Karoon Energy Ltd (KAR) Earnings Call Transcript & Summary

Well, good morning, ladies and gentlemen, and welcome to the 2024 Annual General Meeting for Karoon Energy Limited. A sincere welcome to you all, and it's great to see such a large turn up of shareholders and guests within the room here in Melbourne. Firstly, my name is Peter Botten, and I am the Chair of Karoon Board of Directors. Firstly, I have a couple of housekeeping matters, as always. For those of you in the auditorium, please ensure your mobile devices are now set to silent mode. And in the unlikely event of an emergency, you should proceed down the stairs at the side of the room to the exit, and exit the building while at all times following the direction of the RACV staff. As you are aware, the meeting today will be held as a hybrid meeting. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can also watch a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. Online attendees can submit questions at any time. [Operator Instructions] Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting. Please also note that your questions may be moderated or if we receive multiple questions on one topic, they will be amalgamated. [Operator Instructions] Voting today will be conducted by way of a poll on all items of business. If you are eligible to vote, once voting opens, press the vote icon and all resolutions will be activated with voting options. To cast your vote, simply select one of the options. There is no need to hit the submit or enter button as the vote is automatically recorded. You will receive a vote confirmation notification on your screen. You can also change your vote up until the time I declare voting closed. To provide you with enough time to vote, I will shortly open voting for resolutions 1 to 9. I'm advised that a quorum of members is present. I, therefore, declare the meeting legally constituted and open. Before proceeding with formalities, I'd like to introduce participants joining the meeting today. Firstly, the independent nonexecutive directors of your company: Mr. Peter Turnbull is Chairman of the People and Culture Committee and a member of the Audit, Risk and Governance and Sustainability and operational risk committees; Mr. Clark Davey is Chairman of the Audit Risk and Governance Committee and member of the People and Culture Committee; Mr. Luciana Rachid is the Chair of the Sustainability and Operational Risk Committee; Mr. Tadeu Fraga is a member of the Sustainability and Operational Risk Committee; Ms. Joanne Palmer is a member of the Audit Risk and Governance Committee; and Ms. Melissa Holzberger is a member of the People and Culture Committee. The remaining member of the Board is Dr. Julian Fowles, who is Karoon's Chief Executive Officer and Managing Director. Also participating in the meeting today are Mr. Ray Church, the Chief Financial Officer; and Mr. Daniel Murnane, our General Counsel and Company Secretary. I'm chairing the meeting from the RACV Club, 501 Burg Street in Melbourne, Victoria. Senior Vice President of Communications and Investor Relations, Ms. Ann Diamant, will moderate questions submitted during the meeting. Mr. Julian Muzzin from our registry Computershare will also be supporting the meeting as Returning Officer. Mr. Graeme McKenna, who is in the front row of the auditorium here is representing our auditors, PwC. He is also obviously present today. Ladies and gentlemen, as the notice of meeting has been made available to all shareholders, I will take it as read. As we progress through the meeting, first, I will present my address, followed by a presentation by the Chief Executive Officer and Managing Director, Dr. Julian Fowles. We will then proceed to consideration of the formal resolutions as outlined in the notice of meeting. Now to my address. In July 2023, the Board decided to change Karoon's year-end from July 1 to June 30 to 1 January to 31 December last year. This was done to streamline the preparation of statutory annual financial statements and annual tax returns as well as align Karoon's financial year-end with other industry peers. As a result, Karoon reported a 6-month transitional financial year beginning on 1 July 2023, and ending on 31 December 2023, which we refer to as TY, transitional year '23. This 6 months period was transformational for Karoon. The highest production and sales volume for a half year in the company's history resulted in underlying net profit after tax of USD 144.7 million, a record 6 months for Karoon. A key achievement in TY '23 was also our entry into the U.S. Gulf of Mexico with the $720 million acquisition of interest in the producing Who Dat oil and gas fields, associated infrastructure, and adjacent exploration acreage. The acquisition was in line with Karoon's major strategic objective to diversify our asset base and reduce our dependence on one asset in one country by purchasing a value-accretive long-term production asset with development and exploration upside. We completed the transaction on the 21st of December 2023. This acquisition has fundamentally changed the risk profile and maturity of Karoon and builds a platform of sustainable returns that can now be appropriately shared with our shareholders. Maintaining safe and reliable operations remains our foremost priority. We believe all incidents are preventable and that this must be the first thing we consider across our businesses every day. It is pleasing to note the continued good safety performance across all our operations. This stems from an ongoing focus by our people, our contractors on processes and procedures that drive safety leadership from top to bottom in production, exploration and office environments. However, it is vital not to become complacent, and we continue to seek opportunities for continuous improvement. While Julian will go into Karoon's operational and financial performance in more detail, I want to acknowledge the short-term operational issues experienced in late '23 and early '24. This has led to 2 production guidance downgrades, which is especially disappointing. The issues at Baúna are largely related to the FPSO topsides. Julian and his team are working closely with the FPSO operator, Altera & Ocyan to improve the reliability and continually improve the safety performance of the facility. We are also in dialogue with LLOG, the operator of Who Dat and our joint venture partner, Westlawn about how to optimize both the near and long-term Who Dat production and the value associated with that production. We are working through these issues at both Baúna and Who Dat with the aim of improved performance in the second half of calendar '24. I'd like to stress that we remain very comfortable with the decision to invest in the Who Dat assets, and are confident that they will add material short-, medium- and long-term value to shareholders. We take on the challenge of demonstrating this value to you, our shareholders. While recent production has been lower than anticipated, Karoon is currently benefiting from the strength in crude oil prices, which are driving improved revenue. While off its peak of USD 96 a barrel reached in September '23, the Brent crude price is trading at approximately USD 82 a barrel. While the market crude for our U.S. oil sales, West Texas Intermediate or WTI is at USD 77 per barrel. However, oil prices remain volatile, reflecting ongoing tensions in the Middle East and a mixed outlook for the global economy and the pace of oil supply growth. The impact of higher oil prices is being partially offset by historically low U.S. gas prices. And while there are signs that inflationary cost pressures are easing, the cost of many services to the oil and gas industry remain elevated. All these factors show why it's crucial for Karoon to continue to maintain strong financial discipline. Since our 2021 strategy refresh, Karoon has been steadily delivering its stated objectives. Julian will talk more about this shortly. As a result, we have seen improvements in almost all the key metrics by which international oil and gas companies are judged. Over the past 3.5 years, 2P reserves have nearly doubled reflecting the successful delivery of the Baúna intervention program and Patola development as well as the Who Dat acquisition. 2C contingent resources are up some 3% despite the movement of nearly 15 million barrels into the 2P reserves, while our unrisked 2U prospective resource inventory is nearly 107 million barrels of oil equivalent. On a 12-month rolling average basis, EPS has grown eightfold since we acquired the Baúna asset in November 2020. And while the return on assets has moved from negative into positive territory over the same period. Since the acquisition of Baúna in late 2020, our share price generally has outperformed other oil and gas companies in Australia and the Brent oil price. While recent performance has been soft, we remain confident that this will improve once production has stabilized and various capital management initiatives are endorsed. We believe that our current strategy, which is focused on building a long-term, sustainable cost-effective production profile, will ultimately drive superior total shareholder returns in the form of share price appreciation and direct capital returns to shareholders. Following extensive engagement with our shareholders, we believe our strategy is strongly aligned with the interest of a majority of Karoon shareholders, particularly those who have a long-term perspective and an interest in Karoon remaining a competitive and stable participant in the international oil and gas sector. The Board favors a balanced approach to capital management, where predictable, sustainable dividends can be paid using a business model and set formula while continuing to build the company value through judicious development, exploration and disciplined acquisitions. We do not believe the liquidation of the company through the payment of unsustainably high dividends over a 3- to 4-year period is supported by a majority of shareholders. While acquisitions have been deprioritized until we have integrated the Who Dat assets fully and production from Baúna has been restored to its full potential, Karoon intends to continue to screen both internal and external potential growth opportunities in development, exploration and new ventures. The Board mandate for organic and inorganic growth alike is that any investment opportunity must be assessed using strict criteria that ensure that it is materially value-accretive. Acquisitions must compete on economic merit with other forms of capital returns to ensure we deliver the most value for shareholders. A key element in our long-term growth strategy is ensuring we have access to competitive long-term source of debt capital. Karoon recently accessed the bond market for the first time with an inaugural issue of USD 350 million. We consider this as a highly strategic step in the company's evolution. The timing of the issue was driven by the strategic imperative to broaden and deepen our sources of funds at an optimal time. This was dictated by our current strong credit rating and a desire not to be raising capital during the U.S. elections in the second half of the year, which is the next available window for this opportunity. The bond issue has enabled us to start developing long-term relationships with bond investors who will likely be a significant future source of non-equity funding given the ongoing decline of bank debt for upstream oil and gas developments. It was not a sum have suggested to fund an imminent acquisition, that will not happen. The bond will give Karoon greater flexibility to free up latent capital on the balance sheet, provide shareholder returns and pursue growth where it meets our investment criteria. As was announced in October '21 after our strategic refresh, and many times since, it's been long been our intention to consider capital returns to shareholders once we have achieved a stable and diversified production base. Following the successful Baúna interventions, Patola development and Who Dat acquisitions, we are now in this position. Our capital allocation framework is unchanged. Our priority is to support safe and reliable operations and maintain liquidity and balance sheet strength. Surplus cash will then be applied to value accretive organic and inorganic growth and capital returns to shareholders based on what generates the greatest shareholder value. The Board absolutely recognizes the importance shareholders place on capital returns, including dividends, in adding value to your shareholding. It also recognized the discipline of paying a reasonable, sustainable dividends brings to an appropriate capital management and investment strategy. As highlighted in my letter to shareholders last week, we are well advanced in developing a robust, sustainable shareholder returns policy. We have already completed work that will allow distribution of Brazilian profits to shareholders with minimal tax leakage. Scenario planning based on different production, reliability, oil price and cost outcomes is well underway. In addition, a detailed review of other factors such as available franking credits, our Petrobras contingent payments and restoration and provisions obligations are being considered. We intend to announce our framework for shareholder returns to the market in July 2024 with our quarterly result that will be announced in July. This framework will include what measures we intend to use going forward in determining capital returns and the options available, including dividends and other -- any other initiatives, including share buybacks that are appropriate. We intend to apply this capital management framework from the 2024 half year results onwards. Finally, turning to ESG matters. Firstly, on governance. We believe good corporate governance, which builds trust in the backbone of any well-functioning company and is fundamental to its long-term success. The purpose of Karoon's corporate governance framework shown on this slide, is to delegate tasks while maintaining accountability for outcomes. We believe this is the optimal approach to allow the Board to focus on higher-level strategic decision-making while empowering our management employees to take ownership and expedite projects by leveraging the diverse talents and capabilities of our staff. The Board is responsible for setting and monitoring the strategic direction of the company and setting the remuneration structure. The Board firmly believes that the approach Karoon took to remuneration incentives in transition year for the 6 months covering the period June to December 2023 was appropriate. The acquisition of a suitable value-accretive second-producing asset to diversify Karoon's operations from its single-asset 1 country exposure has been crucial to Karoon's long-term derisking objectives and strategy to create long-term value for shareholders. With this having been largely satisfied with the acquisition of Who Dat, the 2024 STI incentives that are applicable this year to management this year are fundamentally different from the transition year in '23, reflecting a significant change in emphasis for the company. Management in 2024 incentivizes through their STIs to focus primarily on the delivery of production targets, budgeted costs and CapEx, safety targets and various measures of operational excellence. More than 77% of their potential reward is attributed to these factors. The balance of 22.5% relates to superior project execution and capital management, culture development and only 5% is provided for screening and maturation of accretive growth opportunities, which must meet stringent investment criteria. I would note that the Karoon's approach to long-term incentives is similar to other peer companies and market norms. Since assuming the role of Chair in November '23, the composition and renewal of the Board has been a key focus area for me. The proposals being voted on today form part of a carefully considered program that takes into account the Board's current and emerging skills matrix requirements. Board renewal and turnover dynamics, diversity balance and committee leadership responsibilities. The appointment of Joanne and Melissa brings substantial audit, commercial, legal and governance experience to the Board, and will allow a smooth transition of Board committee responsibilities in the second half of 2024 and during 2025. As part of this renewal, Clark Davey has indicated that he will stand down from our Board and as Chair of our Audit Committee in October following completion of the 2024 half year accounts. Joanne will take his place as Chair of this committee. We also expect to appoint an additional director over this period with experience and knowledge of the U.S. oil and gas sector, which was a key reason for requesting a modest increase to our director fee pool this year. Karoon believes that a successful business should not only add value to shareholders, but also help improve the lives of people in our local communities. During TY '23, Karoon supported 22 social and community projects in Brazil. We will continue supporting these projects, which are having visible positive impacts on our local communities. As an oil and gas producer, we recognize the need to take responsibility for our greenhouse gas emissions. We achieved carbon neutrality on our Scope 1 and Scope 2 emissions from Baúna for FY '23, and we are on track to be carbon-neutral for TY '23. While the acquisition of Who Dat increases our absolute emissions, our ambitions for being Net Zero for Scope 1 and 2 emissions by 2035, remain unchanged. In conclusion, I'd like to take this opportunity to thank our shareholders for their support during TY '23 and since. Your Board has heard your sensitivities, and we are committed to drive and deliver value to you in the second half of the year. We'd also like to -- I would also like to commend the entire Karoon team for their hard work and commitment to Karoon during our transition year. In closing, I thank you for your time and attention so far, and I look forward to answering your questions shortly. I will now ask our CEO, Julian Fowles, to address the meeting and speak about the company's operational performance. Thank you.

