Capricorn Energy PLC

Welcome everybody to the Capricorn Energy first half financial results presentation. Speaking today will be Craig Vanderland, Chairman of Capricorn, Nathan Piper, Director of Commercial, Matthew Boyer, Director of Technical, and myself, Randy Neely, CEO of Capricorn. Following our presentations, we open the floor to questions. To begin, I'm going to turn the floor over to Craig, who will update our shareholders on the plans for the company's distributions.

Craig?

Craig?

Thanks, Randy, and good morning, everyone. Back in April at Capricorn's full year 2022 results presentation, I gave clear and firm assurances of the board's commitment to return to shareholders all excess cash flow not required for our core operational focus. The commitment we announced at that time was a significant return of capital of approximately US$575 million via a US$450 million special dividend, a share buyback of at least US$25 million over a period of 12 months, and a further conditional special dividend in Q4 2023 of US$100 million, the release of which was dependent upon a number of factors which the Board would consider over the ensuing months. We paid our shareholders a $450 million special dividend shortly after in May and initiated a $25 million share buyback, of which $15 million has been repurchased already, and we're targeting to complete the remainder by the end of this year. I'm delighted to announce today that the further special dividend of $100 million will be returned to shareholders on 20 October this year, subject to shareholder approval. We will shortly be posting a circular seeking shareholder approval for the special dividend and a share consolidation concurrent with the return as we did with the special dividend earlier in the year. A general meeting to approve the dividend will be held on 5 October with shares trading then ex-dividend on the 6th of October. I'm very happy to be able to confirm the delivery of the capital return commitments we made in April, alongside the progress and delivery on other key priorities under the leadership of Randy Neely, our new CEO. These include significant cost reductions across the business, the curtailment of exploration activities outside Egypt, improving our Egypt business and the drive for a cultural change across the company. We've given assurances that any proceeds we receive from the Senegal contingent receivable will be distributed to shareholders, and we reaffirm that commitment today. We will continue to prioritise capital returns for our shareholders as and when excess capital becomes available, and we will support this by driving to develop Egypt into a business that creates free cash flow, giving us the optionality to balance growth and returns. Let me now hand back to Randy, who'll cover the next part of the presentation.

