Keo Capital (KEOC) Q3 2024 earnings summary

Executive summary

• Operational delays in Brazil and Venezuela, especially with Papa-Terra and Atlanta, led to shareholder frustration and a drop in share price, but management remains confident in long-term asset value and improved alignment with shareholders and the board.

• Major M&A activities included the roll-up of a 15% stake in 3R Offshore into Brava Energia, making the company the 4th largest shareholder, and the acquisition of 5% of 3R Petroleum, with exclusivity to acquire up to 40% of PetroUrdaneta in Venezuela.

• Illinois Basin oil production rose 54% to 276 BOEPD in Q3 2024 year-over-year, driven by new wells and facility upgrades, with revenue up 44% and operating netback up 71%.

• Net loss from continuing operations was $42.8M, mainly due to a $40.6M unrealized loss on Brava Energia shares, partially offset by a $17.9M gain from the roll-up.

• Maha became debt-free after repaying $15M in bank debt in November 2024.

Financial highlights

• Q3 2024 revenue was $1.8M (+44% YoY), with 9M 2024 revenue at $6.2M (+52% YoY); operating netback for Q3 2024 was $0.9M (+71% YoY).

• OPEX per barrel decreased by 23% year-over-year, improving netback margins.

• Q3 2024 EBITDA from continuing operations was negative $1.5M, impacted by non-recurring expenses and discontinued operations.

• Cash and equivalents at quarter-end were $25.7M, with liquid investments at $77.4M, totaling $88M in net cash plus liquid investments.

• Q3 2024 EPS was $(0.25); 9M 2024 EPS was $(0.35).

Outlook and guidance

• Management expects Papa-Terra and Atlanta to return to production by December 2024, targeting stable production around 100,000 boepd for 2025, with potential to exceed this.

• Dividend capacity is projected at up to $3.0B over the next six years, representing up to three times current market cap.

• Continued focus on maintaining production, optimizing OPEX, and prioritizing shareholder returns over aggressive growth.

• Selective pursuit of high-return opportunities in Latin America and ongoing efforts to secure OFAC license for Venezuela operations.

• Illinois Basin production expected to continue ramping up, supporting free cash flow.