Karoon Energy Ltd (KAR) Earnings Call Transcript & Summary

Well, good morning, ladies and gentlemen, and welcome to the 2025 Annual General Meeting for Karoon Energy Limited. My name is Peter Botten, and I'm your Chair. Before we start, we have the inevitable housekeeping issues and matters for those of you in the auditorium. Please ensure that your mobile devices are now set to silent mode. In the unlikely event of an emergency, you should proceed down the stairs at the side of the room to exit the building while at all times following the directions of the Langham staff. Today's meeting is being held online via the Computershare meeting platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can 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. To ask a question, select the Q&A icon, type your question into the text box. And once you finish typing, please hit the send button. 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 may be combined to ensure questions are answered efficiently. To ask a verbal question, please click on the broadcast icon and follow the instructions provided. Voting today will be conducted by way of a poll on all items of business. I will shortly open the voting for all resolutions. If you're eligible to vote, once voting opens, press the vote icon and all resolutions will be activated with your voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You will receive a vote confirmation notifying -- notification on your screen. You can 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 8. I'm advised that a quorum of members is now present. I therefore declare the meeting legally constituted and open. To provide you with enough time to vote, I now open the poll for resolutions 1 to 8. Before proceeding with formalities, I'd like to introduce the participants joining the meeting today. First, the independent nonexecutive directors of your company. to my -- which are all to my right. Mr. Peter Turnbull is Chair of the People and Culture Committee and a member of the Audit, Risk and Governance Committee; Ms. Joanne Palmer is Chair of the Audit, Risk and Governance Committee; Ms. Luciana Rachid is the Chair of the Sustainability and Operational Risk Committee; and Mr. Tadeu Fraga is a member of the Sustainability and Operational Risk Committee. 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. There are also members of our management team and staff in the audience today, and please take the opportunity at the end of the meeting to say hello and ask any questions that you might have of them. I'm chairing the meeting from the Langham Hotel, 1 Southgate Avenue South Bank, Victoria. Our SVP of Communications and Investor Relations, that's Senior Vice President, I should work the acronym. Ms. Ann Diamant will moderate questions submitted during the meeting. Mr. Peter Render from our registry, Computershare will also be supporting the meeting as returning officer. Mr. Graeme McKenna of the company's auditors, PwC, is also present today. Ladies and gentlemen, as the notice of meeting, including the addendum has been made available to all shareholders, I will take them as read. As we progress through the meeting, first, we will have my Chair's address, followed by a presentation by the Chief Executive Officer and Managing Director, Julian Fowles. We will then proceed to consider the formal resolutions as outlined in the Notice of Meeting. Now to my address. As highlighted in our 2024 annual report, 2024 was a mixed year for Karoon. Despite delivering record production, sales revenue and underlying profitability over 2024, our share price significantly underperformed most of our ASX-listed energy peers. This reflected a range of factors, including several downgrades to 2024 production guidance and market uncertainty about Karoon's capital management priorities. In response to shareholder feedback over the past year, we have taken some decisive steps to address the issues of concern and to drive long-term performance. Firstly, we've reinforced the focus of the organization on delivering safe, reliable and predictable operations. At Baúna in Brazil, in addition to commencing a comprehensive program to improve the reliability of the floating production storage and offtake facility or FPSO, we reached agreement with the FPSO owner and operator, Altera & Ocyan to acquire the facility. The purchase, which was successfully completed last month is a major strategic step forward for Karoon, giving us control over how this key asset is operated and ensuring the long-term availability of the vessel for the Baúna project. In addition, the expected return on investment well exceeds our hurdle rates of return. The Board believes this transaction will add material long-term value to shareholders. Extensive work took place in 2024 and early 2025 on the Neon oil field development opportunity, resulting in much more robust potential development concept, which is now being defined further. Given the recent oil price decline, we are taking a measured approach to investing further in Neon by splitting the defined phase into 3 stages, allowing the Board an opportunity to reassess technical and commercial progress and market conditions at regular intervals. We own 100% of Neon and the capital cost of development are currently estimated to be in the region of USD 1 billion. The Board does not believe it is appropriate for a company the size of Karoon size to take on so much delivery and financial risk. So a key focus over 2025 is to seek a partner or partners. We will not progress into a development until a find down has been secured. At Who Dat in the U.S. Gulf, oil production in 2024 was below expectations, it has now stabilized at levels in line with our 2023 acquisition forecast. In addition, 2 of our 3 exploration wells over the year were successful, finding resources close to the existing production facility and third-party infrastructure. With options to maximize current production performance and develop the 2 new discoveries being explored, we remain confident that Who Dat will continue to generate good returns for Karoon as well as diversifying our production base. Oil and gas production always has inherent risks. However, I firmly believe that the actions taken over the last 12 months have stabilized operational reliability and will help us rebuild investor confidence in our forecasts going forward. With the progress on Neon and Who Dat exploration successes, we now have a pipeline of organic growth opportunities within our portfolio, capable of driving long-term shareholder value. Based on preliminary modeling, these all have the potential to offset natural production decline, build a sustainable long-term production profile for Karoon and exceed our mid-teens after-tax return hurdle rates. The second key focus for Karoon has been to develop and implement a clear approach towards capital management, including as promised at last year's AGM, capital returns. Under the new capital allocation framework announced in July 2024, 20% to 40% of underlying NPAT will be distributed to shareholders by way of dividends and/or buybacks with potential for additional capital returns during periods of elevated oil prices or where alternate value accretive uses of excess cash are not identified. Since announcing this framework, Karoon has paid shareholders AUD 0.095 per share in dividends and has bought back approximately 8% of its issued capital through 2 USD 25 million on-market share buybacks and the first tranche of a USD 75 million buyback planned for 2025. Later in this meeting, we'll be asking shareholders for approval to undertake the second tranche. This is required by the ASX, which limits the company from buying back more than 10% of