Thanks, Craig. Since the board was elected and I joined the company, we have been undertaking a review of the company's strategy. Beyond maximizing returns to shareholders, which Craig has just outlined, and maintaining a healthy balance sheet and liquidity, we've landed on a couple of very straightforward conclusions. First, resetting our purpose. And second, delivering Egypt, which I will come to on the next page. First, reset our purpose from an exploration-focused company to a production and cash flow-focused business. starting with right-sizing the organization and having not only the right number of staff, but having the right staff. We need to apply technical skills in a very targeted way to the production and development base of our joint venture in Egypt. By doing this, we believe we can assist in maximizing the potential of the Egyptian assets. To deliver that organization, we need to undergo a comprehensive change in culture, focusing on profitability, costs, and teamwork. and we will need to deepen our relationships with our partner and the government. And by doing these, I believe we'll maximize our long-term option value. To deliver the new Capricorn, the company will first need to work more collaboratively with its partner to maximize the potential of the Egyptian assets. To do that, the company will assist with developing a long-term plan to grow value. This will take talent and time, And we hope to provide an update on our progress on this effort at the detailed operational update, which we are planning for November 30th. A critical element of the long-term value growth must include a renewal, restructuring, extension, amendment to the existing production share and contract terms. In my view, this work will take time, coordination, and collaboration in order to achieve a satisfactory outcome for all three parties, that is, ourselves, our joint venture partner, Chiron, and the government, represented by the Egyptian Government Patrolling Company. Second, the company needs to pursue this goal with a much reduced cost base. The cost base needs to reflect the organization's priorities and scale. We believe that we need to be an active player in our assets, contributing technical skills in order to maximize value for our shareholders. To achieve that, we will need to take a much more active role in the planning of JV activities than would typically be the case for a non-operated partner in the oil and gas industry. This is particularly the case in the PSC setting where operations are carried out by a joint venture entity that is staffed by government employees. The rationale for this approach reflects two things. First, to date, the Egyptian portfolio has underperformed the company's expectation. And second, this is the company's sole asset, so we can't afford to be a passive participant in its development. However, our concentration will be very purposeful and precise and completely positioned as a non-operative partner. Our goal will be to ultimately drive G&A costs down to below $1.50 per barrel. This is an ambitious goal, but one that I believe can be met in time. The third priority is culture change. With the acquisition of the Egyptian assets and the subsequent and current return of the bulk of the company's cash holdings, the company needs to be laser-focused on building shareholder value through the realization of the potential of these assets and our costs. Gone are the days of giant discovery hunting, where costs were not the main priority. We are now a blue-collar oil and gas company, where every dollar counts. We need to have a significant uplift in our understanding of the asset base that the company holds. To assist in gaining that improved understanding, we have just recently commissioned a new reserve report, which we expect to be completed later in the fall. The company also needs to move away from a culture of silos to a culture of collaboration, not just with its partner and the government, but also internally. Now I want to share with you my initial impressions of the company as the new CEO, all of which have impacted my recommendations on strategy adjustments. What I found so far, on the positive side to start with, was a highly skilled professional staff, exceptional individuals, both the ones that remain and many that have departed. Obviously, a motivated and very experienced board of directors, which the shareholders recently nominated and elected, and a board which is heavily engaged in helping to drive the right outcomes for shareholders. A strong balance sheet, inclusive of the total distributions paid and planned for this fall, and not that I discovered it, but to state the obvious, a substantial production base of 30,000 plus barrels of oil equivalent per day of production. But what I also found were misaligned priorities. The company has a significant investment in a very complex joint venture with material production, but with a lack of focus on maximizing the value from that production base. The company was almost entirely an information taker from that side of the business. While at the same time, the effort that was being expended in Egypt was on a very limited exploration portfolio. That is not a slight to the professionals doing that work, but the potential of the opportunities in that portfolio was always known to be small and of higher risk. The company was being run as if it was the Karen of yesterday. Cumbersome processes, certainly not fit for purpose. This included the IT infrastructure, the high-profile offices, and general internal processes. Partner relationships at the executive level with both Chiron and EGPC were practically non-existent or perhaps described as fractured. In my experience, to operate successfully in Egypt, the management team needs to be present, the technical team needs to be present, and we all need to be working collaboratively and constructively in order to add value. As mentioned, there was a lack of focus on the existing portfolio, a rather cursory understanding of the potential of the existing assets, which was unusual given the scale of production. And while this is a macro item, it's a critical item. Egypt is again undergoing another period of significant fiscal challenges. So where do we go from here? As mentioned, I believe instilling a culture of profitability and scarcity needs to be cultivated throughout the organization. Over the past several months, the board also worked closely with key shareholders to improve the alignment of long-term incentives granted to the executive and the senior staff so that awards will be earned based on absolute returns rather than simply relative returns. We've committed as an organization that the Egyptian business must provide an adequate return to the shareholders. And while Egypt is undergoing a significant challenge, that challenge cannot continue to be laid off on Capricorn shareholders. Or put differently, headquarters cannot continue to financially support the business in Egypt without seeing the potential of an adequate return. To achieve the best outcome, we need to work cooperatively and collaboratively with our partner and with EGPC. to achieve an amended and extended production sharing contract portfolio, and to accelerate the realization of PSC revenues or otherwise accounts receivable collections. These goals must be achieved while at the same time remaining committed to our net zero targets, where we have already achieved the Morgan Stanley Sustainability Index rating of AAA, recently upgraded from AA, and a carbon disclosure policy rating of B, also recently upgraded from B-, both terrific achievements. I believe that the best way to ultimately generate value for our shareholders from the existing asset base is not complicated. Simply generate strong returns from the assets themselves. For starters, and it's a bit academic, but the cash flow from operations must exceed capital investment. To date, that hasn't been the case. To date, the company has invested over $600 million into Egypt made up of an initial investment as well as subsequent investments, which exceed the cash flow generated from the business. To date, the Egypt business has not generated $1 of net cash return to the company or its shareholders. And this is excluding costs borne by the company to provide support from head office and, of course, public company costs. We intend to turn that around. First, investments, that is projects, wells, etc., will be prioritized based on risk-projected returns. We will aim to achieve that by working proactively and collaboratively with our partner to optimize project execution, well selection, and the introduction and implementation of practices and technology to improve development and the exploitation of the production base. We will work to influence and prioritize high-return wells to grow liquids and gas production and reserve growth. Ultimately, we believe this will lead to an improved industry position and investment appeal amongst our peers. And longer term, combining this approach with a portfolio of production-sharing contracts with amended, extended, and improved terms will allow the partnership to unlock potential contingent resources. This process is underway, with Capricorn and our partner forming a joint team to prepare analysis for consideration by the leadership teams of both companies. We hope to be able to provide a meaningful update on this effort at our detailed operational update in November. Our journey to transform the business and our culture is well underway. In Egypt, our immediate priorities are to work with EGPC to secure material and timely payments to allow Capricorn to avoid injecting any further capital into the Egypt business. Work with our partners to align on capital investment as we manage through these difficult times in Egypt and work to prioritize those investments. shift the core focus of the Capricorn technical staff from exploration to development, production, and exploitation assistance. To that end, we have agreed with our partners to transfer the operatorship of our exploration blocks to them in the near term. We are working to restaff the company with the appropriate skill sets and experience to provide the input required for our transform priorities. And we're deemed critical implementing temporary measures to bridge skill gaps. Our team will work with our partner to identify opportunities for improvements in drilling, development, and exploitation of the existing asset base, and align with our partner to present a cohesive and achievable proposal to EGPC on the amendment of the terms and pricing of our existing jointly-owned PSCs, work that has already been kicked off over a month ago with Capricorn and Chiron staff working together to build this proposal. For those of you who are perhaps new to investing in Egypt, I thought we would share a little background. Egypt has a population base of approximately 110 million people. The oil business is mature, with the first production in Egypt taking place over 100 years ago. This provides a strong base of services, skills and infrastructure in the country. My experience has always been constructive, and the industry values long-term committed relationships. However, recent global events, including the war in Ukraine, high oil prices and high inflation, have had a magnified impact on Egypt. These recent global events had a negative impact on three of the four sources of foreign currency. Egypt's four primary sources of foreign currency are remittances, tourism, Suez Canal, and the energy business. Of the four, the Suez Canal was not significantly impacted. And while Egypt tourism was significantly impacted in 2022, it has made a very good recovery in 2023. But remittances have been significantly impacted by inflation and higher interest rates. As a result of this, the country is once again dependent on foreign currency loans being provided by the IMF and others to bolster the foreign currency reserves. Until the country is able to secure new credit, We don't anticipate the accounts receivable aging to improve materially. However, in a show of confidence, many of the country's largest international companies have publicly stated their intention to continue to invest in Egypt, including Apache, E&I, and BP, all publicizing plans to invest multiple billions over the coming one to four years. I personally am not aware of Egypt ever not paying in full amounts owed to oil and gas companies. Cost reductions. I also wanted to share with you what we've been doing to reduce our costs. We are targeting to have one quarter of the total workforce that the company had in 2022 by the end of 2023, including an 80% reduction in UK staff contingent. We have transformed the operating structure and reduced positions across the entire organization, including the senior management team and the board, which now stands at seven rather than nine previously. We are in the process of recruiting a COO and CFO and expect to fill those positions shortly into the new year. Our real estate footprint in Edinburgh will have been reduced by 80%. We are vacating the high-profile London address by year-end. We are in the process of exiting legacy licensing service and other lease arrangements as quickly as contractually possible. This includes rationalizing our IT infrastructure that was costing the company almost $5 million a year. Unfortunately, though, all of these changes come at quite a cost, and our current year results would be burdened by the one-off transitional costs, including redundancy. But ultimately, our goal is to drive G&A costs down to $1.50 per BOE. We currently expect 2024 G&A costs to be in the range of $20 million. That may not get us to the $1.50 target, but we will definitely be able to see it from there. And while some may view a $20 million a year G&A burden as excessive, it's a far cry from the $70 million last year, which is after capitalizing over $30 million, so over $100 million before capitalization. But more importantly, I see it as a required balance between cost minimization and deriving value from the existing business. Without the right skills and people, we risk losing the value from the assets. Simply put, it's an investment I believe will pay off. Non-core update. As mentioned previously, our intention is to exit all non-core assets as swiftly and as sensibly as possible, and the costs of which are being recognized in our exploration expenditures figures for the current year. As of today, we have fully exited Mauritania. We expect to be relinquishing Suriname in Q4. Mexico is on track to be fully divested and relinquished by Q1 2024. And we have undertaken an exploratory process to determine if there was a market for the remaining elements in the UK exploration portfolio. And we will be able to provide an update of that later in the fall. We have two separate streams of potential contingent receipts. One is from the sale of the company's interest in Senegal in 2020 to Woodside, where production is established prior to June 30, 2024. The company will be due a payment of up to $50 million, and we are watching that situation very carefully. And the second one is from the sale of the company's production assets in the UK North Sea in 2021 to Waldorf, where the company will be due amounts over the next three years, which we estimate on the aggregate basis to be in the ballpark of $75 million, with the largest of the three payments due next spring. The company's intention will be to return any realized proceeds from the Senegal contingent payment to shareholders and other proceeds as prudently as possible. I'll now hand the mic over to Nathan to take you through the first half results and our expected operational performance for the year.

