Keo Capital (KEOC) Q2 2024 earnings summary

Executive summary

• Closed the largest M&A in Brazil in 2024, becoming the 4th largest shareholder in the merged 3R and Enauta entity, and completed the roll-up of a 15% stake in 3R Offshore into 3R Petroleum.

• Initiated a share buy-back program for up to 10% of shares, authorized in August 2024.

• Enhanced capital structure with $141.8M in cash and investments, full repayment of old debt, and new bank debt issuance.

• Revenue from continuing operations rose 66% year-over-year in Q2 2024, driven by a 53% increase in daily oil production from the Illinois Basin.

• Focused on value generation through M&A and operational expansion in Latin America.

Financial highlights

• Q2 2024 revenue of $2.2M, up 1.2% sequentially and 66% year-over-year; operating netback of $1.1M.

• Net income of $(22.7)M to $(23.1)M, impacted by a $20M unrealized loss from 3R shares.

• Negative EBITDA of $(0.86)M, down 218.1% sequentially and 24.8% year-over-year.

• G&A expenses elevated due to one-off M&A and consultant fees.

• CAPEX of $0.61M in Q2 2024, mainly for new drilling in Illinois Basin.

Outlook and guidance

• Significant dry powder for future M&A following the 3R and Enauta merger.

• Awaiting OFAC and PDVSA approvals to commence operations in Venezuela.

• Ongoing drilling in Illinois Basin expected to ramp up production in Q3 2024 with three new wells.

• Management expects strong cash flow generation from 3R Petroleum over the next five years and anticipates reporting a substantial profit from the 3R Offshore investment in Q3.

• Share buy-back program to commence, aiming to repurchase up to 10% of shares.