its stock over a 12-month period without shareholder approval. We continue to believe that the current share price, buying back and canceling our shares is one of the best uses of our capital. Cash flows are currently being impacted, of course, by recent -- by the recent sharp drop in oil prices. However, Karoon has a competitive cost structure with a cash breakeven of between USD 30 and USD 40 a barrel and an ongoing focus on minimizing outgoings where possible. The company also has a strong and flexible balance sheet with liquidity of more than USD 530 million at the end of March 2025. This should allow us to continue to implement capital returns as well as pursue our value-accretive organic growth opportunities. subject to market conditions, of course, and the outlook for oil prices. Having already commenced high-priority operational and capital management initiatives in 2024, in early 2025, we completed a bottoms-up strategic review. The review concluded that Karoon's core objective to remain a safe and reliable low-cost offshore oil producer focused in Brazil and the U.S. Gulf remains the best strategy to create sustainable long-term value for shareholders. As already mentioned, we have made strong inroads into delivering our goal of restoring safe, reliable and predictable operations at both Baúna and Who Dat. Our long-term objective to extend field life, offset natural decline and maintain stable production through value-accretive organic growth opportunities has also made progress. We are committed to assessing all growth options in a highly disciplined way using strict investment criteria to ensure that any developments we embark on add value to shareholders and risk-adjusted rank well relative to capital returns. Another key outcome from the strategic review was an update on our climate strategy. We have decided to change our climate target from our prior target to be net zero by 2035 to being net zero by 2050 or sooner. This change recognizes the challenges in meeting net zero targets for a company of Karoon's scale and resources and aligns with the broader oil and gas industry. While our absolute emissions may increase due to future production growth, we are aiming to reduce Scope 1 and 2 emissions -- emission intensity by 30% by 2032 from a 2021 baseline. Since 2021, we have reduced emissions intensity by 21% from 14 kgCO2e/boe to 11.7 kgCO2e/boe in 2024. In addition, we are developing a formal climate transition action plan, which will be released in early 2026 to outline our pathway to our target of net zero by 2050 at latest. We intend to continue to fully offset our operational share of Scope 1 and Scope 2 emissions each year as we have done since 2021. We have also committed to increase our social community and community investments in Brazil from 0.04% of sales in 2024 to 0.1% by 2027. During 2024, Karoon supported 22 community projects in Brazil in the areas in which we operate, which are having positive impacts on -- and building lasting relationships with our local communities. Over 2024, in response to the first strike received at last year's AGM, the Board and management held meetings with many of our shareholders regarding Karoon's remuneration structure. Following their feedback, together with input from external experts and relevant benchmarking data, we reviewed our remuneration policies and award structures to see where improvements could be made and how shareholders concerns could be addressed. As a result, 77.5% of management's short-term incentive STI scorecard in 2024 was weighted towards production, cost targets and operational performance compared to 55% in [ TY '23 ]. Despite being eligible based on achievement of some of the scorecard elements, our CEO and key executive management personnel offered to forego any short-term incentive reward in recognition of the poor overall shareholder outcomes in 2024. The Board also exercised its discretion attenuation of STI outcomes for other Karoon staff given the uneven production performance. In 2025, 80% of the STI scorecard will be related to delivering safe, reliable and sustainable operations. And this includes 15% associated with the acquisition of the Baúna FPSO at a cost that delivers an IRR of more than 20% and a safe and smooth transition of operations to Karoon. The relatively high weighting reflects how strategically important this acquisition is to the company. The remaining 20% comprises 15% related to achieving a value-accretive farm down for Neon and progressing Who Dat organic developments, while 5% is weighted towards our emissions intensity reduction goals. The structure of long-term incentives is unchanged with 50% related to peer performance and 50% to absolute shareholder returns. However, the performance hurdle for the TSR component will increase in 2025 onwards from a compound annual growth rate of 10% to 18% to 14% to 18%. As I am sure shareholders can appreciate, there are ongoing significant challenges operating across Karoon's operational time zones with our activities spanning North and South America as well as the East Coast Australia. The pressures created by having to operate in these time zones during the working week and through significant travel are becoming unsustainable for the physical and mental health of our employees. As a result, over the next year, we are planning to move a number of roles currently based in Melbourne to our offices in Houston and Rio de Janeiro. We are committed to handling this process with sensitivity and absolute fairness. We are also mindful that remuneration expectations in the U.S. may be different to those in Australia, which may have a cost impact. However, this is likely to be at least partially offset by greater productivity and reduced travel costs. While opportunities to list the company on alternative securities exchanges have been explored, we concluded that at present, it is more advantageous for Karoon to remain an Australian-listed company. There is an ongoing process of Board renewal planned over the next few years to ensure that the Board has the appropriate skills and diversity to help drive the company forward. This is likely to include appointing a director with U.S. experience with an appointment targeted to be made by the end of the year. In further Board succession, it's likely that a number of directors will transition over the next 12 to 18 months, ensuring that we have the right skills and local experience on our Board. In conclusion, I would like to thank all our shareholders for your patience and continued support during a difficult period. Karoon Board has listened and responded to your concerns. I'm confident that the company is now on a stronger operational footing with material growth -- organic growth opportunities, which have the potential to add significant shareholder value. I'd also like to thank our management and staff, led by Julian for all their hard work in 2024 as well as more recent achievements such as the successful FPSO maintenance program, the reinstatement of production at SPS-88 well, both delivered on time and on budget. In addition, successful acquisition of the Baúna FPSO represents, as I say, a significant event for Karoon, which has the potential to reduce operating costs and extend field life. While there is no doubt be challenges ahead, including navigating the transition of operatorship on the FPSO and the current volatility in commodity prices, our aim is to provide attractive long-term returns to shareholders, guided by a strict capital allocation framework, and that objective is unchanged. Thank you for your attention, and I look forward to answering your questions shortly. I'll now hand over to our CEO, Julian Fowles, to address the meeting. Julian?