Thank you, Randy, and good morning, everyone. In the next few slides, I'll take you through the first half 2023 financial performance, the cash flows, and current balance sheet position, and update on 2023 guidance. But before getting to that, I want to highlight, as part of our move away from exploration, we're changing our basis of accounting from this year to a full successful efforts accounting policy. This means all non-wealth-specific exploration spend is now immediately charged against profit or loss rather than being capitalized on the balance sheet. Also, all Egyptian near-field exploration drilling costs are now capitalized directly within development and producing assets. Applying these changes results in a $66 million reduction in our intangible exploration and appraisal assets, largely related to exploration spend in Suriname, UK and Egypt. And to be clear, this is, of course, a non-cash movement. Now on to the first half of 2023, where our working interest production at Bebetco averaged around 31,500 barrels of oil equivalent per day. We continued to prioritise higher margin liquids production, with liquids representing 44% of total production, up slightly on 2022. Revenue generated through the period was almost $100 million, 75% of which was from liquids. Average realized prices were almost $79 a barrel and $2.90 MCF for gas. OPEX through the half year averaged at the low end of full year guidance at less than $5 a barrel of oil equivalent, helped by a weaker Egyptian pound. And the vast majority of our OPEX is EGP denominated. Egypt capex, where a meaningful component is also EGP, was $77 million. Split across 42 in development and production, where we drilled 17 wells, with $35 million on exploration, largely related to the Yatso well offshore Mexico and onshore Egyptian exploration. Gross profits in Egypt, that's revenue less OPEX, were 71 million, whilst the operating cash inflows to the period were 23 million before CAPEX, Shell Contingent and RBL repayments. The receivable position continues to reflect the challenges industry faces around the pace of payment in Egypt, given the macro headwinds outlined by Randy earlier. Egypt has always paid, but the timing remains the uncertainty. The receivables position increased from around $100 million at the end of 2022 to almost $150 million at the end of the period, of which $113 million were due for payment. This is broadly in line with the current receivables position. We continue to hold active discussions with the Egyptian state oil company EGPC on the receivables issue. In this slide, the next slide, I want to detail the cash movement over the period. We started the year with a net cash position of $597 million. We then returned over $460 million to shareholders in the period via a special dividend in May and a share buyback. We bought back $11 million in the period, although in total we've bought back $50 million year-to-date. Egyptian cash flow is netted to a cash inflow of 23 million before exploration and development capex and a 25 million contingent consideration payment to Shell. We have two further payments to make over the next two years to Shell. We detail our contingent payables and receivables in the appendix. After working capital settlements, a contingent consideration of over £150 million was received in the first half, largely in respect of North Sea earnouts. Legacy exploration capex outside Egypt was £21 million, predominantly in Mexico, along with spending in Mauritania and the UK and Suriname as we exit those positions. To be clear, there will be no further international exploration spend beyond 2023. Adjusting for admin, financing, and other costs, this took us to a cash position of $301 million. And if we net off the $126 million debt position held at our Egyptian subsidiary, we move to a $175 million net cash position at the end of the half. In addition, we have almost a $150 million receivable position at the end of the period. Given we are nine months into the year, we want to update on guidance from an operational and investment perspective. We continue to expect production to build into year-end, exiting around 15% higher than at the end of 2022. However, a number of factors that Matthew will detail next have combined to result in a business expecting to achieve the low end of the 2023 production guidance. That said, we are also guiding to the low end of the range on OPEX, in addition to guidance on capex being significantly lower, 25% below the midpoint of the original 2023 guidance. As wells are drilled cheaper, lower-cost oil wells are selected ahead of higher-cost gas wells, and slightly fewer wells are expected to be completed overall this year. Egyptian exploration spend through 2023 is also reduced from £25 million to around £12 million to reflect a pause in drilling as we assess recently acquired 3D seismic to help optimise the remaining committed exploration drilling taking place into 2024. For clarity, the Egyptian exploration commitment relates to a dollar spend rather than a number of wells and we expect to have met that commitment by the end of next year. On international exploration, following focused work from the team in exiting our legacy international exploration positions, we can confirm that the capex in this area will be less than $30 million. As mentioned in our previous presentation and earlier on today, the bulk of the spend is associated with the Yatsel exploration well drilled earlier this year offshore Mexico. To be clear, there are no international exploration commitments or spending beyond 2023, and costs here reflect any outlay associated with our country exits or relinquishments. I'll now hand over to Matthew Boyer, our Technical Director, to talk through our operational performance.

