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

How did Karoon perform for FY21?

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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.

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