Karoon Energy (ASX: KAR) share price sinks despite record profit

How did Karoon perform for FY21?

| More on:
Oil miner holding a laptop and mobile phone looks at his phone and sees the falling oil price and falling Woodside share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares in Karoon Energy Ltd (ASX: KAR) are heading south today. This comes after the energy company released its full-year results for the FY21 financial year.

The Karoon share price is trading at $1.37 apiece, down 6.69% at the time of writing, after sinking to an intraday low of $1.30 this morning.

Karoon share price falls on record result

Some of last week's gains in the Karoon share price have been erased today despite the company's robust result for the 12 months ending 30 June 2021. Here are the key highlights:

  • Oil production totalled 3.14 million barrels (MMbbl), since Karoon's acquisition of the Baúna oil field in Brazil on 7 November 2020
  • Sales revenue from the cargoes lifted came to US$170.8 million
  • Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) jumped to $9.8 million, compared to a loss of $85.4 million in FY20
  • Underlying net profit after tax (NPAT) surged to $33.4 million, against FY20's $65.2 million loss
  • No final dividend declared by the board.

What happened in FY21 for Karoon?

Karoon's new phase as an oil producer delivered a strong performance against a backdrop of the unprecedented COVID-19 pandemic.

The company sold 6 oil cargoes totalling 2.9 MMbbl from Baúna under its oil marketing agreement with Shell. The weighted average realised price of the contract came to US$59/bbl, net of selling expenses.

Crude oil sales revenue from the cargoes lifted stood at US$170.8 million, resulting in a gross profit of US$59.4 million.

The company said operating activities generated cash inflows of US$29.8 million, compared to cash outflows of US$67.1 million in the previous financial year.

Management noted that the results were supported by the macro-oil environment. Oil prices increased from US$45/bbl to more than US$70/bbl during the year. With no hedging in place over the year, Karoon benefited from the oil price strength, ending the year in a robust financial position.

The company had cash and cash equivalents of US$133.2 million for the end of June.

What did management say?

Karoon CEO and managing director Dr Julian Fowles touched on the milestone achievement, saying:

The 2021 financial year has been transformational for Karoon.

Following the acquisition of the Baúna oil field in Brazil in November 2020, the company has now entered a new era as a material oil producer and operator.

A strong emphasis on safety and reliability, coupled with operating and financial discipline, has enabled Karoon to safely deliver a strong underlying profit from our first eight months as an oil producer.

What's next for Karoon?

In FY22, Karoon expects Baúna production to be in the range of 4.2 MMbbl to 4.6 MMbbl. Unit production costs are forecasted at US$28 to US$32/bbl, with unit depreciation and amortisation of between US$12 and US$13/bbl.

With production costs largely fixed, the company expects unit production costs to increase, reflecting lower production rates in FY2022.

Unit depreciation and amortisation are expected to remain largely unchanged.

Dr Fowles discussed the outlook for FY22:

Our highest priority in FY2022 will be on continuing to deliver safe and reliable production from the Baúna concession while we focus on progressing the Baúna intervention and Patola projects, on time and on budget, and implementing the Strategic Refresh initiatives.

The company expects to fund investment expenditures from existing cash, cash flow and drawdowns from Karoon's US$160 million debt facility.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Fallers

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A worried man holds his head and look at his computer.
Share Fallers

Why 29Metals, Brainchip, Platinum, and Premier Investments shares are falling today

These ASX shares are having a tough time on hump day.

Read more »

Man with his head in his head because of falling share price.
Share Fallers

Why 29Metals, Atlas Arteria, IDP Education, and Mineral Resources shares are falling

These ASX shares are having a tough time on Tuesday. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why ALS, EOS, NRW, and Patriot Battery Metals are dropping today

These ASX shares are starting the week in the red.

Read more »

A man looking at his laptop and thinking.
Technology Shares

Why are these ASX tech shares getting smashed today?

Owners of these two stocks are missing out today.

Read more »

a man weraing a suit sits nervously at his laptop computer biting into his clenched hand with nerves, and perhaps fear.
Share Fallers

Why AGL, Brickworks, IGO, and New Hope shares are dropping today

These ASX shares are having a poor session. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Amcor, Arafura, Brainchip, and South32 shares are tumbling today

These ASX shares are having a tough time on hump day. But why?

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Aussie Broadband, Liontown, Metals Acquisition, and Seek shares are falling

These ASX shares are having a poor session. But why?

Read more »