Thanks, Nathan. In the next couple of slides, I will summarise our production performance in the first half of 2023 and give an overview of some key new wells that the joint venture have drilled so far this year. In the first half of 2023, working interest production across the four concession areas in the Western Desert averaged approximately 31,500 barrels of oil equivalent per day, with 44% of the production mix coming from liquids. Bepetco production to date this year has been affected by operational challenges, with system constraints shut down at the Badr al-Din or bed area facilities and ESP performance issues on some of our good oil producing wells. A number of projects have been progressed in the year, but delivery schedules slipped on the teen early production facility and on compression projects at bed and teen. The Petco production performance in 2023 has been supported by an active six-rig fleet, drilling a combination of development, water injection and exploration wells, and an additional four work-over rigs. This activity is expected to deliver approximately 40 new wells in the calendar year, allocated across the asset base, with prioritised activity on lower capex oil wells in the bed area. The joint venture's new well activity in the latter part of 2023 will be focused on liquids production, with a plan to drill nine wells in the bed area prior to year end. The focus for new well activity is the Abra-Roash Reservoir. Initial rates from this reservoir for new producers can exceed 1,000 barrels a day, and drilling and hook-up timescales are short. Given the focus on the Aberystwyth Reservoir in bed, Capricorn has been undertaking independent technical work to help inform development strategy, supporting world prioritisation recommendations to the operator. Work continues here to better define water flood strategy and delineation of the resource potential to influence longer-range asset activity. Gas production in the latter part of 2023 will be impacted by a nine-day shutdown later this month of the Obeid field for essential facilities maintenance. Gas production gains have been forecast from the compression and team projects. Whilst liquid production is expected to be positively impacted by the focus of the rig fleet in the bed concession area, and the impact of this means that we forecast year-end production of approximately 33,500 barrels of oil equivalent. Despite the maturity of the assets, opportunities continue to be matured that allow field extension and new accumulations to be discovered. These near-field opportunities do carry risk, particularly in terms of the reservoir distribution, but in the first half of 2023, five new wells drilled by the joint venture have delivered encouraging results. In the AESW concession, a Karam well targeted the Abruroesh reservoir and delivered the highest flow rate in a new well yet achieved by the joint venture, with 4,600 barrels of oil per day. The chart on this slide shows the gross resource additions from these five successes, illustrating the importance of these wells in terms of reserves replacement and immediate production contribution. At year end, the corresponding reserve additions from these wells and the follow-on activity will be quantified. The definition of dependent follow-on activity is a key aspect of these near-field extension wells. For instance, much of the drilling activity in the Bed 15 area has been unlocked through near-field extension success in 2022. In the Bed area, several reservoir levels are productive, resulting in oil pay being counted in multiple zones. The uncertainty in reservoir development and extent and fluid distribution therefore provides the opportunity to develop an inventory of new well targets. Capricorn are working proactively to bring more of these near-field extension opportunities to the joint venture, with a considerable focus on continuing the progress made in the bed area. I'll now pass back to Randy.

