of shares purchased under the Buy Back will depend on the prevailing share price, market conditions and regulatory considerations……
Tom73
Added 4 months ago

KAR announcing capital and dividend returns is a great step in the right direction and what my investment thesis depends on. A positive announcement but it is just a first step and one the board has basically been pleasured into doing.

I would like to see them truly internalise the improvement in capital management that this is meant to signal. If this is done and oil prices hold around current levels or even a little lower then KAR is very cheap, if not its probably still ok value hence an asymmetric bet in my view.

Disc: I own RL

7
Jimmy
Added 4 months ago

@Tom73 released a few minutes ago by Citi:

News SummaryDJ Karoon's US$50M Returns Look About Right to Citi -- Market TalkKAR$1.782-$0.013 (-0.7%)$1.78$1.785

25 Jul 2024 11:27:282 Views0127 GMT - Karoon Energy shareholders should receive at least US$50 million for 1H 2024 under the Australian energy explorer's new capital returns policy, Citi analyst James Byrne says. He tells clients in a note that the figure is appropriate and signals that the company is focused on shareholder returns rather than empire building. Byrne would have considered anything less than US$50 million as insufficient, while returns close to US$100 million would have been too aggressive and would limit investment capacity. Citi has a last-published buy rating and A$2.75 target price on the stock, which is up 0.6% at A$1.805. (stuart.condie@wsj.com)

(END) Dow Jones Newswires

5
Arizona
Added 4 months ago

@Tom73 While the news is headed in the right direction, we don't have the detail. Much of todays info has been touched on previously in the letter to shareholders.

I guess the best we can hope for is that the figures get nailed down on the 28th August and the returns to shareholders are significant.

From the response this morning, It feels like the market is understandably hesitant.

I own IRL & SM


3
Tom73
Added 4 months ago

Article in Intelligent Investor by Gaurav Sodhi on KAR yesterday.

They have increased their buy price from $1.50 to $2.00 (ie it's now a buy) and sell from $3 to $4 in response to the derisking that dividends and buybacks have on misallocation of capital and the fact that it is dirt cheap if you take management empire-building risk off the table (which it isn't fully but has been enough to provide an asymmetric upside given it on a PE and free cash flow multiple of around 3-4).

It is good to see Gaurav adjust his view given the impact of the active investors, I am a big fan of his and respect his view generally (if he isn't sure he says so) but particularly in the mining and energy space.

Disc: I own RL

14
Strawman
Added 4 months ago

I agree @Tom73 -- Gaurav is a sharp cookie.

If you missed it, we did an interview with him a couple years ago (see here). We should get him back for another chat.

16
Arizona
Added 4 months ago

@Tom73 Thanks for sharing this.

I too like Gaurav and I believe KAR is probably in his wheelhouse.

That's a decent jump on buy price.

The obvious danger here is that management continue to muck around.....but of course that's why the price is down in the first place.

I hold in RL and SM.


7
Tom73
Added 4 months ago

Would love another SM meeting with Gaurav @Strawman !!!

Have watched the previous video but it was a while ago so will probably watch again this weekend.

Cheers

@Arizona yes your right that's the issue - if we could bank on management doing the right thing it would be twice the price!

9