Carnarvon Energy Launches 10% On-Market Share Buy-Back Amid Dorado Delay
Carnarvon Energy has announced a strategic on-market buy-back of up to 10% of its shares, signaling confidence despite the recent deferral of its Dorado Development Project.
- On-market buy-back approved for up to 10% of issued capital
- Buy-back to commence around 14 February 2025, lasting up to 12 months
- Funded from existing cash reserves of A$187 million
- Buy-back price capped at 5% above 5-day VWAP, no shareholder approval required
- Board cites undervaluation of shares and strong balance sheet as rationale
Strategic Share Buy-Back Announcement
Carnarvon Energy Limited (ASX: CVN) has revealed plans to initiate an on-market share buy-back program, allowing the company to repurchase up to 10% of its issued ordinary shares. This move, scheduled to begin around 14 February 2025 and potentially extend over a 12-month period, underscores the board’s commitment to enhancing shareholder value amid evolving project timelines.
Context Behind the Buy-Back
The announcement follows the recent deferral of the Dorado Development Project, a key asset in Carnarvon’s portfolio. While the delay may have introduced some near-term uncertainty, the board’s decision to deploy a significant portion of the company’s substantial cash reserves, reported at A$187 million as of 31 December 2025, towards buying back shares signals robust confidence in the company’s intrinsic value and financial health.
Mechanics and Market Considerations
The buy-back will be conducted in accordance with ASX Listing Rules and the Corporations Act, with share repurchases capped at no more than 5% above the five-day volume weighted average price (VWAP) prior to purchase. Notably, the company does not require shareholder approval to proceed, allowing for flexible execution based on market conditions and strategic discretion. Carnarvon has emphasized that buy-back activity will not be continuous but opportunistic, responding to prevailing market dynamics.
Board’s Perspective and Market Signal
Chair Rob Black articulated the board’s rationale, highlighting a perceived disconnect between the current share price and the underlying asset value. The buy-back is positioned as a mechanism to return value to shareholders by reducing the number of shares on issue, potentially supporting the share price and improving earnings per share metrics over time. This approach also reflects a vote of confidence in Carnarvon’s balance sheet strength despite project delays.
Looking Ahead
While the buy-back program offers a clear signal of management’s commitment to shareholder returns, the actual scale and timing of repurchases remain uncertain and contingent on market conditions. Investors will be watching closely to see how the buy-back influences trading liquidity, share price performance, and the company’s capital allocation strategy as Carnarvon navigates the next phase of its development pipeline.
Bottom Line?
Carnarvon’s buy-back is a confident bet on undervalued assets, but execution and market response will be key to its success.
Questions in the middle?
- How aggressively will Carnarvon execute the buy-back amid fluctuating market conditions?
- What are the implications of the Dorado Project deferral on Carnarvon’s longer-term growth prospects?
- Could the buy-back signal further capital management initiatives or strategic shifts ahead?