Thanks very much, Chairman, and good morning to everyone joining us here in the auditorium and on the call today. As you've heard from Peter, TY '23 was a transformational period for Karoon as well as delivering record production and profitability. The key achievement in TY'23 was the acquisition of the Who Dat assets in the U.S. Gulf of Mexico. The USD 720 million purchase was funded by a combination of a new debt facility, cash and an equity raise. At the end of 2023, our gearing, which is defined as net debt over net debt plus equity, remained at a modest 10%. As you can see on Slide 19, with the acquisition of the Who Dat asset, we have delivered on almost all of the strategic goals that we set ourselves in October 2021 as part of the strategic refresh. We have delivered successive improvements in our safety performance, which is fundamental to Karoon, and we have embedded a strong safety culture throughout the organization. We approved, contracted and delivered the Baúna intervention program and the Patola development on time and under budget, resulting in a material increase in production and profitability as seen in our TY '23 results. The acquisition of the Who Dat assets has diversified our production base and reduced risk, while adding a substantial additional low-cost, long-term production stream with substantial infill and near field production exploration upside. Through emissions reductions and the acquisition of offsets, we have achieved our Scope 1 and 2 carbon neutrality ambitions. Following the equity raise and the debt facility refinancing in November 2023 and the recent bond issue we have a robust and flexible balance sheet that will provide us with long-term access to debt funding. The final objective in the 2021 strategy refresh was to commence capital returns. Now that we have a stable production and revenue stream from 2 assets, we are in a position to satisfy that objective. As Peter has already mentioned, we are making good progress with finalizing our capital returns policy which will be announced in July for implementation from the 2024 half year results. Over the last 3 years, you can see the transformation of Karoon reflected in our production and financial results in these 6 charts. Our investments in the Baúna intervention and Patola development has resulted in production increasing from around 2 million barrels of oil in the 6 months to June 2022 to just under 5.5 million barrels in the last 6-month period. As Karoon's cost base is largely fixed, Karoon's unit production cost has fallen from USD 26 per barrel to just over USD 11 per barrel in the 6 months ended December 2023. While not evident from these charts, the Who Dat acquisition is expected to result in another upward step change in production, revenues and in cash flows. Turning now to the March quarter trading update. In this quarter, both our assets were impacted by short-term operational issues. However, despite this, we maintained an excellent safety performance with no lost time or recordable incidents in either Brazil or the United States. And the operational issues we have been experiencing both at Baúna and Who Dat are being progressively addressed, and I'll talk more about these later. Our growth opportunities are progressing well with the Who Dat East and South exploration/appraisal wells. Both joint venture approved and the Who Dat East well currently drilling ahead. We've also moved into the next stage of the Neon development evaluation process. I'd now like to talk more about our producing assets. So the Baúna project slide summarizes Baúna production over the last 2 years. As you can see, production increased following the successful Baúna intervention program and the drilling and hookup of the Patola wells. However, the 6-week production outage in 2Q 2023 meant the benefit of these 2 projects was not reflected in production until the September quarter when production averaged more than 30,000 barrels of oil per day. Topsides problems on the FPSO and mechanical problems in well SPS-88 have since impacted Baúna production as we have flagged to the market. Issues at the gas dehydration unit, compressor reliability and natural decline saw Baúna production averaged 24,000 barrels of oil per day during the March 2024 quarter. We have had further issues caused by pinhole leaks in the production pipe work during April. These issues have been factored into the latest guidance provided to the market for CY '24. It is important to emphasize that recent production reflects topsides issues and does not reflect reservoir performance, which remains as predicted. We commenced our planned 3-week maintenance and integrity shutdown on the 20th of May Brazil time, and we're working closely with Altera & Ocyan, the FPSO owner and operator to address and improved facility reliability and efficiency. It's important to note that as a result of the ongoing maintenance issues at the Baúna FPSO and the 3-week shutdown, Baúna production in Q2 is forecast to be lower than in Q1, in the range of 1.2 million to 1.4 million barrels. Our Q2 results will be reported in July, but this range is already built into our Baúna production guidance for CY 2024, which remains unchanged at 7.5 million to 9 million barrels. Turning now to the U.S. Production from the Who Dat asset for the 2024 March quarter was below our expectations. Ongoing JV technical workshops have highlighted that production has been impacted by several operational factors including delays in bringing new wells on stream in the earlier part of the quarter and bottlenecks at the G manifold, one of 3 manifolds that sits on the sea floor is a part related to the handling of the high-pressure new zone encountered in the G2 well and to a higher water cut than anticipated in the recently sidetracked E2 well. In addition, for commercial reasons, the operator further curtailed high rate gas wells in response to a very weak gas price environment with the Henry Hub gas price sinking to a 25-year low in the March quarter although it has since recovered to above $2.50 per MMBtu. Together with joint venture partner, Westlawn, we are closely engaged with LLOG to identify and execute to the most efficient lifting and optimization of production to ensure we maximize near-term value from Who Dat. As we indicated at the time of the acquisition late last year, we're also working with the operator to bring forward the best in-field infill opportunities to ensure that we are able to sustain higher production through the medium term. Optimization efforts are ongoing and earlier this month demonstrated that gross production through the floating production and storage facility, the FPS, above 40,000 BOEs per day is achievable. While the short-term impacts to production have been disappointing, it is important to recognize that the largest part of the Who Dat CY '24 production downgrade, which was from 4 million to 4.5 million BOE to 3 million to 3.5 million BOE on a net revenue basis is related to gas production. And gas production represents just over 8% of Who Dat revenue at current spot prices. Who Dat is adding substantial low-cost higher-margin, long-term production to Karoon as well as nearby exploration and appraisal opportunities. In addition, Who Dat has brought major strategic benefits to Karoon such as a reduction in risk and approved access to less expensive and more flexible forms of financing. We believe that the value in Who Dat that we saw when we made the acquisition remains unchanged. Turning now to our organic growth program in the U.S. As shown in the map, there are several exploration appraisal opportunities in close proximity to the Who Dat FPS. We commenced drilling Who Dat East on the 27th of April. This well is located approximately 27 kilometers east of the FPS in a water depth of approximately 1,300 meters. It is appraising a gas condensate discovery made in 2001, testing a number of potential reservoir targets in the middle Miocene section. The well is expected to take approximately 55 to 60 days to drill and evaluate. The Who Dat East well is currently setting casing at around 4,500 meters measured depth and is expected to reach the first target in the next 2 weeks or so. Subject to the results, the well may be suspended as a potential future producer. We expect to commence drilling Who Dat South around the middle of the year, and we are currently going through the joint venture review process for drilling Who Dat West later in the year. The total resource volumes targeted by these 3 wells on a gross basis are in the order of 17 million BOEs of 2C and 143 million BOEs at the 2U level. The chances of success at 62% at Who Dat East, they are 52% in Who Dat South and 36% in Who Dat West. In a combined success case, these opportunities have the potential to more than double the discovered resource base in the vicinity of Who Dat. In the event of success at one or more of these prospects, further appraisal may be required. Field development plans would at that stage, then be created based on subsea tieback to the FPS most likely with the specifics of timing and cost dependent on exactly what it is encountered in the wells. Turning now to Neon. In March, the Board approved the Neon project to enter Concept Select following the identification of 2 viable development concepts. Further studies are underway to address the 2 major challenges for the project, which are, firstly, a subeconomic return in the low side resource volume case. And secondly, the negative impact of increasing market contractor rates and development costs. Resolving both of these key issues satisfactorily will be important to ensure the Neon project continues to progress. To address the first challenge, the team is working to assess all aspects of the development concept to better mitigate against low case reservoir outcomes. Furthermore, the team is working on ways to reduce development costs to mitigate the impact of CapEx inflation. The next major milestone for the Neon project will be in early calendar year 2025 when we will decide whether the project should progress into the next phase, the defined phase, as we call it. Moving now to the funding strategy. As Peter mentioned, we have successfully just accessed the US 144A bond market with our inaugural issue of USD 350 million. This will supplement our RBL debt facility, which was refinanced in November 2023 and supported by increased commitments from all of our lenders: Macquarie, Deutsche Bank, ING Bank and by Shell. Bond funds have now been received and were largely used to pay off the RBL facility with the remainder strengthening our balance sheet. The RBL is in the process of being expanded to incorporate the Who Dat assets, and that will increase the borrowing base to USD 340 million, although these funds remain undrawn. The bond gives Karoon greater flexibility to free up capital available from our balance sheet in order to pursue at the appropriate time, our growth strategy as well as shareholder returns, as Peter has emphasized. Equally importantly, this opens up a long-term strategic funding source, which is vital in the current environment of banks progressively reducing the funding available to upstream oil and gas. Moving to the summary slide. Karoon remains committed to safe and reliable operations as our first priority. We are in an enviable position as a mid-cap oil and gas producer with well over 35,000 BOE per day of net working interest production once Baúna production returns after the planned shutdown in two of the most prolific and prospective hydrocarbon basins in the world and with a demonstrated capacity to access funding despite significant headwinds related to the energy transition. Our company has a robust balance sheet with gearing at 10% as at 31 December 2023. We are primarily focused on delivering value from Baúna and from Who Dat and ensuring production is optimized and reliable in each project. As that production is delivered, the strong cash flows it will generate, along with the recent bond issue, should allow Karoon greater capacity to provide both capital returns to shareholders and to drive long-term value accretive growth. I would like to reiterate Peter's thanks to our Karoon team for the hard work that has gone in during the 2023 transitional year And also to thank you, our shareholders, for your continued support and your commitment to Karoon. Thank you, and I will now hand back to Peter.

