Capital Allocation & Who Dat Returns, page-4

This is my alternative strategy - return all free cashflow to shareholders unless extremely compelling returns are available from acquisitions or capex.

Based on my calculations, over the next 4 years there will be $1.82 / share of after tax cash available to distribute. Then there is a long tail of free cash flow that will come out of the two existing assets over the next 15 years, in total providing circa $5.00 / share.

The alternative is, Karoon management will spend the $1.82 / share produced over the next 4 years on assets worth $1.00 / share, diluting future returns significantly. The cycle will repeat and returns will be extremely low.

Unless Karoon can be buying assets that will be improving shareholder returns, they should be returning shareholder capital.

See Horizon Oil for an example of this played out and the success story it has been for shareholders.

Karoon management and the board will be against this, even if it means better shareholder returns, as it will mean their remuneration packages go down over time rather than go up.