Well, good morning, everyone. Thank you, Peter. Good morning to everyone joining us in the auditorium and on the call today. As you've heard from Peter, 2024 was a year where we had both a number of achievements and significant challenges. And as shown on this slide, production in 2024 was 10.4 million BOEs. Although this was an all-time high for the company, reflecting the Baúna intervention campaign and the Patola development through 2022 and 2023 as well as the Who Dat acquisition in late 2023. As Peter has pointed out, disappointingly, this was 20% less than the expectations we set for the year. That was largely due to operational issues that we encountered both at Baúna and at Who Dat. I'll talk about what we're doing to improve production reliability shortly. As a result of the higher production, 2024 revenue increased 14% to USD 776.5 million and our underlying EBITDAX rose 13% to USD 492.4 million, both of which were records for the company, while underlying net profit after tax was also a record at USD 214 million. This strong financial performance allowed Karoon to commence capital returns to shareholders as well as drilling 3 exploration wells at Who Dat, 2 of which were successful, and we've managed to progress also the Neon development opportunity. As of the end of the year, 31st of December 2024, net debt was under USD 10 million, and our total liquidity was more than USD 680 million. The Bauna project in Brazil acquired in late 2020 is Karoon's cornerstone production asset. And while it is a very high-quality field, unfortunately, we did face several operational issues during 2024, mainly related to operations on the FPSO. FPSO efficiency for the year was 84.5%, which is materially below our target range of 90% to 95%. In addition, the SPS-88 production well was offline for the entire year. In the second half of 2024, the owner and operator, Altera & Ocyan, A&O, undertook works on the FPSO to address these production and also safety critical issues. This was followed up in the first quarter of 2025 by an extended maintenance campaign with up to 200 additional workers accommodated on a floating hotel, a Floatel more adjacent to the FPSO. The Floatel campaign has allowed us to make significant inroads into addressing the maintenance backlog that we have at Baúna, and together with the work completed in 2024, resulted in FPSO efficiency, excluding our maintenance shutdown that we normally do annually, productivity of more than 97% in the first quarter of 2025. However, there is still a long way to go to fully clearing the maintenance backlog and reestablishing reliable and consistent FPSO performance. In February 2025, we completed the SPS-88 well intervention a little quicker than anticipated and within budget. We've brought the well back on stream slowly, and it reached a peak flush production rate of 3,000 barrels of oil per day prior to resuming natural decline. During 2024, Karoon commenced discussions with A&O regarding buying the FPSO. Agreement on the key acquisition terms was reached in early 2025, and we completed the purchase on the 30th of April this year. This is, as Peter has pointed out, a major milestone for the company. Strategically, the acquisition of the FPSO gives us control over a critical component of the Baúna project, and it will allow us to strengthen the safety culture and manage operational performance more effectively. We're currently considering several potential FPSO operating structures. These include securing a new operations and maintenance contractor with a tender process currently underway or for Karoon to manage operations with support from service providers as required. Preliminary work suggests the latter may be the optimal long-term outcome, albeit would likely require a longer transition period than the former as Karoon develops the required systems and processes and secures regulatory approvals. A transition services agreement has been signed with A&O to ensure continuity of operations and a safe and smooth handover of operational control pending our determination of the preferred structure, which we expect to make during the third quarter of 2025. From a financial perspective, once the transition is complete, we expect total operating expenses to be USD 30 million to USD 40 million per annum lower than in 2024. This should allow Karoon to continue operating the field until the late 2030s, capturing thereby a portion of the current 11.2 million barrels of Baúna project 2C contingent resource. Prolonging the life of Baúna will also defer abandonment and decommissioning liabilities. The FPSO acquisition is expected to deliver a post-tax internal rate of return of over 20% and payback within 4 years. Over the last few years, the Neon team has completed extensive technical work on the Neon project. This included a full reevaluation of the Neon resource based on the results of the 2 control wells that we drilled in 2023, core samples collected in those wells and reprocessed 3D seismic, rebuilding geological models and updating our petrophysical evaluations. This has resulted in a 57% increase in 2C contingent resources from 55 million barrels in May 2018 to 86.5 million barrels now. Importantly, the 1C contingent resource has also increased significantly and now sits at 60.1 million barrels. As a result of this work, we now also have more than 21 million barrels of 2U prospective resource, comprising 6.7 million barrels that we recognize at Neon and a further 14.8 million barrels at Neon West, a prospect which lies just 1 kilometer to the west of the main Neon field. Neon's contingent and prospective resources have been assessed by an independent expert, Miller and Lents Limited, whose estimates are very similar to those that Karoon has. The resources we have booked are those provided by the Miller and Letns numbers. The increase in resources, particularly at the 1C level, has increased our confidence that a Neon stand-alone development has the potential to be an attractive, robust and value-accretive project, and the opportunity has now moved into the defined phase. The defined phase itself has been split into 3 stages to limit capital exposure while providing the Board with the opportunity to