Capricorn Energy : Circular re return of cash to shareholders

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you are recommended immediately to seek your own personal financial advice from your stockbroker, bank manager, solicitor, accountant or other appropriate independent financial adviser who is duly authorised under the Financial Services and Markets Act 2000, if you are in the United Kingdom, or from another appropriately authorised independent financial adviser if you are in a territory outside the United Kingdom.

If you sell or transfer or have sold or otherwise transferred your entire holding of Ordinary Shares, please send this document (but not any personalised Form of Proxy) as soon as possible to the purchaser or transferee of those shares or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for onward transmission to the purchaser or transferee. However, such documents should not be forwarded or transmitted in or into any jurisdiction in which such an act would constitute a violation of the relevant laws of such jurisdiction.

The distribution of this document and any accompanying documents in or into jurisdictions other than the United Kingdom may be restricted by local law and therefore persons into whose possession this document and any accompanying documents come should inform themselves about and observe such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

Applications will be made to the FCA and the London Stock Exchange for the New Ordinary Shares resulting from the proposed Share Consolidation to be admitted to the premium segment of the Official List and to trading on the main market for listed securities of the London Stock Exchange in place of the Existing Ordinary Shares. It is expected that dealings in the Existing Ordinary Shares will continue until 4.30 p.m. on 15 May 2023 and that Listing of the New Ordinary Shares will become effective and dealings in them for normal settlement will commence on the London Stock Exchange at 8.00 a.m. on 16 May 2023. Nothing in this document should be taken as constituting an offer of shares in Capricorn.

CAPRICORN ENERGY PLC

(incorporated in Scotland with Registered number SC226712)

Special dividend of 115 pence per

Existing Ordinary Share, 33 for 70 Share

Consolidation and

Notice of General Meeting

This document should be read as a whole and in conjunction with the accompanying Form of Proxy. Your attention is drawn to the letter from the Chair of Capricorn which is set out in Part I of this document recommending, on behalf of the Directors, that you vote in favour of the Resolutions to be proposed at the General Meeting referred to below.

Notice of the General Meeting, to be held at the Company's head office at 50 Lothian Road, Edinburgh EH3 9BY at 10.00 a.m. on 15 May 2023, is set out at the end of this document.

Enclosed with this document is a Form of Proxy for use in respect of the General Meeting. You are requested to complete, sign and return the Form of Proxy as soon as possible, and in any event, so as to arrive at the offices of the Company's registrars, Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, not later than 10.00 a.m. on 11 May 2023. Alternatively, you may register your proxy appointment or voting directions electronically via the www.sharevote.co.uk website (further information regarding the use of this facility is set out in the notes to the notice of General Meeting) not later than 10.00 a.m on 11 May 2023. If you hold your Ordinary Shares in CREST, you may appoint a proxy by completing and transmitting a CREST Proxy Instruction so as to be received by the Company's registrars, Equiniti, not later than 10.00 a.m. on 11 May 2023.

None of the Existing Ordinary Shares or the New Ordinary Shares have been or will be registered under the US Securities Act or the securities laws of any other US jurisdiction, and none of them may be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to the registration requirements of, the US Securities Act or except pursuant to a transaction that has been registered under the US Securities Act and the securities laws of any other relevant US jurisdiction.

None of the Existing Ordinary Shares, the New Ordinary Shares, or this document have been approved, disapproved or otherwise recommended by the SEC or any US state securities commission or any non-US securities commission or regulatory authority nor have such authorities confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a criminal offence in the United States.

Forward-looking statements

This document contains (or may contain) certain forward-looking statements with respect to certain of Capricorn's plans and its current goals and expectations relating to its future financial condition and performance and which involve a number of risks and uncertainties. Capricorn cautions readers that no forward-looking statement is a guarantee of future performance and that actual results could differ materially from those contained in the forward- looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as "aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", or other words of similar meaning. Examples of forward- looking statements include statements regarding or which make assumptions in respect of future events. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, including, but not limited to, economic and business conditions, the effects of continued volatility in credit markets, market-related risks such as changes in the price of oil or changes in interest rates and foreign exchange rates, the policies and actions of governmental and regulatory authorities, changes in legislation, the success of future acquisitions and other strategic transactions and the impact of competition. A number of these factors are beyond Capricorn's control. As a result, Capricorn's actual future results may differ materially from the plans, goals and expectations set forth in Capricorn's forward-looking statements. Any forward- looking statements made in this document by or on behalf of Capricorn speak only as of the date they are made. Except as required by any applicable laws, the Listing Rules, the Disclosure and Transparency Rules or other regulations, Capricorn expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward- looking statements contained in this document to reflect any changes in Capricorn's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

Note regarding presentation of currencies

All references in this document to "pence", "pounds sterling" or "£" are to the lawful currency of the United Kingdom and all references to "US dollars", "US$" and "$" are to the lawful currency of the United States. For the purpose of this document and unless otherwise stated, a pound sterling to US dollar exchange rate of £1:US$1.24475 has been applied. Such translation should not be considered as a representation that such currencies could have been or could be converted into pounds sterling or US dollars (as the case may be) at any particular rate, the rate stated above, or at all.