Thanks, Matthew. Before I conclude the presentation, I want to point out something obvious. In 2021, the former board of management decided to purchase the Egyptian assets for about $320 million. As I mentioned earlier, the company still has not seen a net dollar of return yet. But I would also point out that if you break out the implied value of the Egyptian production business, it is a free option in the company's stock. As you can see on this chart, simply taking the company's net financial position, adding potential contractual contingent payments, and deducting our net financial position in Egypt, you're left with a theoretical asset value of Egypt of less than zero. Somewhere between negative 26 and perhaps negative 70 million, which the company paid over $300 million for two years ago. There's a lot of work ahead of us, and obviously the contingent numbers are just that and not guaranteed, but I'm confident we can improve on this, and this is why we'll be turning our full attention to it. So in conclusion, it's a simple plan. Restructure and right-size the company to maximize the potential of the existing business in Egypt. Target our downsized technical team where we think we can provide the best returns. Keep in mind the lumpiness of cash returns in Egypt, particularly given the current fiscal challenges in the country. Complete the promise made earlier this year to return the $575 million to shareholders. Support the value enhancement proposition through a comprehensive change in culture, significant cost-cutting to preserve optionality, and deepening our relationships with our partner and the government in Egypt. And by doing this, we believe we can ultimately realize the potential of the Egyptian assets. That's the conclusion of our presentation, and we'll now open the floor to questions.