assess the economic merits of the project before progressing progressively into the next stage. A key component of this is identifying and securing an FPSO and also a suitable drilling rig. We have identified several FPSOs suitable for Neon that could be redeployed. And while the rig market is tight, we have found a number that may also be available in the desired time frame and preliminary discussions with owners has actually already commenced. As Peter has already mentioned, we don't believe it's appropriate to develop Neon at 100% equity for Karoon, and we would like a partner to share the risks and rewards of the project. And we expect to commence the farm-down process once the defined phase is further progressed, currently targeting midyear with an aim that we would sell down 30% to 50% interest in the project. We are aiming, should we meet all these hurdles to make a final investment decision on the project around mid-2026. The time frame and progress through the defined phase substages is dependent on the FEED work continuing to support Neon as a commercial value-accretive development as well as supportive macro conditions and completion of the farm-down that we've mentioned. While there's still a lot of work to be done, the concept being taken forward into the defined phase is based on a first phase of development that would target 60 million to 70 million barrels of oil with a peak production rate of some 40,000 to 50,000 barrels of oil per day with first oil in early 2029. Based on a long-term oil price assumption of USD 65 per barrel, 2025 real terms, this development would generate an IRR of well over 20% and have a payback period of approximately 2 years with material potential upside from future development phases and at least one potential tieback from the already discovered resource at [ Goya ]. Now turning to the U.S. Who Dat output in 2024 was lower than our expectations due to a later-than-expected start-up of new production wells, reservoir pressure management issues and production system constraints. The operator, LLOG has worked to resolve these issues and production rates are now roughly in line with our original forecast with gross production currently between 37,000 and 38,000 barrels of oil equivalent per day. Who Dat is a high-margin, albeit mature asset with 2024 operating cost of USD 8.50 per barrel of oil equivalent on a net working interest basis. Several potential infill opportunities have been identified within Who Dat, which have attractive returns and payback periods to help mitigate the natural decline that we see in the field. One of these, the E6 sidetrack is expected to commence drilling in the third quarter of 2025 with the potential to add up to approximately 5,000 barrels of oil equivalent per day in the fourth quarter of 2025. The Who Dat joint venture is also considering a second sidetrack to be drilled in late 2025 or early 2026. Studies by LLOG aimed at improving uptime performance and reducing bottlenecks at Who Dat are on track to be completed in mid-2025. These studies will indicate how to optimize production and processing capacity on the Who Dat Floating Production System, or FPS, most efficiently and cost effectively as well as improving reliability. In 2024, we drilled 3 exploration wells in the Who Dat area, 2 of which Who Dat East and Who Dat South made discoveries. The well results were better than our expectations and have led to a material increase in Karoon's contingent and our prospective resources. Both accumulations are within tieback distance to Who Dat or to third-party production infrastructure. And based on their size, they have the potential to be highly value-accretive developments. The results of the LLOG FPS studies will help the joint venture determine what is the optimal development route for these. The JV is aiming to achieve FID on the first of these opportunities by early 2026. As Peter has already mentioned, the oil price has fallen markedly over the past few months in response to a perceived easing of geopolitical tensions, proposed increases in OPEC production and the expected impact of U.S. tariffs on global economic growth. While recent trade deals have seen oil prices recover some of their losses, the outlook still remains very volatile. With more than 90% of our production being oil and with limited hedging, our cash flows are negatively impacted by this. Fortunately, we have a robust cost structure. Karoon's cash flow breakeven, which includes the cost of production, cost of royalties, corporate costs as well as sustaining CapEx and finance costs sits between USD 29 and USD 40 per barrel. This is expected to reduce next year when the benefits of the FPSO acquisition start to flow through. Despite a number of large nonrecurring cash outflows in the first few months of 2025, the company's liquidity was more than USD 530 million at the end of the first quarter of 2025, and both S&P and Fitch have recently reaffirmed Karoon's B credit rating with a stable outlook. Nonetheless, and especially given the volatility in oil prices, Karoon maintains strong financial discipline, and we are currently looking at all of our discretionary spending for any opportunities to reduce costs. In summary, Karoon remains committed to safe and reliable operations as our first priority, and I can't emphasize that enough. We are in an enviable position as a mid-cap oil and gas producer with more than 24,500 BOEs per day of net revenue interest, low-cost production based on our 2025 guidance. We have taken control of the Baúna FPSO, a critical asset for Karoon, and we have several potentially value-accretive organic opportunities within our portfolio, capable of extending our production profile well into the 2040s. We're committed to ensuring our funds are invested in the highest returning opportunities with any funds invested in organic growth ranked against returning capital to shareholders through dividends and buybacks. I'd like to reiterate Peter's thanks to the Karoon team and to our contractors for the hard work during a challenging 2024, and also, of course, to thank you, our shareholders, for your continued support and commitment to Karoon. And I'll now hand back to our Chair.