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TABLE OF CONTENTS

	Page
PART I Letter from the Chair of Capricorn Energy PLC	4
PART II Expected timetable of events	7
PART III Details of the Return of Cash	8
PART IV United Kingdom taxation in relation to the Return of Cash	11
PART V Frequently asked questions with answers	13
DEFINITIONS	16
NOTICE OF GENERAL MEETING	18

SHAREHOLDER HELPLINE

Questions of a factual nature relating to the Resolutions to be proposed at the General Meeting may be directed to the Company's registrars, Equiniti, using the telephone helpline number [phone]. Lines are open from 8.30 a.m. to 5.30 p.m. (UK time) Monday to Friday (excluding English and Welsh public holidays). Calls to the helpline from outside the UK will be charged at the applicable international rate. Please note that calls to these numbers may be monitored or recorded for security and training purposes.

This helpline will not be able to provide advice on the merits of the Resolutions to be proposed at the General Meeting or the Return of Cash, or give personal, legal, financial or tax advice.

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PART I

LETTER FROM THE CHAIR OF CAPRICORN ENERGY PLC

CAPRICORN ENERGY PLC

(Incorporated in Scotland with registered number SC226712)

Craig van der Laan (Non-Executive Chair)	Registered and Head Office
Tom Pitts (Non-Executive Director)	50 Lothian Road
Richard Herbert (Non-Executive Director)	Edinburgh
Hesham Mekawi (Non-Executive Director)	EH3 9BY
Maria Gordon (Non-Executive Director)
Catherine Krajicek (Non-Executive Director)
Erik Daugbjerg (Non-Executive Director)
Christopher Cox (Interim Chief Executive)
	28 April 2023

To Shareholders and, for information only, to participants in the Capricorn Share Schemes

Dear Shareholder

Special dividend of 115 pence per Existing Ordinary Share, 33 for 70 Share Consolidation and Notice of General Meeting

1. Introduction

On 27 April 2023, the Company announced a further update with respect to the comprehensive strategic review being undertaken by the Board of the Group's business and cost base. As announced at that time, having reviewed the Group's expected cash requirements, the Board has determined that the Company is in a position to return approximately US$450 million (approximately £362 million) to Shareholders by way of a Special Dividend, representing a return of 115 pence for each Existing Ordinary Share held by Shareholders at the Record Time (being 6.00 p.m. on 15 May 2023). In connection with this proposed Special Dividend, the Company also proposes to undertake a consolidation of its Existing Ordinary Shares, with the aim of making the market price of an Ordinary Share comparable before and after the Return of Cash, subject to normal market movements following the date of this document.

The purpose of this document is to provide Shareholders with information on the proposed Return of Cash. A general meeting of the Company is to be held at the Company's head office at 50 Lothian Road, Edinburgh EH3 9BY at 10.00 a.m. on 15 May 2023 to seek the approval of Shareholders to the proposed Return of Cash. The notice of that general meeting is set out at the end of this document.

Shareholders are advised to read the whole of this document and not just the summarised information set out in this letter.

2. Special Dividend

The Return of Cash is proposed to be made by means of a Special Dividend, in terms of which each Shareholder will receive 115 pence per Existing Ordinary Share held at the Record Time (being 6.00 p.m. on 15 May 2023).

If payment of the Special Dividend, and the associated Share Consolidation, are approved, the Special Dividend is expected to be paid to Shareholders on 23 May 2023.

Further details of the Special Dividend are set out in Part III (Details of the Return of Cash) of this document.

3. Share Consolidation

The aggregate amount proposed to be returned to Shareholders by means of the Special Dividend is equivalent to approximately 52.85 per cent. of the market capitalisation of the Company at the close of business on 27 April 2023 (being the last practicable date prior to publication of this document).

As is common when an amount representing a significant proportion of the market capitalisation of a company is returned to shareholders, it is proposed that the Special Dividend be combined with an associated Share Consolidation. The effect of the Share Consolidation will be that every 70 Existing Ordinary Shares will be replaced by 33 New Ordinary Shares so as to reduce the number of shares in issue to reflect the amount of cash to be returned to Shareholders. The aim of this is to seek to make the market price of an Ordinary Share comparable before and after the Special Dividend, subject to normal market movements.