Thanks, Julian. Ladies and gentlemen, we now move to the formal business of the meeting. As I mentioned earlier, voting is open on resolutions 1 to 9 inclusive. I remind you that you do have the ability to change your vote up until the time I declare voting closed. Proxies have been received from 1,034 shareholders, representing over 501 million ordinary votes being approximately 63% of Karoon's issued share capital. As we proceed through each resolution, the proxy votes for that resolution will be shown on your screen. I propose to vote all available open proxies able to be voted and given to the Chairman of the meeting in favor of resolutions 1 to 9. Results of the polls will be available after the close of the meeting and will be announced on the ASX and posted on the company's website. I appoint Mr. Julian Muzzin of Computershare Investor Services as poll scrutineer. The first resolution for voting is the election of Melissa Holzberger as a Director. In accordance with the ASX listing rules and the company's constitution, Ms. Melissa Holzberger is seeking election as a director at this meeting. Melissa's profile has been outlined to shareholders in the notice of meeting. She has over 20 years' experience in the International Energy and Resources sector. She brings a deep understanding of energy operations and projects having previously worked with BHP, including with BHP Petroleum assets. Rio Tinto as a trusted adviser to multinational Australian companies. Ms. Holzberger was first appointed to the Board as a director in April 2024. The Board strongly supports her election. And I now invite Ms. Holzberger to address the meeting.

