Karoon Energy Ltd

Thank you. Good morning, everyone, and thank you for joining our 2025 Full-Year Results webcast. My name is Carrie Lockhart, CEO and Managing Director of Karun. I have with me this morning Ray Church, our CFO, and Anne Diamond, our SVP of Investor Relations. Earlier this morning, we released our 2025 Full-Year Results to the market. This presentation should be read in conjunction with the ASX announcement And I draw your attention to the disclaimers on slide two and notes and definitions on slide three. I will move directly to slide five, which provides an overview of 2025. We are pleased with Karun's performance during 2025. We produced 10.3 million BOEs, which was nearly on par with last year, despite well issues and natural decline. While our sale revenue and NPAT were lower in 2025, largely due to the softer oil prices, our low costs high margin assets generated $231 million of operating cash flows, demonstrating the robustness of our business. These cash flows underpin the discipline investment in our organic growth opportunities and healthy returns to shareholders. We paid shareholders $80 million, which includes $35 million in dividends and $45 million in buybacks. Since the second half of 2024, we have purchased and counseled 11% of shares on issue, delivering solid returns to our shareholders. I will share more about our operations reserve and resource base and projects while Ray Church will discuss the 2025 results later in the presentation. Slide six summarizes our good safety record and sustainability initiative. We achieved year-on-year improvement in both personal and process safety, which are core to how we run our business. We also reduced our flaring by 41% compared to 2024 as we improved operations and FPSO reliability. We do remain committed to being 100% carbon neutral for Scope 1 and 2 emissions, primarily by surrendering independently verified carbon offsets. This has been achieved since 2021. We will remain relentless in our aim of delivering zero injuries every day, minimizing our environmental impact where practical and cost effective, and being a positive supporter to the communities in which we work and operate. Moving to slide seven, we achieved a total shareholder return of 16% in 2025. Our share price appreciated 11%, closing the year at Australian $1.54 per share, And we paid 7.4 Australian cents per share of dividends unfranked during the year. Our positive share price performance was despite Brent crude price declining 19% and the ASX 200 energy index being down 2% over 25. The board has declared a fully franked final dividend for 2025, a 3.1 Australian cents per share to be paid on March 31st, 2026, bringing the total dividend declared for 2025 to 5.5 Australian cents per share. On the next slide, we show our capital allocation framework and our priorities to create value for shareholders, which remain unchanged. The on-market buyback program has been reviewed as we enter a period of higher capital intensive work during the first part of this year, as well as oil price volatility. We believe with the strong fundamentals from the base business and our current share price, which in our view remains undervalued by the market, it is prudent to continue with the on-market purchases as part of our disciplined approach to capital allocation. As we move to slide nine, reserve and resource growth have been an ongoing thematic for Karun over the years, and this year is no exception. Reserves increased significantly. 7% year-on-year primarily due to conversion of Biona 2C to 2P as acquiring the FPSO and reducing operating costs has given us the confidence in being able to produce to late 2030s. As a result, reserve life has also increased to 7.1 years. Our 2C contingent resource saw an increase of 34% driven by an upgrade in the NEON resource with improved sub-surface characterization and the acquisition of licenses containing the Paracuca field. On slide 10, our business has a healthy and balanced pipeline of portfolio growth opportunities in different phases of maturity. The short term includes short cycle project deliveries, primarily at HUDAT in the Gulf of America. The medium term includes NEON and potentially Paracuca, Goya, and the NEON West in Brazil, which we are continuing to mature. In the long term, we have a sizable prospective exploration acreage position in the South Santos Basin. I will talk about each of these opportunities in more detail shortly. Now, I'd like to hand over to Ray, our CFO, who will run through the financial highlights.

