Action necessary is obvious really...each to their own however.

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lilac

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26/04/24

10:43

Post #: 73520077
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Originally posted by volf: ↑

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.

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We might not keep the bastards honest, but we can try and ruffle their feathers. The complacency of Ann Diament in her responses to shareholders astounds me, and has to reflect the attitude of at least some of the Board.

Originally posted by volf: ↑

Hi All,

1. Has anyone run an IRR model on the Who Dat acquisition?
- At their acquisition price of $720m, the IRR I get using the futures curve for WTI & Natural gas is close to a 0% IRR. I even allow for nearly all of the 2U being developed into 2P. Meaning at what they paid, it's all risk and no return.
- To get a 15% IRR on Who Dat, which is what you should be targeting for an asset like this, the acquisition price has to be circa $200m.
- So they effectively torched US $520m of shareholder funds.

2. They have a "50 for 10" strategy, meaning they want to grow to 50,000 BOE per day.
- This is ~50% more than they're producing and means they plan to make further acquisitions.
- In what world does Karoon board and mangement believe they have been given the mandate to do this?
- They just torched a few hundred million on Who Dat.
- Management appear to be empire builders and want to grow their pay packet at the cost of shareholders.

The Karoon share price will never rocket, because as soon as it gets on a run and becomes fairly priced, you can bet there's another cap raise at a discount to buy another overpriced asset to grow the remuneration package.

As a holder, I would like to see management removed and no further acquisitions or large capex projects and all free cash flow returned to shareholders.

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Action necessary is obvious really...each to their own however.

KAR Price at posting: $1.95 Sentiment: Hold Disclosure: Held
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Action necessary is obvious really...each to their own however.

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