Thank you, Chairman. Good morning, shareholders and colleagues, and thank you for the opportunity to present today about what I can bring to our company. It was 20 years ago that I moved to Melbourne to commence a role as a lawyer in BHP's in-house legal team. And I had the opportunity back then to work very closely with BHP Billiton then BHP Billiton Petroleum. So I'm delighted to be back here today with the opportunity to use my skills, knowledge and experience for the benefit of Karoon shareholders. It's a privilege to be considered for election to the Karoon Energy Board. And I'm mindful of the responsibility that it requires to help guide one of Australia's leading listed oil and gas companies. By background, I'm an energy, oil and gas and mining lawyer with more than 20 years' experience in both private legal practice and in-house with multinational and Australian energy and resources companies. With a particular legal focus on energy and resources projects, operations, risk management and ESG matters. For over 10 years, I've been an independent Nonexecutive Director on listed, government and not-for-profit Boards, and I'll share various audit governance, risk and sustainability Board committees. I'm currently a Director on two other Australian-listed companies, Argo Investments and Paladin Energy, the uranium company, and an intermodal terminal company, wholly owned by Aware Super and a member of the federal government's Australian Radiation and Nuclear Safety Agencies Advisory Board. I have a blend of skills and experience that complement those of my colleagues on the Board. I bring strong corporate governance, legal, risk, compliance, corporate ethics, sustainability and ESG skills and experience to Karoon. I consider it a great honor and a responsibility to be a director and steward of Karoon. If elected today, I'll work diligently for you, our shareholders to contribute to our company's success. I'm looking forward to continuing from today with your support, trust and confidence. Thank you.

Thank you, Melissa. Details of the proxies received for the resolution to elect Ms. Holzberger are up on the screen now. Of the proxies received, 93.94% are for the resolution and 5.32% against, with 0.74% other. I'll turn to Ann Diamant, who's moderator. Do we have any questions online relating to this resolution?

Yes, we do. Thanks, Peter. The first is from Mr. Stephen Mayne. The new directors Melissa and Joanne -- we'll focus on Melissa along with the Chair, comment on the recruitment process that led to their appointments to the Board? Was a headhunter involved? Did the full Board interview any other candidates? Did Melissa or Joanne know any of our directors before engaging with the recruitment process.

Well, I can talk to the recruitment process, and I'll leave Joanne and Melissa to answer the other parts of the question. It was a very comprehensive process of recruitment using a headhunting firm. The -- there were -- I forget. Probably 40-plus people that were approached around this. It was a highly competitive exercise and one that really sought out the talent set that were necessary for the Board skills and the succession process that this Board is now undertaking with a number of the long-standing directors progressively standing down and being replaced by appropriate skills. And Joanne and Melissa represent the new skills coming on board, both in terms of audit skills, legal skills and governance. It was a very comprehensive process. I don't know whether you've got a microphone up at your end of town, Melissa?

Can you hear me? Yes, good. Thank you. That's my understanding of what occurred Peter behind the scenes on the Karoon end. But certainly, I can confirm earlier in the year, I was approached by a Board recruitment company about this opportunity. It was very appealing to me primarily because it was an oil and gas company. And given my background and my experience, I felt like I could add a huge amount of value to an oil company. I was very excited about that opportunity. I did my own due diligence over a period. And no, I didn't know any of the Board members or executives or indeed anyone that I could see through my due diligence at Karoon, which was a surprise to me because I had worked here in BHP in Melbourne with BHP and worked on with drilling companies and oil and gas service companies as a lawyer providing advice. So I'm surprised I didn't know anyone on the Board or in the executive or in the team. So the only person I do now know on the Board, my colleague, Joanne Palmer, and that's because we're on the Paladin Energy Board together. We joined that a bit over 2 years ago. But before Paladin Energy, I didn't know Jo, and I didn't actually know she was joining the Karoon Board until a week before we joined. The recruiter seemed to be running the recruitment process in parallel. So we didn't know till then. But I'll hand over to Jo, who may want to add anything further.

Thanks, Melissa. Good morning, shareholders. I'm Jo Palmer here. The comments made by both Peter and by Melissa, I echo. It was a truly independent process. It was an independent headhunting firm. I think it was late last year. There was a discussion on no names places in respect of Karoon and then subsequently, that then sort of more formally commenced during this year. Your description was spot on equally, I wasn't aware, I think until 5 to 7 days before we were appointed that Melissa is in the [indiscernible], it's obviously a confidential process. We undertake our own -- I certainly undertook my own due diligence over an extended period. And I'm excited to be here, and I'll give you a sort of further summary about myself and shortly. So is there any further comments or questions?

Yes. Just another question from Mr. Stephen Mayne. Does any of the 5 main proxy advisers [indiscernible] Ownership Matters, Glass Lewis, ISS and ASA recommend a vote against any of today's resolutions, including Melissa's election? If so, what reasons did they give, and would you disclose the proxy votes before the debate on each resolution, so shareholders can ask questions about the reasons. And why not disclose the proxies to the ASX along with the formal address like many other companies do?

Look, I can confirm that all proxy advisers covering Karoon recommended in favor of all resolutions, including the resolutions for the appointment of directors but I confirm proxy advisers voted in or recommended voting in favor of all resolutions.

There are no further questions online.

Are there any questions from the floor? Yes, [ Gabriel ].

[indiscernible] just a quick question to Melissa and Joanne, as part of the process, were you asked [indiscernible] support strategy [indiscernible].

I'm happy to go first. We bring our own skill sets to the table. And until you are -- I mean we met management and the organization was the first time face-to-face this I -- certainly, from my perspective, a very data point driven individual. Facts don't cease to exist because they're ignored. So once in the door, certainly, the approach I take to any consideration -- individual considerations of where an organization or a business such as Karoon company goes, is sole in mind based on my evidence based due diligence and thereafter post appointment. So I think during the due diligence process individually for me, there's certainly an understanding of where the company is heading, but it's now being in front of you as an appointed director where we are working through mature work streams. And obviously, I'm working with management and overseeing or indeed working with them and understanding those key data points. It's part of real-time discussion.

Thank you for that question. I had a number of interviews, the interview process was quite long and so excited with Board recruitment company and then interviews with the directors. I don't recall being asked about my views on the strategy in the interview process. But similar to Joanne, when I started doing my deep due diligence after signing a confidentiality agreement, obviously, I could see historic Board papers. But I pride myself on making decisions in the Board room, and I'm looking forward and they'll be made with the interest of the -- best interest of the shareholders. As each decision comes up to the Board and making decisions in a very timely manner. And part of that, as you know, the Board's role is setting the strategy and that oversight of the strategy, and I'll be exercising my directors' duties really diligently in that era. I can assure shareholders. Thank you.

Can I step forward, Mr. Chairman?

Yes, you can.

Could you perhaps both just -- could you perhaps both just explain to shareholders your concept of shareholder value because it's quite topical in terms of what was presented today.

Thank you for that. I think today in the presentations from -- I have an individual view about shareholder value. But -- well, but we are -- Karoon as a Board. And we -- whilst in the boardroom, we have debate topics, constructively challenge management. The Board as a collective speaks with 1 voice. So certainly, today, our presentation by Peter Botten and our Managing Director, I'm certainly aligned with the Board on where Karoon is heading for the benefit for all shareholders.

