Ann: First production achieved from Patola, page-5

Just had a quick stab at an Income statement for the 2nd half of the year using previous guidance of between 7.5m-9m barrels for the year. I think the 7.5m barrels will be revised upwards as we already produced 3.4m barrels in H1, and to get to 7.5m barrels that only needs daily average production of about 22-23k bopd, so I suspect we will likely end the year between 8-8.5m, but I used 7.5m and 9m as my base.

Even with the temporary export tax levy, I am working on 2nd half PAT (based on $80 / barrel average - I also left the loss from cashflow hedges in there which would be lower) of between US$121m to US$170m or annual EPS of between US35c and US40c based on H1 plus H2 assumptions.

So thinking about dividends here (and therefore different shareholder groups that may be interested in KAR going forwards), I thought about a A$0.05 dividend. Cost would be about A$28m, so not a huge cost, it would only be an annual payout of 10% or lower of EPS, but would sit us on a dividend yield of 2.3%, with growing production into 2024 (when production should be closer to 11m barrels (30k / day).

EPS of US35-44c or in real terms for us A$0.54 to A$0.68 with a SP of $2.10 and paying dividends at 5c (2.3%) but with expectation to grow that (we could easily IMO cover 30% payout rate next year and still finance the PB consideration and Neon work), it seems ludicrous that the SP will remain where it was.

I mentioned either earlier this year or late last that I suspected the market will wait until our final results are released before any re-rate and it appears that could be the case, but if we finish the year with an EPS of what I suggest above (and I can't see why we wouldn't, barring any complete collapse of the POO) then I can't see how a significant re-rate wouldn't occur in the 2nd half, especially if we started paying dividends and therefore start to attract dividend funds.

To put it into context, BPT produced 10m barrels in H1,and produced EPS of A$0.09 and paid a dividend of 1c. If we assume they double that for the year, then their full year EPS would be $0.18 (7.6 times earnings) and dividend of $0.02 (1.5% yield). our current SP stacks up pretty well at an expected P/E multiple of 4.8-6 and dividend yield at 2.3%. If we were priced at what BPT is with a 10% discount (accounting for Brazil), that would indicate a SP of between $2.40 and $3.00 with significant increases in production volumes, and hopefully removal of that 9.2% export tax that we are getting that should be temporary. Thats worth about A$0.04 and A$0.06 on an EPS basis alone.

Happy to add at these levels and I did earlier.