Thank you, 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 8 inclusive. I remind you that you have the ability to change your vote up until the time I declare voting closed. Proxies have been received from 480 shareholders, representing over 421 million ordinary votes, being approximately 56.80% 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 given to the Chair of the meeting in favor of resolutions 1 to 7 and against Resolution 8 if it is put to the meeting. 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. Peter Render of Computershare Investor Services as poll scrutineer. I will now hand over the role of Chair to Mr. Peter Turnbull, who will conduct the meeting in respect of Resolution 1 being my appointment as a Director of the company. Over to you, Peter.

Thank you very much, Peter. And may I add my welcome to the meeting to shareholders, ladies and gentlemen, here as well as those with us online and by phone. As Peter has mentioned, this agenda item relates to the reelection of Peter himself. The precise resolution reads to consider and if thought fit, to pass the following resolution as an ordinary resolution that Peter Botten, who retires for the purposes of Listing Rule 14.4 and Paragraph 11.6 of the constitution and who being eligible, offers himself for reelection, be reelected as a director of the company with immediate effect. Just by way of a bit of background, Peter has served Karoon Energy as an independent Non-Executive Director since the 1st of October 2020 and was appointed Chair of the Board on the 23rd of November 2023. In terms of the Board's view on this, the Board, excluding Peter himself, unanimously supports the reelection of Peter as a Non-Executive Director and Chair of the Board. So at this stage, I will ask Peter to address the meeting, if I may.

Thanks, Peter. And thank you, ladies and gentlemen, for giving me the privilege of once again standing for reelection to the Board of Karoon Energy. As Peter has said, I first joined the Board in October 2020 and became Chair in November 2023 at a reasonably challenging time for the company. My career in the oil and gas sector now, I'm afraid to say, has spanned almost 50 years. And that's a long time to be involved in an industry, which has been particularly dynamic and in part challenging with both cycles up, down and around. Over that period of time, my career was dominated as being MD and CEO of a company called Oil Search, which I held that position for 27 years and was responsible in part for building that business from a $250 million market cap company to a peak of something over $15 billion at one stage. I believe that the experiences that I have gained from that long career in oil and gas and specifically, the lessons -- the positive lessons and negative ones about what worked or what didn't work for Oil Search are very applicable to the transition that Karoon is now making. And the lessons I learned there are, I think, value added to a consideration by -- any consideration by the Karoon Board as to its future direction. Some of those lessons you're already seeing being applied, I think, and have been applied through the last 18 months. Control of our operations, control of our business, controlling key parts of that is fundamental to future success. I think you've also seen the building of an organic portfolio within Karoon that basically is the platform for future value growth for the business. There are key areas of focus in terms of getting our business structured properly. Part of that will be unambiguously a move by certain key roles to the East and a more efficient and cost-effective way of managing our future. As I say, a critical part is -- of any success of any company is controlling a business, sustainably delivering safe, reliable production, along with a rigorous capital management process, which I believe is now inherent core in our future business at Karoon. With that in mind, I'm very excited to be part of the future of Karoon. I will be downsizing my other Board roles during the rest of the 2025 year. I don't think it necessarily will make any particular difference to my commitment and time allocations to Karoon, but it is something that I will be doing, and I signaled that in the notice of meeting. It probably will be my last round as a director and part of my process as Chair will be to ensure a smooth transition to -- through the Board for all directors, but also for Chair of the company into the future. So I really sincerely look forward to working with our Board and management and with our shareholders to deliver the value that I think is latent within our existing portfolio and into the future with our various potential investment opportunities core in our organic license base. So thank you for the opportunity, and thank you for any support that you might have. Thank you.

Thank you very much, Peter. Turning now to the formality of the resolutions on the slide should be the proxy numbers at this stage. Details of the proxies received for this resolution are 96.23% supporting the resolution, 3.15% against with 0.62 other being abstentions and the like. Can I check at this stage whether we have any questions on the resolution from the floor here in Melbourne?

I've just got a simple question for Peter. Well, first off, Henry Stephens speaking from the Australian Shareholders' Association. Just got a question for Peter about how many hours approximately do you work per week on Karoon Energy business? First question. And second question, just about the directorships, you've got 4 major publicly listed vehicles that you're a Chairman of. Which 2 are you going to get rid of?

Well, thank you for your questions. Look, I suppose Board work goes in peaks and troughs. It's not like a normal 9:00 to 5:00 Job. It's -- I have intense periods of time where I work specifically for any one company that might be several days a week. This week, it's been largely Karoon dominated by Board meetings, committee meetings and obviously, the AGM. But I generally work somewhere between 40 and 50 hours a week. You generally work 6 days a week. Maybe -- and frankly, I've just gone past 70, and I think I don't need to necessarily have such a full-time role. It's nice for you to say some of those companies are material. Probably they're not as material as some of the other companies I have worked at before. But at the end of the day, I'm not going to tell you which ones I'm getting off because I think that is a piece of business between myself and those companies. But whatever I do, I will do it with a proper transition and a proper handover, which will hopefully not impact those companies too much.

Any other questions here in the room? If not, Ann, do we have any questions online?

Peter, no, we have no questions online.

