Karoon shares rise as analysts back new capital returns policy
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The news: Shares in Karoon Energy climbed in morning trade on the ASX after analysts found positives in the oil and gas major's revised capital returns policy and June quarter report, announced on Thursday.
The numbers: Karoon shares jumped 5.7% to $1.84 by 11:35pm AEST, having closed Karoon 2.79% lower on Thursday after the announcement.
Macquarie analysts retained their 'outperform' rating on Karoon but reduced their target price 2% to $2.40.
Citi analysts kept their 'buy rating' but cut their target price from $2.75 to $2.35. They also downgraded their estimates for Karoon's CY24 earnings per share by around 14% due to operational issues at the company's Baúna oilfield in Brazil.
Morgan Stanley analysts maintained their 'equal-weight' rating and $2 price target on the stock.
The context: Morgan Stanley analysts said they "anticipate a welcome reaction" to Karoon's June quarter results and capital allocation framework.
Macquarie analysts described the framework as a "new chapter" for Karoon. Together with improving production in the second half of FY24, this should aid share price recovery, they said.
Citi analysts noted Karoon's lower earnings outlook, but said the company's new capital returns policy "strikes the right balance" between shareholder returns while also preserving capacity to reinvest in the business.
What they said: "We know this cash flow won't necessarily fund empire building that some had feared and we, as equity, can enjoy some of this cash flow via distributions," Citi's analysts said.
The sources: Morgan Stanley research, Citi research, Macquarie research