If I can concur with that, I don't think I can add much more.

[indiscernible] different things to different people.

Maximizing value is both an assessment of capital returns plus growth opportunities. And I think that's been set out quite clearly in the slides. And indeed, I'm happy to take personal discussions thereafter. I think for the purposes of this meeting, the slides have been quite clear. And both Peter and Julian have set out our views on maximizing shareholder value.

Any more questions from the floor?

Charlie Kingston from K Capital. Just a question for you, Melissa. It looks like you got a great CV, Argo and Silex, and Paladin, some companies that have done very well, but 1 that wasn't included was Andromeda, which is a mining exploration company that you're on the border for about 3 years and roughly the share price has sort of imploded down by about 90% throughout that experience. And I'm a big believer in learning. We can certainly learn the most from our failures and what goes wrong. So it'd just be great to hear your thoughts as to what went wrong in that experience. And it's an exploration company, Karoon is talking about doing a lot more exploration going forward. So just be great to hear your thoughts as to why that went so badly wrong and what experience you can bring to the Board to make sure that doesn't occur again. Thank you.

Thank you. I think you're referring to Andromeda Metals. There have a world-class scale and deposit in South Australia on the Eyre Peninsula. And at the moment, there is that they are exploration company, their preproduction, they've got all their approvals. And I think they're obviously departed the Board now. So I can't speak on behalf of the Board, but they're looking at arranging their funding and they're pretty much shovel-ready. So a great team there. I'm really proud of what the team achieved when I was there. And I think I should maybe focus on Karoon today. But of course, directors learn lessons and any director that doesn't have a continuous learning view on things. I'd be very aware he's sitting on a Board with a person like that. So you've highlighted Andromeda, but I would like to also direct shareholders that I have had a number of companies I've been involved in that have certainly added a lot of shareholder value, Paladin and Energy. The team there have achieved very impressive results and also Silex systems. So I've been on a number of Boards, and I can go through all of them, but in the interest of time, happy to have a chat with you and the other shareholders straight after or really open to meeting with shareholders throughout the year at a time convenient. So thank you for your question.

Any further questions from the floor? No. Well, thank you for those questions. I -- the resolution on the screen is now put to the meeting. And you can vote accordingly. The second resolution for voting is the election of Ms. Joanne Palmer as a Director. In accordance with the ASX listing rules and the company's constitution, Ms. Joanne Palmer is seeking election as a director at this meeting. Joanne's profile has been outlined to shareholders in the notice of meeting. She has over 27 years of professional experience providing audit and assurance services with 19 years working at EY in various positions. And ultimately holding the position of equity partner before becoming an Executive Director at Pitcher Partners. Ms. Palmer was first appointed to the Board as a Director in April 2024. The Board strongly supports her election, and I now invite Ms. Palmer to address the meeting.

Thanks for the introduction, Peter, and thank you to the Board for their confidence in appointing me on the 19th of April as a Director of Karoon Energy. I'm honored to stand here before you today and offer myself for election. I'd like to express my appreciation for the opportunity to serve on the Board of Karoon Energy. I've spent the majority of my career working in the field of audit and assurance services and technical accounting, and I'm keen to bring that expertise to Karoon. My experience in auditing international resources companies has provided me with a global perspective and an understanding of the complexities of our industry, and I believe I'll be a valuable addition to this Board. Over the last 27 years, I've had the privilege of working on a wide range of financial matters, including company listings, mergers, acquisitions, takeovers within the resources sector. I'd be fortunate to work with respect to organizations such as EY in both London and Perth. We have gained exposure to diverse markets and industries. Currently, I serve as a director for listed entities Paladin Energy, as mentioned by Melissa and St. Barbara, both operating in the resources sector. I believe that my diverse background in financial services, along with my experience in assurance, risk, capital markets and business development will complement the existing skills and expertise on the Karoon Board. I'm committed to contributing effectively, collaborating with my fellow directors and representing the best interest of you, the shareholders. I understand the importance of the stewardship of the role, and I'm fully committed to upholding the principles of good governance, transparency and accountability. If elected, I will work diligently to ensure that Karoon Energy continues to thrive and deliver value to shareholders. In conclusion, I want to assure you that I have the time and dedication necessary to fulfill my responsibilities as a Director of Karoon Energy effectively. I'm excited about the opportunity to work with this talented team and contribute to the future success of our company. Thank you.

Thank you, Joanne. Details of the proxies received for the resolution to elect Ms. Joanne Palmer are up on the screen now. Of the proxies, 93.56% are For the resolution and 5.68% Against with 0.76% designated as Others. Moderator, do we have any questions online relating to this resolution?

No, there are no questions online.

Thanks. Do we have any questions from the floor on this resolution? It doesn't appear to be. So as there are no questions, I'll now put the resolution on the screen and that resolution is now put to the meeting, and please vote at your leisure. The next resolution for voting is the reelection of Mr. Peter Turnbull, as a Director. In accordance with the ASX listing rules and the company's constitution, Mr. Peter Turnbull is seeking reelection as a director at this meeting. Peter's profile has been outlined to shareholders in the notice of meeting. He has over 30 years experience in very large publicly-listed organizations with global operations, particularly in Southeast Asia, Europe and the U.S. This experience included over a decade in energy markets and the resources sector. Mr. Turnbull was first appointed to the Board as a director in 2014. Mr. Turnbull is the Chair of the People and Culture Committee and a member of the audit, risk and governance and sustainability and operational risk committees. The Board strongly supports his reelection. And I now invite Mr. Turnbull to address the meeting.

Good morning, everyone. Thank you very much for the opportunity to all those here and those online to allow me a few minutes to talk about my involvement in Karoon, what I've been involved in historically and what I see ahead. Throughout my nonexecutive career, I have always well understood that the shareholders are the company owners. I work for you and the Board in each case are the appointed stewards of your investment. Shareholders invest on a risk-reward basis, and it's the Board's job to build enterprise value over the short and longer term in a risk-managed way for shareholders. That is our goal and very much the prism through which we make our decisions at Karoon Energy. Looking a little bit historically in terms of what I've aimed to bring to the Board of Karoon, as you may have seen from previous shareholder reports, I bring quite wide nonexecutive director skills as well as quite specific skills in the areas of corporate and commercial law, governance structure and practice, including ESG matters, internal culture development, risk management, technology identification, integration and commercialization, energy transition skills and major multi-country project development experience. In terms of my tenure at Karoon, I've been with Karoon for just under 10 years at this point. If reelected on this occasion, this will be my last term at Karoon. The succession plan for the Board overseen by Peter Botten is unfolding right now as intended, ensuring that the full range of needed skills are there in the future in a continuous and uninterrupted manner. At this stage, the Board's view is that for me to serve all or part of a further term to assist with current priorities and to help cement the recent Board appointments and associated succession will be valuable and will help ensure a smooth transition. I want to assure you that I have the time, commitment and energy to continue for a period should the shareholders decide to reelect me. Looking a little bit historically as part of the Karoon team, I've been involved in many transformative decision-making processes, which have underpinned Karoon's growth from a smaller explorer to a sizable upstream production company today. Some of these issues have included helping to achieve Karoon's growth milestones, the renewal and expansion of the management team, evolution of the remuneration structure to keep up with the nature of larger and more complex entity, succession of the chair role on multiple occasions, noting that I also took on the role of interim chair for a period prior to the appointment of Bruce Phillips. Oversight of staff development and retention strategies, 2 complex acquisition transactions. I've also been involved in the growth of Karoon's governance and risk management structures as well as Board succession and the assessment and selection of new NED candidates. Looking ahead, in terms of if I was to be reelected, what would I be focused on and where could I add some value? The pathway ahead created by Karoon strategies are a journey, and as such, there is always more to do. At this stage, I and the Board believe I have more to offer Karoon. I want to assure you that my focus and commitment towards assisting that with Karoon's journey remains as firm and focused as it always has been. I have a deep understanding of Karoon's people, structure and goals. In terms of my own focus looking forward, if reelected, the following matters are a snapshot of areas where I believe I can add some value. That's across culture, using my knowledge to assist with the cultural evolution of the company across 3 countries. As with all organizations, our internal working culture is absolutely vital. Staff retention, I think I can help management to achieve the best possible staff retention outcomes in what is a very competitive oil and gas sector in which we operate, and that includes mapping out career development pathways for our team across the 3 countries. In terms of remuneration, I think I can help to create future focused remuneration settings, which balance and align shareholder returns with management remuneration outcomes. And also in relation to risk management, I think I can help to ensure the best possible risk management is applied across the organization, which now encompasses 3 geographies, 3 time zones and 3 different cultures. If elected, I will work closely and collaboratively with the Board and management team on behalf of the shareholders to grow the enterprise value of Karoon and to ensure shareholder returns are a priority. So thank you very much for the opportunity.