Or by phone.

There's no question on the phone. Thank you.

Okay. As there are no more questions, the resolution itself should be on the screen if we move forward one, I think, and I now formally put the resolution to the meeting. To give you a little bit of time to mark the voting papers. And Peter, I -- based on the proxies, congratulations on your reelection. I hand the meeting back to you.

Thank you, Peter. And thank you, ladies and gentlemen, shareholders, for your continued support, and I'll do whatever I can to repay your faith in the activities that I'm involved in. The second item -- agenda item relates to the reelection of Ms. Luciana Bastos de Freitas Rachid, Luciana as a director. To consider and if thought fit, to pass the following resolutions as an ordinary resolution that Ms. Luciana Bastos de Freitas Rachid, who retires for the purposes of Listing Rule 14.4 and Paragraph 11.6 of the constitution and who being eligible offers herself for reelection, be reelected as a Director of the company with immediate effect. Ms. Luciana Bastos de Freitas Rachid has served the company as an Independent Non-Executive Director since the 26th of August 2016. The Board, excluding Ms. Rachid, unanimously supports her reelection of Ms. Rachid as a director. In accordance with ASX listing rules and the company's constitution, Ms. Rachid is seeking reelection as a director at this meeting. I now invite Luciana to address the meeting.

Dear shareholders, ladies and gentlemen, good morning, and thank you for the chance to speak to my candidacy for reelection once again. It has been extremely stimulating and rewarding to be a member of the Board of Karoon, and I'm truly honored to have contributed as part of a great team to its strategic direction and to have witnessed the transformation and evolution of the company. Looking ahead, I see further transformation and growth in the horizon. And I will highlight a few reasons for my positive stance, none of which are unknown to you. As mentioned earlier, Karoon is on the verge of a step change in the operation and maintenance of the Baúna facility. After getting ownership of the FPSO, now it is about taking up the reins of the assets. This is no small change in transformation and requires full support and oversight from the Board. And I believe I can offer useful effective inputs to this process, considering my 45 years involvement in this industry. Regarding growth, I see encouraging prospects for a small to mid-cap company, independent oil company with good quality assets with potential for organic growth and upsides operating in jurisdictions with favorable environment for the petroleum industry. Despite current oil price volatility and uncertainties about global economic growth, Karoon has the necessary resilience to face these headwinds. Furthermore, oil and gas demand will remain strong in the medium and long term, notwithstanding the increasing share of renewables in the energy mix. And whilst Karoon has long-term aspirations as an oil producer, the company is not oblivious of the climate change challenges, the hurdles imposed on fossil fuels and is updating and improving its climate strategy, aiming at responding to regulatory and societal requirements and demands for a low-carbon future. So considering the overall context, I'm certainly excited about the future of the company, and I would be gratified to impart my experience and skills to the next steps of its journey. While I'm confident I can still provide positive contributions to Karoon, I acknowledge the importance of Board succession to foster innovation and critical thinking and to ensure that the Board remains dynamic and responsive to change. Therefore, if reelected, this will be my last term serving in this Board following principles of good corporate governance, attentive to risk management, capital discipline and committed to delivering shareholder value. Thank you.

Thanks, Luciana. Details of proxies received for the resolution to elect Ms. Rachid are up on the screen. Of the proxies received, 90.9% are for the resolution and 8.48% against with 0.62% being other. Do we have any questions from the floor on this resolution?

Thank you. Luciana, just wondering why somebody with your experience -- immense experience would receive 8% of the vote against you? That's the first question. Second question is, why -- your experience is 45 years is extraordinary. Why would you come and do this job in Australia on the other side of the world and have all the travel obligations and the timing differences and the Board meetings and all that, why would you bother?

Well, with regard to the first question, I cannot answer that. So I may have some guesses, but I cannot answer that for sure. As to my commitment to Karoon, that goes back to 2016 and a set of circumstances. And I remember the Board was in review when I was interviewed and then I joined the Board. And it has been very rewarding. I enjoy this very much. I know that I'm a bit too old for professional of my country traveling around the world. But I still love the industry. I love Karoon. I love the history of the company. And I'm quite sure that the future of the company is bright, and I'm happy to serve another term if reelected.

Peter, could you comment on the 8%?

Look, I have been in working for public companies for many years, and I never -- I can speculate as Luciana might be able to as to why people vote for or against any resolution. I -- but I cannot give you a definitive answer and therefore, probably should not be venturing into what might be choppy waters. All I can say is Luciana has -- and I might say to tell you our Brazilian-based directors do travel a lot. We're a busy Board. We meet and have had to meet regularly. We do that very effectively through teams meetings as well as regular visits to either Australia or Brazil. But the value that our Brazilian-based directors bring to the Board in terms of local knowledge, understanding a really tremendous depth of understanding about Brazilian oil and gas business, the workings of politics and process within Brazil is enormously valuable to our business. And that succession planning for all our skills on the Board is a crucial part of derisking Karoon's business by having great people with great local knowledge to contribute at Board level. Are there any other questions? Do we have any questions online relating to this resolution?

No, there are no questions online.

Thank you. And any questions on the phones?

There are no questions on the phone.