Thank you, guys. Brendan Long here from WH Ireland. I was just interested. I take on board that you're prioritizing cash flow repayments to shareholders. I was just wondering, is it going to be a pure cash suite model? And I appreciate that international exploration is out. What does that mean for international development projects? Is that of interest to you?

In the current world that we're in, no. Our focus is going to be on, I guess, writing the ship in Egypt, focusing on – there's a big asset base there that the company hasn't focused on, and we think there's – as Matthew just outlined, there's opportunities there. We want to focus on that. We've got a – right-size the organization, put the right people to work on that. That's first-order business. Once we get that working properly, perhaps down the road there will be an opportunity to look at other opportunities. But for the time being, we're focused on this part of the business.

I was just wondering about the – sorry, it's Dan Slater from Zeus. I was just wondering about the growth – profile obviously at the moment you're doing 32 odd thousand barrels a day it sounds like there's an awful lot more to go for in the portfolio can we imagine that you'll potentially be doing maybe 35 or 38 or something like that in maybe two or three years time or is it more about just keeping production where it is making a lot of cash from that and paying that out and to what extent it sounds like you've got the portfolio potentially to grow But to what extent is an update to the fiscal terms going to govern whether or not you make the investments to do that, to push on beyond $32,000? You may have answered your own question there, Dan, but thanks.

Good to see you again, by the way. Yeah, for the time being, we've got to understand the assets better. As I said in my part, I don't think the company has a really good understanding of the assets, and that's what we're trying to unpack right now. You know, outside looking in, it's 30,000 plus BOE a day. It's a big portfolio. And it's something that I think if we turn our attention to, we're going to see opportunities. They're going to fall out of that. The timing of how we can build that production, yet to be determined. So that's the work that we're undertaking right now. But it's, you know, as far as a starter kit for a company, it's a pretty nice starter kit, 30,000 barrels a day and a lot of opportunities packed in there, plus the opportunity to renew and revitalize the contract terms in Egypt, which the government is obviously open to. As you know, I was involved in sort of pioneering that, and I think there's a great opportunity here for the company to move that forward. And I'm not going to say it's going to happen overnight, but we'll get it done.

That's really kind. Thank you.

You're welcome. James McCormack from Cavendish. You mentioned earlier how you're going to be a more proactive non-operative partner. I just wondered how aligned you are with your thinking, with your partners and your licenses in terms of opportunities and the program going forward?

In terms of alignment, I think we're building that alignment right now. I think up until recently, there was very little sort of interaction other than on the exploration side on the actual development and production side of the business. But we're building that. Matt and his team are working on that. Our team in Egypt are pulling that together. So far, my observations has been it's been really good, really good interactions between both parties, really receptive to ideas on both sides of the equation. So I think we've got a really good head start on this in getting alignment over the long term. I mean, at the end of the day, both parties want to maximize value for shareholders. We've got a whole bunch of shareholders. They've got one, but the motivations are exactly the same to maximize the value from the asset base.

And a second, if I may. How do you see, given the fiscal challenges in Egypt at the moment, do you see there's opportunities for inorganic growth in the country? Maybe some looking to exit the country at the moment, or are you purely focused on your existing assets?

For the moment, we're very focused on our existing assets, but you're right. I mean, there are difficult times in Egypt right now. I think, you know, just like I've seen before, you know, you've got to weather through them and be there for when things get better. And in my view, they will get better. So I'm not really concerned about that myself. And, you know, if you make it through, there will be opportunities to look at additional assets to add to the portfolio.

Thank you. Just want to make one quick point on Egypt. If you think about it in relation to other parts of the world, the Egyptian government wants us to be there, and there is a potential to improve our fiscal terms, which may be in sharp contrast to other parts of the world. Thanks, David.