Thank you, Peter. Details of the proxies received for the resolution to reelect Mr. Peter Turnbull are up on the screen. Of the proxies received, 70.81% are For the resolution and 28.62% Against with 0.57% designated as Others. Moderator, do we have any questions online relating to this resolution?

Yes, Peter, we have one from Mr. [ Ed Swan ]. Peter, you indicated some of your skills. Can you outline your corporate finance skills? The Board has indicated the return targets for acquisitions, what is your assessment of the current cost of equity and work for Karoon?

Thank you for the question. My financial skills, I guess relate right back to an economics degree, majoring in finance from the University of Melbourne. I have dealt with financial issues across many companies in an executive and nonexecutive role. We are very focused on anything we do at Karoon being value accretive. I think you touched earlier, Peter, on the sort of level we're looking for in the mid-teens in terms of our outcomes.

Yes.

So look, I think all I can say is that there is an academic background in finance there. There is a lot of learned experience across listed and unlisted and even early companies -- early-stage companies that I'm also involved with. So I am financially literate when it comes to listed companies and very involved in helping to set the targets and the parameters on which Karoon operates for major decision-making.

Thanks. Any more questions online?

No further questions online.

And questions from the floor.

Charlie Kingston, again. Just a question for Peter. You joined the Board in 2014 when the share price was roughly $3, today it's trading at roughly $1.80. So over your oversight on the Board. You've delivered a loss to shareholders of roughly 40%. You mentioned you're heavily focused on increasing the enterprise value. I'm not really sure that that's of any benefit to shareholders given all that really matters is the share price and dividends, of which we have received 0 dividends. So clearly, that capital loss is quite a nasty result in your time on the Board. So just be great, given there's been a lot of talk today about long-term thinking. I think 10 years is a very long time, but just appreciate your thoughts as to why you think Karoon has not delivered shareholder value, it's delivered a shareholder loss over your 10-year period?

Well, okay. Thank you for the question. I mean, a lot's happened in that period. Our first major acquisition was the Baúna one. There were all sorts of issues around getting to a final binding sale and purchase agreement on that one. Prior to that, we were -- we had a capital sum that we came from the sale of the Browse Basin and that money was effectively running down over time. So the market sets the price along the way. But a lot's happened in that period. And until we got to the acquisition of Baúna, I think we were just regard it as a pre-revenue company running down a capital sum of money. So it's very hard to comment on what went on which year during that period. I mean, I understand the point you're making. But I think we've got a very sound base now with 2 very substantial production assets and a platform and a future we can build on.

And then just a follow-up. Your personal shareholding and please correct if I'm wrong, but it's roughly 170,000 shares that the Board recently asked for shareholders to participate in the rights issue roughly 1 to 4. I think you took up 10,000 shares, if that's correct, but that's far lower than what you would have been entitled to take up in your full entitlement. Just appreciate any thoughts there. Did you not think it was good value at [ 2005 ]. Why such a limited take-up please?

The thoughts there are quite simple. That's what I could do at the time.

As a comment that -- it does seem like there is a bit of a lack of alignment over 10 years, but I'll leave that as a comment.

Other questions from the floor?

Henry Stephens from the Australian Shareholders' Association. I'm quite surprised by the 28% that's voted again to Peter. Can you cast any light on why that is the case. Is there something we don't know. What's the reason?

Look, I love looking into shareholders' minds, and I've done quite a bit of that over the last 4 weeks, in fact, over the last few months. And all I can say is there is always a spectrum of, shall we say, thought processes that drives the way people feel. At the moment, it's a very interesting dynamic in Karoon. I mean, I think it's anybody who knows the oil and gas business knows that this is a cyclical business. The strength that Karoon has right now is so different to what Karoon had back in 2014 and share price, obviously, and value of the company reflects it. I don't know what the market cap in 2014 was better, but it would have been a tiny amount. So look, I can't comment really as to why Peter's -- why that vote is the way it is with Peter. Peter has been a tremendous contributor to the Board since I've been on the Board. And I must say there are -- everybody has their own views, and I wouldn't want to necessarily delve into that and speculate. I should say, as I say, Peter has been a tremendous contributor and a real person that's focused on shareholder value and shareholder contribution. So he has stewarded a range of committee responsibilities over the years, and he is crucial in our own succession planning to ensure that the responsibilities he presently has on committees are progressively passed across as part of our succession plan for the Board. The Board has got some longstanding directors sitting on it. And as I say, a focus for me, when I became Chair in November last year, is to ensure an orderly succession with new skills and talent that can take this company and follow this company and lead this company to its next phase. Gabriel?

Thank you, Chairman. If I could just maybe respond to your question just before, there was actually a pretty simple straightforward answer as to why there was that vote. A couple of shareholders ourselves and [ Fred Willard ] from Samuel Terry actively campaigned against Mr. Turnbull's reelection. So that's where that vote comes from. I would have thought that would have been a pretty straightforward response to give him. Just a quick question for you, Mr. Turnbull. Do I understand correctly that you'll be serving a full term? So we've got the pleasure of your company for another 3 years.

I'm in the hands of the Board on that. It depends how the transition goes a little bit. So I'm open to what the Board...

Up to 3 years.

No more than 3 years, and it depends a little bit how the transition unfolds and but I'm completely -- and I've said to the Board prior to today, I'm in your hands, as I've always said on all my Boards. No one's around forever, but if the Board's judgment is I can offer some value during that term, I'll stay. If not, I'll go. But it will be a maximum 3 years. It's depends.

Mr. [indiscernible] 14 years.

Okay. Any more questions from the floor?

Yes, just quickly. The presentation from Samuel Terry and [ Sanderling ] is pretty public. The articles in the AFI have been numerous. Why didn't you mention that? It seems an obvious thing to mention. You failed to mention at that note.

Excuse me. I was asked what the rationale was. And I could quite easily have said, yes. There are 20-odd percent of people voting against. But the rationale is not necessarily particularly clear. And I would not want to speak for the rationale that Sam and Gabriel necessarily -- that's their decision, right? I mean, we're -- they're owners of the company. The -- you are all shareholders, you're owners, you can have a reason. I was asked what their rationale was and it's for them to talk to their rationale, not necessarily me, albeit that it's clear that various parts of this of the resolutions are clearly imposed by Sam and Sanderling undoubtedly have got some support from other shareholders. Yes, Gabriel.

Sorry, I take that -- We wrote you on 1st of May. We wrote you on the 1st of May, giving pretty detailed reasons as to our voting on each resolution, including Mr. Turnbull. So it wasn't a petulant fit of anger that...

No, no, not at all.

We actually gave you the reason.

Yes, I agree. But it's not up to me and necessarily. You're in the room.

I know, but I'm saying the person asked the question.