Okay. As there are no more questions, the resolution on the screen is now put to the meeting. I'm always used to -- I don't know how many AGMs I've done, but I usually put up my [indiscernible] blue forms to go voting in favor, yes or no. But I understand we don't do that anymore. No. I know it's a poll, but I just -- it's form really more than anything. So my apologies for that confusion. The third item on the agenda relates to the consideration of Karoon's annual financial report. While no resolution is required to be put forward to shareholders to the agenda, shareholders should consider these documents and raise any queries they may have. Shareholders are now provided the opportunity to ask questions regarding the financial reports -- financial statements and reports, the operations and management of the company in general or questions to the auditor in respect of the audit report. Mr. Graeme McKenna, representing the company's external auditor, PwC Australia, is available today to respond to any questions in relation to the conduct of the audit and preparation of the content of the auditor's report. Do we have any questions from the floor on this agenda item? Any questions from the floor? Well, thank you. Do we have any questions from online relating to this item?

No, there are no questions online.

And again, do we have any questions on the phone?

There are no questions on the phone.

Thank you very much. Well, as there are no questions, we will now move to the next agenda item, which is the adoption of the remuneration report. A vote on this resolution is advisory only and does not bind the company or its directors. However, the Board will take into consideration the outcome of the vote when reviewing Karoon's remuneration practices and related policies. To consider and if thought fit, to pass the following resolutions as a nonbinding advisory resolution that for the purposes of Section 250R(2) of the Corporations Act, and for all other purposes, the remuneration report for the calendar year ended 31 December 2024, as contained within the directors' report be adopted. I'll speak very briefly regarding the company's overriding aim in terms of remuneration being to ensure that the executive performance outcomes are aligned with the company's stakeholders and particularly those of our shareholders. As outlined in Julian's speech and my earlier address, Karoon made significant advances towards these objectives in CY '24, responding to, I believe, very legitimate shareholder concerns at the last AGM. The reward structure for key management personnel, KMP includes a fixed salary, a short-term incentive over 1 year and a long-term incentive over 3 years. KMPs must maintain a shareholding in Karoon equal to 50% of the first year's after-tax remuneration within 3 years of their appointment. The details of CY '24 remuneration outcomes are set out in the remuneration section of the annual report. The nonexecutive directors support the adoption of the remuneration report. This resolution is subject to voting exclusions as set out in Section 4 of the explanatory memorandum. Details of proxies received for this resolution are now up on the screen. Of the proxies received, 98.46% are for the resolution and 0.91% against with 0.63% being in the other category. Do we have any questions from the floor on this resolution? No questions? Do we have any questions online relating to this resolution?

There are no questions online.

And on the phone?

There are no questions on the phone.

As there are no questions, the resolution is now on the screen is now put to the meeting. Thank you. The next agenda item relates to the approval to exceed 10-12 buyback limit. The shareholder approval is sought to undertake a further tranche of buybacks. If this resolution is passed, the company will have the flexibility to buy back up to USD 55 million in the next 12-month period following the AGM. We continue to believe that the current share price buying back and canceling our shares is one of the best uses of our capital. To consider and if thought fit, to pass the following resolution as an ordinary resolution, which goes to approve for the purposes of Section 257C of the Corporations Act and for all other purposes, and on-market buyback of fully paid ordinary shares in the company of up to USD 55 million in the 12-month period following the approval of this item on the terms and as described in the explanatory note is now put to -- sorry, in explanatory notes to the Notice of Meeting. Details of proxies received for this resolution are up on the screen. Of the proxies received, 94.96% are for the resolution, 4.43% against and 0.61% is in the other category. Do we have any questions from the floor on this resolution? No. Do we have any questions from online?

No, there are no questions online.

And on the phones?

There are no questions on the phone.

As there are no questions, the resolution on the screen is now put to the meeting. The sixth item on the agenda relates to approval of the issue of securities under Performance Rights Plan 2025. The company's previous Performance Rights Plan, the Performance Rights Plan 2022 was approved by shareholders at the 2022 Annual General Meeting, with the 3-year approval term due to expire on the 29th of January 2025. As such, the following resolution is put forward for approval by shareholders to consider and if thought fit, to pass the following resolution as an ordinary resolution that shareholders approved for all purposes, including Listing Rule 7.2, exception 13, the Performance Rights Plan 2025 as described in the explanatory memorandum accompanying this Notice of Meeting and the issue of securities under Performance Rights Plan 2025. This resolution is subject to voting exclusions as set out in Section 6 in the explanatory memorandum. Details of proxies received for this resolution are up on the screen. Of the proxies received, 98.31% are for the resolution. 1.07% against with 0.62% in the other category. Do we have any questions from the floor on this resolution? Moderator, do we have any questions online relating to this resolution?

There are no questions online.

And do we have any questions on the phone?

There are no questions on the phone. Thank you.

As there are no questions, the resolution on the screen is now put to the meeting. The next item on the agenda relates to the issue of performance rights to Dr. Julian Fowles. This resolution is subject to voting exclusions as set out at Section 7 in the explanatory memorandum to consider and, if thought fit, to pass the following resolution as an ordinary resolution that shareholders approve for all purposes, including Listing Rule 10.14, the issue of Dr. Julian Fowles of 656,583 long-term incentives CY '25 LTI performance rights, which are at-risk remuneration and will only vest should the LTI performance hurdles over the 3-year performance period from January 1, 2025 to 31 December 2027 be satisfied under and in accordance with the 2025 PRP and otherwise on terms and conditions set out in this explanatory memorandum. The nonexecutive directors support the issue of performance rights to Dr. Julian Fowles. Details of proxies received for this resolution are up on the screen. Of the proxies received, 98.21% are for the resolution and 1.17% against with 0.62% in the other category. Do we have any questions from the floor on this resolution? No questions online?