Thanks. Chris Wheaton from Stiefel. Three questions, if I may. Firstly, with the right size G&A and the lower CapEx, what's the cash balance you need to run this business now? What's the minimum cash you need in the company? And therefore, what could you theoretically return to shareholders?

Well, what we can theoretically return right now is the extra $100 million. In terms of what we do next year, it will depend on collections. But right now, we're comfortable returning the $100 million. And as we move forward, we would look at what is the excess cash over our capital commitments. So I think it's to be determined at this stage. We're in the business of providing returns to shareholders, so ultimately we'll be trying to return as much as we can and as prudently as we can. But in terms of what the dollar number is, it sort of depends. When things are going really well in Egypt, you don't need to have much cash on your balance sheet. When things are ebbing and flowing the way they are right now, mostly ebbing, you've got to have a little bit more cash on your balance sheet.

Yeah, so that would suggest a number like 50 to 75 million or something at the moment, because obviously you've got the remainder of the debt to pay down as well.

That's correct. We have the debt to continue to pay, and we have commitments to pay the additional shell payments that are still due for another two years, exactly. So we've got to bear all those things in mind.

Okay, thank you. The second question was, following on from the previous one, if you're drilling 40 wells a year under a new reduced capex profile, what kind of growth can that actually deliver you? Is that sort of... $2,000 or $3,000, or you're just holding things flat?

Well, our internal view is that to hold things flat is probably more in the line of about three rigs per year. So this year was a little different, obviously, but we think long term, if we get to kind of three rigs operating at high efficiency, they can maintain production flat. We have to get cooperation from the geology and the reservoirs, but assuming history... Exactly. But we think it's in that range. So as we go over that, you should get some growth.

Okay, that's great. Thank you. And last question on... I guess, receivables and also production. If you wanted to play hardball here, you should just shut off the gas and ask Egypt to pay you when you'll turn it back on when you get paid. I'm not sure that's an option here, but I wonder if that is under consideration.

I think playing hardball is, if you're going to leave the country, you might want to try to play that hardball. But clearly, you know, in terms of investment, you can certainly slow down investment. You know, keep in mind that ultimately who controls the taps is the government. We're the non-operator to the operator who operates through a joint venture that's almost entirely government employees. So turning off the taps is not – it's theoretical, but it's not reality. You cannot turn those taps off because the government's getting half or more of the hydrocarbons that are coming out of the ground. So it's just not physically possible to do that. You can slow down investment, but you can't turn the taps off.

I apologize for arriving late. It is amazing how fast the plane works, to and from Canary Wharf already this morning. Mark Wilson-Jeffries, hi. What have you been most surprised about positively since taking over at Capricorn, Randy, given your obvious experience in Egypt?

Oh, positively, I would say it's the quality of the people in the business. I mean, the company hadn't been doing a very good job at running the business, but it was not because they weren't quality people. They were focused on the wrong things. I mean, from my perspective, they were focused on a small exploration portfolio and God knows what else, but the people that are there are very high quality. So I feel a lot of confidence in that. I didn't know the board before I joined other than through discussions before I joined and very top quality board with very motivated to bring shareholder value and no nonsense too. So far it's been a terrific landing for me.

And should we draw any comparisons to what you managed to do with your previous Egyptian company in terms of PSC renegotiations? Is that possible on any kind of short-term timeline or even medium-term?

Well, the short answer is yes. Every situation is different. So you have to get to the bottom of, you know, at the end of the day, it has to be a win-win for the government and the contractors, so ourselves and our partner, Chiron. So we have to develop a plan that we can deliver to them that says that there's something in it for them to change the contracts. Now, there's easy things that, you know, contracts are ending soon and you're not going to invest more, so they want to continue that investment and grow production. Egypt is short energy, and they need energy. In my experience and observation is that when these contracts get turned back to the government, the production only goes in one direction, which is down, because they don't have the money or really the resources. the people to continue to grow that production. It's mostly the money side of it. So with the international sort of setup, the international players will bring that to bear and grow. That's why they continue to look at these opportunities to improve the contract terms. I mean, you've got to bear in mind that a lot of these contracts, the models were developed decades ago. And so they weren't really set up for today's costs and for unconventionals and all those types of things that just weren't considered.

Great.

Well, thank you, everybody, for attending the half-year results, and we look forward to continuing our conversations in the future.