Thanks, Kerry. Good morning, everyone. I'll move right into slide 12 and open by saying that in 2025, the FBSO acquisition, oil price impacts on the Petrobras contingent consideration provision, and expense treatment of the FLOTEL campaign make it important to look through to the underlying result. Slide 29 in the appendix shows these items in a reconciliation of statutory to underlying results, and I'll now focus on those underlying numbers. With production of 10.3 million BOE marginally down from 2024, 15 offloads took place at Baona in 2025 versus 16 last year. Revenue was also affected by oil price, resulting in sales of $628.6 million versus $776.5 million in 2024. With costs largely fixed, that revenue reduction flowed directly to underlying EBITDAX and operating cash flow, partly offset by royalty reductions and FPSO lease savings. As you can see, we drew cash to close the year with $143.9 million of net debt, primarily as we funded the FBSO acquisition. I'll say more about cash movements on later slides. Turning to underlying earnings on slide 13, and to provide more detail, the revenue reduction comprised two parts, the first being $100.4 million from realized price as the average liquid price was 14% lower at Bauna and 17% lower at Hudat, and the second being $47.5 million from a sales volume reduction, mostly at Bauna. Production costs improved by a net $7 million through savings of $40 million in FPSO lease DNA and interest costs, offset by roughly $28 million of temporary FPSO transition support costs and $5 million of logistics and non-recurring mooring line repair costs. Royalties reduced by $7 million in line with price and produce volumes and crude inventory movements were $26 million as a lifting occurred in January, 2026. The majority of the increase in net finance and interest costs relates to the accounting treatment of $17.8 million of withholding tax on intra-group funds movements This is fully offset in income tax expense. Of the remaining $52.4 million, the increase year on year is a result of $3.9 million of full year bond interest impacts, plus $4.2 million of reduced interest received as we drew down cash. And as I mentioned, income tax expense includes $17.8 million credit for withholding tax, neutralizing the impact on NPAT in the year. Excluding this item from tax expense and profit before tax, the underlying tax expense rate is 33%. This all leads to an underlying NPAT of $107.5 million. Slide 14 provides a per BOE view of the 2024 and 2025 cost structure on a pre-AASB16 basis. Despite the oil price decline, the pre-tax cash margin remained above 65% per BOE, Unit production costs further reduced to $13.20, and break-even realized price improved from $33 to $31 per BOE. This reflects the ongoing work to improve topside efficiency, replace natural decline, and the emerging FBSO acquisition impacts, and it demonstrates Karun's leverage to oil price. Moving to slide 15, as I've already flagged, EVA DACs included the flotel costs and converted after taxes and net finance costs to $231.3 million of operating cash flow, including FPSO lease payments. This provided adequate funding for CAPEX investments in the HUDAT sidetrack and SPS 88, as well as the last of the largest Petrobras contingent payments, leaving $57.8 million of free cash from operations. This, combined with our opening cash, was then applied to the strategic FPSO acquisition and capital returns to shareholders, resulting in a net drawdown of cash of $135.1 million. This led to the change in net debt mentioned earlier. Moving to liquidity and the balance sheet, slide 16 shows this cash reduction to close the year with $206.1 million of cash. As no further draw on debt was necessary in the year, The combination of the RBL debt facility and cash leaves us with $546.1 million of total liquidity at year end. This positions Karun's balance sheet for the second extended shutdown and Flotel campaign and well works at Bona and Hudat with approximately 85% of this planned 2026 capex expected to be spent in the first half. It will also fund the much reduced contingent consideration and the announced capital returns. I'd like to finally note that the RBL facility amortizes with reserves and is reassessed in April and October of each year. Thank you, and now I'll hand back over to Carrie.

Thank you, Ray. Looking forward to 2026, we see the year as having two distinct halves. This first half is a period of intense investment and the second half when we aim to realize the benefits of this work. Over the next few months, we will realize on performing essential inspections, maintenance, the annual turnaround, systems revitalization and upgrades on the Biona FPSO, together with the production, rise or rain statement work at HUDAT. Regarding wells, we have one well and one subsea intervention plan in Brazil aimed at restoring well production and a sidetrack plan at HUDAT. Assuming the operational programs in the first half go as planned and oil prices remain steady, we expect to realize increased facility uptime and production, as well as operating cost reductions, in turn delivering strong cash flow generation. Next slide. The Biona FPSO acquisition was a very significant milestone for Karun, as it provided us with strategic control over arguably our most important asset. Acquiring the vessel has already led to improved safety, reliability, and cost efficiencies. Production from Biona in 2025 was higher than 2024 despite natural decline and was driven by improved FPSO efficiencies of 95% versus 84.5% in 2024. The acquisition also allowed us to extend field life by seven years to 2039 and increase our 2P reserves. As shown in slide 20, Our Brazil operations team are heavily focused on several major concurrent activities during the first half of 26, as previously mentioned. Our FPSO revitalization campaign is currently planned over a four-month window with an option of a two-month extension if necessary. For most of this time, we will be producing as normal. The annual maintenance turnaround is planned to commence