Fractional entitlements arising from the Share Consolidation will be aggregated and sold in the market on behalf of the relevant Shareholders. Given the proceeds of sale are expected to be less than £3.00 per individual Shareholder, and consistent with the Articles of Association, the Board intends to donate the aggregated sale proceeds of the fractional entitlements to charities chosen by the Board.

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As all ordinary shareholdings in the Company will be consolidated, Shareholders' percentage holdings in the issued ordinary share capital of the Company will (save in respect of fractional entitlements) remain unchanged immediately following the Share Consolidation. Similarly, although the nominal value of each Ordinary Share will change as a result of the Share Consolidation, the New Ordinary Shares will be equivalent in all respects to the Existing Ordinary Shares, including their dividend, voting and other rights and will be admitted to trading in the same way as the Existing Ordinary Shares. The New Ordinary Shares will however trade "ex entitlement" in relation to the Special Dividend, as the Record Time will occur while the Existing Ordinary Shares are in issue.

Further information on the Share Consolidation is set out in Part III (Details of the Return of Cash) of this document and an illustrative example is set out in paragraph 12 of Part V (Frequently asked questions with answers) of this document.

4. Capricorn Share Schemes - impact of Return of Cash on outstanding awards and options

Separate letters are being sent to participants in the Capricorn Share Schemes to advise them of the effect (if any) that the Share Consolidation will have on their outstanding awards and options and as to whether they will be entitled to participate in the Return of Cash. In general terms, the position will be as follows:

1. The SIP
   Participants in the SIP are the beneficial owners of a number of Existing Ordinary Shares which the trustee of the arrangement is holding on their behalf and accordingly they will be entitled to participate in the Return of Cash in respect of those shares.
   In accordance with the rules of the SIP, participants will be given the opportunity to have the whole of their Special Dividend reinvested in New Ordinary Shares. Any such shares will be classed as "Dividend Shares" for the purposes of the SIP and will be subject to a mandatory three-year holding period during which they cannot normally be sold or otherwise withdrawn from the plan. Any participant who does not elect to reinvest in Dividend Shares will receive the Special Dividend in cash.
2. Other Capricorn Share Schemes
   Participants in the remaining Capricorn Share Schemes (i.e. those arrangements other than the SIP) who hold options or awards entitling them to acquire Existing Ordinary Shares will not be eligible to participate in the Return of Cash in respect of those options or awards. For the avoidance of doubt, this includes any awards under the 2017 LTIP that are currently subject to a post-vesting holding period.
   As a result of the Share Consolidation, no adjustment will be required to the terms of these entitlements. Options or awards over Existing Ordinary Shares will take effect as options or awards over the same number of New Ordinary Shares, which are expected to have approximately the same value per share following the Share Consolidation. Similarly, any "dividend equivalent" rights attaching to outstanding awards granted under the 2017 LTIP will be disapplied in relation to the whole of the Special Dividend.

The Company has established an employee benefit trust which, as at the close of business on 27 April 2023 (being the last practicable date prior to publication of this document), held 3,962,557 unallocated Existing Ordinary Shares in aggregate. These Existing Ordinary Shares may be used to satisfy awards and options granted under the Capricorn Share Schemes. The trustee of the trust has waived its entitlement to any dividends (including the Special Dividend) on its holding of unallocated Existing Ordinary Shares. Such Existing Ordinary Shares will be subject to the Share Consolidation.

5. 2017 LTIP - impact of Share Consolidation on dilution limits

At present, the 2017 LTIP is the only one of the Capricorn Share Schemes pursuant to which future options and awards can be granted over new Ordinary Shares. Under its rules, and consistent with guidance issued by the Investment Association, two limits are placed on the number of new issue shares that can be utilised in this manner.

The first limit provides that, on any day, the total number of Ordinary Shares which have been issued or which require to be issued in connection with options or awards that have been granted under the 2017 LTIP and any of the Company's other discretionary share schemes during the immediately preceding period of ten years cannot exceed 5 per cent. of the issued share capital of the Company immediately prior to that day (the "discretionary schemes limit").

The second limit provides that, on any day, the total number of Ordinary Shares which have been issued or which require to be issued in connection with options or awards that have been granted under the 2017 LTIP and all the Company's other employee share schemes during the immediately preceding period of ten years cannot exceed 10 per cent. of the issued share capital of the Company immediately prior to that day (the "all schemes limit").

However, the impact of the Share Consolidation will be to reduce the number of Ordinary Shares in issue. In the absence of any change to the terms of the 2017 LTIP, this would result in a disproportionate decrease in the currently available headroom under the discretionary schemes limit and the all schemes limit (i.e. on the basis that, for the purposes of those limits, the number of Ordinary Shares previously issued in satisfaction of options and awards would remain constant).

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