There are no questions online.

And on the phone?

There are no questions on the phone. Thank you.

As there are no questions, the resolution on the screen is now put to the meeting. The final agenda item for this AGM, therefore, is the spill resolution, and that's the conditional item. This resolution is subject to voting exclusions as set out at Section 8 in the explanatory memorandum. On the basis that less than 25% of votes were cast against agenda item 4, that being the resolution to adopt the remuneration report, agenda item 8 will not be put to today's meeting. Proxy voting for this resolution will not be released. Now there's an opportunity for general business and any other questions. So do we have any other questions from the floor? No questions from the floor? Any questions online, Ann?

Yes, we have a couple of questions online. The first comes from Mr. Sampson Hatfield. Why is the share price trading so low relative to earnings and our future earnings sustainable?

I can answer -- I'll answer the second part of that question or the second question first. I genuinely believe that what has taken place over the last 12 months in getting control of that business, getting control of the FPSO, be removing a point of commercial tension between the owner of the FPSO who wanted to change our contract terms substantially and put up our costs to where we have now controlled that and are able to reduce the potential costs of running the FPSO gives much greater predictability and sustainability for Bauna production out and has added unambiguously a number of years of extra production to the value of that asset. There is ongoing decline in all our production, and we need to address that by further investment. But I think the portfolio that we have at the moment, which does include Neon subject to its farm-out has the capability to add to our production base and more than replace our reserves and production over the next few years. Obviously, there's risk attached to that. I don't believe any company, even ExxonMobil generally doesn't develop fields at 100%, it develops fields at lesser equity with an appropriate risk/reward balance, and that's what we will be doing with Neon to farm down prior to potential development that will derisk that for us. The first question, the -- I think we have turned a ship for Karoon in the last 12 months, which came from some doubts about our ability to deliver production sustainably and predictably. Recognizing we're only ever as good as the last run on the Board, but we are hopefully now building the credibility to continue to deliver predictable production cost base to guidance. And that, together with the rigorous capital management process and investment criteria hopefully, we will build and continue to build appropriate support and confidence in the business, which will hopefully then support sustained share price performance. We can't control the oil price, though. So inevitably, we will be subject to the swings and roundabouts of positive and negative oil price movements and our revenues will be based on that. But what we control, we have significantly improved our ability to influence our business and control our business over the last 12 months, and that will help.

Thanks, Peter. The second question is from Mr. Lucas [indiscernible]. Is Peter able to provide some detail around the Board consideration of an alternative share listing? Assuming this was in the U.S., why was it not considered appropriate at this time?

I think the reality of our share portfolio and the makeup of our shareholder base is that the Australian shareholder base still makes up the vast majority of our shareholdings. And we, therefore, need to continue to support and provide that support through our ASX listing to that shareholder base. That may evolve over the next few years, but we will see how that goes. And in part, that will be dependent on the size and shape of Karoon and where the Karoon value lies in, let's say, 2 or 3 years' time. But at the moment, the Board believes that we are best to serve our shareholders through continuing our ASX listing. That doesn't mean to say we won't review that regularly and appropriately and in consultation with shareholders, discuss where that listing is best managed.

Thanks, Peter. The next question is also from Mr. Lucas [indiscernible]. For how long does the Board see that share buybacks will continue? Is this the best use of funds with regards to future capital requirements of developing Neon? And should an allocation of capital be set aside now?

Look, we revisit capital allocations and where we spend our capital extremely regularly. Every significant investment opportunity is gauged against other opportunities, and that includes a Neon investment versus a share buyback or a dividend or other parts of our business, including exploration. At the present time, we believe share buybacks remain an important part of rewarding shareholders. I think I've covered the Neon piece. I'm genuinely excited by the technical work that our technical teams, commercial people have put into Neon. But I do believe it's not appropriate for a company of our size and shape to spend and develop that field at 100%. So Neon's future and how much capital we might think about putting into Neon will be subject to successful farm-out into the future. And I think share buybacks will continue to be part of this. Obviously, it's a dynamic share price, and that might change if the share price increases substantially. But at the moment, it's certainly part of our investment portfolio and our capital management strategy.

Thank you, Peter. There are no further questions online.

Any questions on the phone? No?

There are no questions on the phone. Thank you.

No more questions on the floor. Great. Thank you for your questions. Well, ladies and gentlemen, in 1 minute, I'll be closing the voting system. So please ensure that you have cast your votes on all resolutions. I'll now pause to allow time to finalize your votes. Well, thank you, ladies and gentlemen. I'll let the little pink boxes finish their tour. Thank you. Thank you, ladies and gentlemen. Voting is now closed. The results of the poll voting will be announced to the ASX as soon as possible after this meeting and will also be posted on the company's website. As there is no further business to be conducted, I now declare the meeting closed. Thank you for your participation today. And for those who have joined us in-person, the Board now invites you to join us for some light refreshments, which are at the back of the room. And please do. I think there's a pretty reasonable spread, including stones and cream. Thank you very much for attending the meeting. Thank you very much for your support, and we look forward to the exciting 12 months ahead. Thank you very much.