during March and will run for 28 days. Alongside this, we expect to conduct SPS 92 and PRA 2 well activities in late March to early May window. These concurrent offshore activities present both a challenge and an opportunity, with safety remaining our highest priority throughout. Simultaneous operations and logistics are being managed via detailed planning and the use of a flotel, which is already on location. The drilling rig is expected to mobilize in the field second quarter to undertake the SPS 92 ESP well workover. And that peak offshore workforce at Bayona is expected to exceed 700 personnel compared to a typical complement of around 90. On slide 21, during 2025, our NEON team completed some excellent subsurface work, further maturing the NEON development opportunity, resulting in NEON 2C contingent resources increasing by 50% to 90.3 million barrels. Additionally, we picked up the nearby Paracuca resource, which allowed us to book a further 19.6 million of 2C contingent resource, while 2U prospective resource at the nearby Neon West exploration prospect increased 69% to 25 million barrels unrest based on technical studies completed in a year. The NEON work was centered on a standalone redeployed FPSO development concept. Late last year, a preferred concept option went off the market. Since then, other available FPSO options have been identified, including the strategic ownership of the Biona FPSO, which may present a more value creative development solution. Our focus over the next few months will be on further assessing and optimizing the NEON development concept in a disciplined project management process, including cost reductions and exploring potential synergies with Biona and the future development of Paracuca and Goya discoveries as part of the greater NEON area development plan. We're also well into a competitive farm down process, which is targeting a 30% to 50% interest sale down in NEON and the surrounding areas. This cost reduction initiative, development concept review, and equity farm down will steer our define and feed activities and schedule. On slide 22, Karun has built a substantial acreage position of over 7,300 square kilometers in recent Brazilian licensing rounds, all with no associated drilling commitments. We believe this area located in the South Santos Basin has a working petroleum system to support the potential post-salt tertiary play. Although it isn't tested and unproven, our work to date suggests this area and potential targets could potentially be significant if successful. Our leading drill candidate is currently the Eta Front Prospect located in SM 1482, which is supported by seismic direct hydrocarbon indicators. Extensive work remains in the surrounding acreage to assess additional prospectivity. We have begun a farm down process and have secured a rig option to potentially drill in 2027. This is subject to farm down results and technical and regulatory requirements. As we move to slide 23, our non-operated HUDAT asset produced in line with our expectations in 2025. We saw an increase in liquids contribution as the year progressed finishing with 74% liquids and 26% gas. Our production share on a net revenue interest NRI basis was 2.6 million BOE in 2025, with the natural reservoir decline rate mitigated to 10% relative to 2024. The E6 sidetrack well was successfully drilled and completed under budget with excellent rig performance. The well, which came online in fourth quarter 25, flowed within expectations at a rate of 1,050 BOEs per day on an NRI basis. In early February, a minor leak was detected on one of the six production risers at Houdat Data Floating Production System. The riser was immediately shut in and has since undergone inspection and seawater flushing to remove the hydrocarbons. The operator, ELOG, is currently working to reroute production, if feasible, and proceed with repairs and reinstatement of the riser. As a result, HUDAT first half production is estimated to be lower than planned. However, the 2026 HUDAT production is currently expected to be within our guidance range of 2.1 to 2.5 million BOEs on an NRI basis, albeit at the lower end, based on current plans for reinstating production from the riser and other activities such as the planned A1 sidetrack, which is estimated to start operations in early Q2. On the next slide, we have two potential Houdat development opportunities in the U.S. Gulf of America. Both are short cycle and are proximal to the existing infrastructure. The joint venture is maturing the Houdat East opportunity towards a potential final investment decision, which is subject to royalty relief and project commerciality. The preferred development concept is a single well tied back to infrastructure. We expect this could add 3,500 to 5,000 BOE per day of initial flow rate net to Karun on an NRI basis. The Houdat South has been undergoing further geologic and geo studies. We believe the Houdat area has additional potential for value creating opportunities that leverage the existing infrastructure. Karun participated in the recent Gulf of America bid round and we are apparent successful bidder of Block Mississippi Canyon 587 near Houdat South. We plan to purchase additional seismic to further mature the potential prospects on that block once it is rewarded. Our final slide showcases our focus on leveraging our competitive advantages to optimize total shareholder returns. We're doing this by maintaining safe and reliable operations of these high-quality assets and ensuring low cost and high margin barrels. Our strong balance sheet provides us with the flexibility to sustain business and balance capital returns with our organic value, creative portfolio, and growth opportunities. I would like to thank all of our staff and contractors for their hard work and dedication to Karun and to thank our shareholders for their continued support of the company. Ray, Anne, and I are now happy to take any questions, first from the telephone lines and then from the online facility. Now I will hand it back to the moderator.