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Highlights:
- Capricorn reaches $50m payment milestone: This is based on oil price thresholds from its 2020 deal with Woodside Energy.
- Shareholder returns planned: Capricorn plans to distribute proceeds to shareholders, pending tax obligations in Senegal.
- Ongoing tax concerns: Senegalese authorities have raised tax issues, but both Capricorn and Woodside are contesting the charges.
Capricorn Energy (LSE:CNE) has announced that it has reached a significant $50m payment milestone under its 2020 agreement with Woodside Energy, following production from the Sangomar oil field development offshore Senegal. The proceeds from this milestone are expected to be returned to shareholders, though the precise amount will depend on any tax obligations due in Senegal.
Key Details of the Deal and Milestone
In 2020, Capricorn Energy, a London-listed energy developer, sold its stake in the Sangomar oil field to Australia’s Woodside Energy. As part of the sale, Capricorn was entitled to contingent payments if certain oil price thresholds were met during the first six months of production. Specifically, Capricorn would receive $25m if the average Brent oil price exceeded $55 per barrel and $50m if it exceeded $60 per barrel. With production commencing on 10 June 2024, when Brent was trading around $80 per barrel, Capricorn met the higher payment threshold.
The production condition required 30 days of continuous output to trigger the contingent payment. On Friday, Capricorn confirmed that Woodside had verified that this condition had been fulfilled, ensuring the company will receive the $50m payment. The payment is expected to be made in early 2025, though Capricorn has noted that the exact amount available for distribution to shareholders will depend on any applicable tax charges in Senegal.
Potential Tax Issues in Senegal
While Capricorn remains committed to returning proceeds to shareholders, it has flagged potential concerns regarding tax obligations in Senegal. Earlier this year, Senegalese tax authorities raised issues that could lead to additional tax charges. Both Capricorn and Woodside are actively contesting these claims, though they could impact the amount ultimately available for shareholder distribution.
Outlook for Capricorn Energy
Capricorn’s commitment to returning value to its shareholders remains clear, despite these potential challenges. The contingent payment represents a positive milestone following the successful sale of its stake in the Sangomar project. However, the outcome of tax disputes in Senegal could play a significant role in determining how much of the $50m will be returned to shareholders.
As of 0845 BST on Friday, shares in Capricorn were trading up 2% at 212.9p.