Well, I was asked why and -- and it's not just you voting against either. So look, I take it on Board and -- but in reality, as I say, why you vote For or Against is your business. Okay. Well, let me move on. Let me therefore put the resolution to the meeting. And you can vote accordingly. The next resolution for voting is the reelection of Tadeu da Costa Fraga, as a director. In accordance with the ASX listing rules and the company's constitution, Mr. Tadeu da Costa Fraga is seeking reelection as a director at this meeting. Mr. Fraga's profile has been outlined to shareholders in the notice of meeting. He has over 40 years of experience in the oil and gas sector, including 23 years as an executive at Petrobras. Mr. Fraga was appointed to the Board as a director in August '22. Mr. Fraga is a member of the Sustainability and Operational Risk Committee, and the Board strongly supports his reelection. And I now invite Tadeu to address the meeting.

Thank you, Peter. Good morning, everyone, especially the dear shareholders. Thank you for the opportunity of being here presenting my candidacy for reelection. As said, I have built my career in the oil and gas business during the last 43 years from [indiscernible] engineer to Board member, engaged in several offshore [ project ] production and operations in Brazil and U.S. Gulf of Mexico from shallow water to deep water, including the recent pre-salt in Brazil. I have 30 years of experience in C level and senior leadership positions, 15 years of experience as a member of Board of Directors, Board committees and Advisory Boards in Brazil and abroad. I have to say that thanks to your support, it has been a privilege for me to serve Karoon as an independent Board member since 2022. This company has evolved a lot in a very short period of time, which, of course, started before my engagement. Since Karoon assumed the operatorship of the Baúna field in November 2020, it's very first offshore production endeavor up to now, the company has managed to double its net production output, double its 2P reserves and cut by half their production costs. In Brazil, where I live, a place that's recognized as one of the most active oil and gas offshore arenas. And where we have 53 different companies operating 280 oil and gas production license. Karoon is currently ranked #8 by operating volume. Head-to-head with Shell, which has been in the country for more than 4 decades. I want to share with you that the Brazil oil and gas community acknowledges that as a remarkable achievement for a junior oil and gas producing company, still at the early stage of a very successful journey. The credits for this achievement are to the ones that have been serving Karoon, some of them not more with the company, and to the shareholders that have supported that. The big picture is that oil and gas business, we will still be very important for decades in the context of the changing global inners landscape. In light of the growing demand, we have challenges and opportunities ahead of us given that we are able to supply affordable, efficient and reliable energy, but we will need to do that with less emissions. Therefore, we must be able to capture the opportunities ahead, conscious of the need of moving further in our emissions-reducing strategy, but in a realistic and pragmatic manner. I would be very honored to keep on serving in this Board. I have time and energy to dedicate to this company. I have a strong background in technical, economical and strategic drivers of this business, having been exposed to the opportunities and challenges in different geographies. I'm fully conscious of my duties and responsibility as an independent Board member, and I have a lengthy experience in corporate governance and sustainability. I remain committed to providing positive contributions to Karoon's strategy evolution and management always taking in consideration some principles, safe, reliable and technical solid operations, proper corporate governance, careful capital allocation, health balance sheets, consecutive and cooperative relationships with stakeholders, all based on the foundation that is people -- best people motivated by an innovative challenging and rewardable environment. That's the core of any successful journey. Last but not least, let me finish by saying that I remain totally focused on creating value in a sustainable manner for you shareholders, the owners of this company. Thank you.

Thank you, Tadeu, for your address. Are there any questions on the realm of the...

Yes, there's a question from Peter and Helen Fitzgerald and Albert Alu directed towards Tadeu. You're an experienced oil and gas executive, please define what value accretion means? Specifically, what is your assessment on Who Dat value accretion for shareholders.

Thanks for the question. A very accretive transaction has to be one that generates value to time. I appreciate the concerns that you all have about the recent events in Who Dat. What we have there, according to my knowledge, our first very nice resources -- natural resources. That's the first only step to assess any transaction. And what we are facing? We are facing technical issues that might happen in offshore operational environment and not solvable. So I believe that transaction is very value accretive.

The second question for Tadeu. Samuel Terry and Sanderling Capital have voted in favor of your reelection. Is your view on capital management aligned with these 2 shareholders?

My view on capital management is aligned with the company proposition that has to balance return to shareholders to other capital allocation. As said, clearly, by Peter, we are getting a point in time that I believe some of the shareholder expectation will be fulfilled.

There are no further questions online.

Thank you. Questions from the floor.

Charlie Kingston. Just a question for Mr. Fraga. You recently bought roughly 21,000 shares in the company. Just looking through the annual report, there's a lot of related party payments, sort of well over USD 100,000 I think your Board fees is roughly a similar amount, but it does again seem like there's limited alignment. You've spoken a lot about shareholder value and why you think this is a great company, et cetera. But can you just talk to why you've been on the Board for almost 2 years now. It's taken you so long to one buy shares? And why is that your shareholding so much below the actual amount that you're extracting from the company? No doubt, you are working for it and it's all legitimate, but it does seem very out of whack in terms of the alignment. Thank you.

No, it's a good question. I have to tell you to buy shares from Brazil is a nightmare. It's just a nightmare. I spent 6 months trying to do this transaction but I don't know why. I can tell you a little more. But the main reason is the bureaucracy around that. It's a nightmare.

Okay. That didn't really answer the question of your case and...

Sorry for being...

Okay. But do you intend on increasing your position relative to the amount of money that you're extracting from the company and related party transactions on you or your salary? Do you think that should be more in balance going forward. I believe in the value that you could create?

Sorry, actually, first of all, I have to follow the policy. I'm obliged to do that, and I'm pleased to do that. Second, I would [indiscernible] to my availability. But I do believe that the company will generate all of that in the future, that's my belief of if not, I would not be here.

Any more questions on the floor? No? Okay. Well, the details of proxies received for the resolution to reelect Tadeu da Costa Fraga are up on the screen. Of the proxies received, 95.34% are For the resolution and 4.06% Against with 0.6% in the Other category. So I will now put that resolution. And you can vote at your leisure. The next resolution is consideration of the financial statements and reports and the company's financial statements for the transitional financial year ended 31 December 2023, including the directors' reports and the report by the auditor were provided to shareholders in the [ FY '23 ] annual report. Shareholders are now provided the opportunity to ask questions regarding the financial statements and reports or questions to the auditor in respect to the audit report Mr. Graeme McKenna representing the company's external auditor PricewaterhouseCoopers is available today to respond to any questions in relation to the conduct of the audit, the preparation and content of the auditor's report. The accounting policies adopted by the company in relation to the preparation of the financial statements and the independence of the auditor in relation to the audit. And do we have any questions from -- relating to this resolution online?

There are no questions online.

Are there any questions from the floor? Yes, Fred.

I'd like to ask about the recent bond issue. Do the terms of the new bonds contain any restrictions on the company's ability to pay distributions to shareholders?

I can call upon Ray Church, our CFO, to answer that question. The ability to pay dividends is far less restrictive under the bond issue than the RBL. But I'll open to Ray to answer that.

Thanks, Peter. You hear me. The bond is built around all elements of the strategy. So it caters for our investments in case to return the capital. There are restrictions as they would be on any debt facility, but it's based on a going concern, and it's very typical of any, I guess, US 144A bond. I pointed out that it covers -- it more than adequately covers all the scenarios that the Board have been discussing around returns of capital. So I don't think there is any constraints that the bond necessarily places on that.

Yes, of course.

You mentioned the RBL [indiscernible] some restrictions. Could you tell us what those are?

Ray, you can answer that.

Sure. The RBL similarly has adequate headroom in it. It has some constraints around how we allocate capital requiring some permission. But it doesn't -- it's built also around the same parameters of strategy deployment and returns of capital. So it also has adequate headroom for everything being considered by the Board. I think what Peter is talking about is that generally covenants on the bond are, in general, not just on returns of capital are much, much more generous than the RBL.

Sorry, just want to know...

Without knowing what the parameters of the Board is considering your response is somewhat meaningless to us because we don't -- we can't quantify what it means without knowing what the Board's given. I would have thought it would have been a nice sort of book end to have borrowed the money and also at the same time, we announcing to shareholders what the capital management strategy was. So that we could see that they were consistent. And understand what they were.

Well, I think I'm going to pass back to Peter to make comments on what's being considered by the Board. But I would point out strongly that a bond and any debt facility is aimed at a going concern. So liquidating a company is not what a bond or any debt facility would contemplate.

Perplex that the word liquidation has been used a couple of times I certainly don't believe we've suggested liquidating the company. Just...

Any further questions? Yes, please?

I've just got a question on -- when you look at your drilling program, where do you see the most upside? And what is Neon going to cost? And what are the key issues that have to be evaluated in order to make a decision on the Neon project?

I'll turn it to Julian.

Yes. Thanks for the question. Good opportunity to clarify some of this. The opportunities that we've got at Who Dat, there's 3 drilling opportunities there, one of them ongoing. The -- as is normal, we have risks that I've spoken about, chances of success in those 3 areas are round about 60% for Who Dat East, 50% in Who Dat South and about 35% in Who Dat West. And the overall volumes we're targeting there are a little under 20 million barrels of contingent resource and a little under 150 million BOEs of prospective resource both at the 2C and the 2U level. All of those prospects would be highly value accretive should they come in. In terms of Neon, there's a few million dollars of spend to get us through to the next decision gate, which will be in early 2025. I believe the cost of that Neon program are already built into the CapEx guidance that we have provided. In terms of the work that is ongoing to reduce the -- or to clarify how we can tackle the 2 key risks. One of them is a downside volume scenario. We have seismic reprocessing that is ongoing at the moment. That will provide a much better view of the in-ground resource, and it will help provide clarity for us in terms of the range of available resource outcomes that we would have. So that work is ongoing at the moment and will be completed in time for that next decision gate early in 2025. Tackling the CapEx part of the equation. We're looking at the most optimal development program and how we can minimize costs in that going forward. Should we get to the point where we want to develop the field, where we feel that, that is competitive. That's a key objective is to ensure that we have a development plan that minimizes CapEx in the best way, while also being able, obviously, to maximize the value-accretive resource recovery.

Yes, Gabriel.

On the debt levels, the presentation earlier talked about a modest 10% gearing as at 31 December. Question was 2 parts. What would the gearing be now? And what would the gearing be if you were to fully draw your debt facilities, which we estimate around [ $700 million ].

I think probably Ray has the best handle on giving you the numbers and the response on that.

Gearing -- our gearing would be lower now because we've built some cash and gearing is a net gearing basis that Peter was talking about because we've built cash, we haven't actually extended further debt. It's repaid the RBL and then place cash on the balance sheet. So it will be less. If we fully drew, I think about EBITDA multiple, so we'd remain below onetime EBITDA. So you would still not reach a very high level of gearing on the balance sheet. But of course, that would depend on time, the time of drawing, how much cash is on the balance sheet. And then we don't obviously plan on drawing any time soon. So there'd be a point at which we need to [indiscernible].

[indiscernible] the presentation, 10% gearing. What would that 1x EBITDA leverage represent in terms of gearing percentage?

Mathematically, I guess it depends on -- again, it depends on where we're on production, where we're in reserves, at the time how much we've produced and converted to cash, but we're in the low 20s. It's not a high percentage of gearing. And again, I think I'd point out that because we cash generate and the cash is applied to cash-generating assets, that's a peak. So you would stay there for very long. Nevertheless, the access to that facility allows us to make the balance sheet do some work.

Any more questions primarily on the financial results of the company rather than general business?

Yes. Charlie Kingston again. Just -- it's not actually in the financial results, but it's in your reports and you mentioned it a few times today, your IRR hurdle or target, which just hoping you could be more explicit on what that figure is? And I know IRRs are pretty buzzy, to be honest, but just secondary to that, there is a lot of talk in the presentation specifically around the Who Dat acquisition about accretion. But just maybe a high-level question. I mean, Karoon was trading at the time at around 2.5x EBITDA, again, all very roughly is. You bought an asset in Who Dat at around about a cost of 7x EBITDA or cash flow. So arguably, that could be very decretive. The Board clearly had options to could have bought back stock at 2.5x. Instead, it issued stock to pay for an asset. That had a much higher valuation. I know there's a lot of nuances and life of deposits resources, et cetera. But there's a lot of nuance in that, but simplistically, you could have bought back stock at 2.5x. So I'm just trying to understand, one, what is the IRR target? And two, why was that acquisition accretive when theoretically, you could have bought back stock at a much cheaper price, which I would have thought it would have been even more accretive to shareholders in that sense, a 2-part question, please.

A number of less nuanced pieces of information that I can probably give you now. Our target return expectation is mid-teens rate of return post tax. So we don't enter into major investments without seeing upside from that time. I should say the experience doesn't mean that much, right? I've been in the oil and gas business now for over 45 years. And I will classify the Who Dat acquisition and the Who Dat asset as being a Tier 1 project with a reserve life that goes out past 2040. And therefore, measuring your business against an asset in, let's say, Baúna which might have 5, maybe 6 years' worth of production and significant decline over the next 5 years. It might go longer, it may not, depending on oil price. But the Who Dat asset provides long-term life to this organization, and it will be tested by what return it gives, but not over a 6-month period over a number of years and years to come. So I have a view that the Who Dat acquisition is, when I say, a Tier 1 asset, which will be valuable to the Karoon over many years. Mid-teens rate of return post tax is our threshold, and we believe we can achieve that. Buying back stock would -- just buying back stock would mean that we would be in substantial depletion mode in 3, 4 years' time and no other asset to fill that revenue stream back. I agree that there is a need to demonstrate value and medium- and long-term value is part of the asset set that Who Dat brings Karoon. And in my view, it's not -- it's challenging for short term and has been for a range of reasons in terms of share price performance. But the quality of the asset and its ability to bring value needs to be tested over a number of years. And that's the challenge we have, and that's the reality of a depleting resource when you start producing it. There are a range of opportunities in the medium term and short term that we believe as a Board fundamentally allows shareholders to share in the upside value that we are through dividends, through other capital management, maybe buybacks, maybe specials, may be a range of things that the Board is working on. And when we understand what our 30th of June results are, we'll be coming out and giving a template of what style of sustainable, meaningful long-term dividend stream shareholders should support. Now that's the core of it. I do not necessarily endorse more radical, high levels of dividend, which [indiscernible] got the company over a period of a few years because the residual value left in the company may not be that large. So -- and the multiples that are assumed for that are, I think, debatable. So I'm very happy, and I've really enjoyed my various conversations with Fred and Gabriel around this. And you're shareholders. Shareholders need to express their views. And we, as a Board, will absolutely take those views on Board. But my view, as Tadeu has put is a more balanced view about rewarding shareholders, and you can criticize the Board for not doing it earlier. We could have done it at the end of last year, but we would not have had the results of Who Dat in our results, and we will this June. And we will give shareholders a strong guidance with a formula, a predictable, sustainable long-term dividend stream that will come from these assets. And that will be underwritten by Baúna production for a number of years, but by long-term production out of Who Dat and [indiscernible]. I've been in the business for 45 years. Who Dat is a good asset. We have to demonstrate that. And I also know that some days you're in the sun, some days it's raining. We have to demonstrate that this asset brings this the sun to shareholders and take on that challenge.

Unlike what people might think, we would love nothing more than to see massive success out of Who Dat drilling. What happens in shore doesn't deliver. Looking at everyone on the board who is involved in that acquisition. A lot of the prospects of Who Dat come in the future given the price that was paid, 62% odds of success. I suspect a lot of people assume 62% is over 50%. Therefore, it's probably 100%. Statistics can be challenging. What happens if it doesn't deliver the result?

Well...

In other words, who takes the fall?

Well, I can tell you, I will take a fall. Do you want my accountability? Absolutely.

I'm just asking the question.

No. Well, look, that's -- that's the game, right? I have no -- in my whole professional life, I don't mind taking the fall. I don't mind living and dying by what I decide and don't decide. And...

We don't want that to happen...