Capricorn Energy : Sustainability Report 2022

As an energy producing company, the environmental aspect of sustainability means it is vital for us to find a way to deliver net zero carbon emissions for the Company."

Chris Cox

Interim Chief Executive Officer (CEO)

Overview

Capricorn is an Egypt-focused energy producer, with an attractive portfolio of onshore exploration, development and production assets in the Western Desert.

Outside Egypt, the Company has selective exploration interests which it is seeking to monetise, farm-down or exit.

Capricorn is headquartered in Edinburgh, Scotland.

Contents

Overview

Our Sustainability Strategy

Environment

People

Society

Governance

About Our Sustainability Report

This document comprises Capricorn Energy's full Sustainability Report 2022, covering our sustainability strategy and performance from 1 January to

31 December 2022.

A key focus for the business in 2022 has been on setting out our net zero policy more clearly for our stakeholders. As part of that, we aim to reduce Scope 1 and 2 equity CO2 emissions by 15% by 2025 and by 30% by 2030. Ultimately, this would lead us to our target of being net zero by 2040, if not sooner. This has involved setting clear principles to underpin those targets - see page 9 for more detail.

Key initiatives and updates in 2022

• Articulation of our roadmap to net zero.
• Culture shift towards greater use of targets and measurements.
• Establishment of well-resourced,highly-targeted presence in Egypt.
• Social investment programmes being discussed in Egypt, and continued in Suriname and Mexico.
• Careful consideration of human rights challenges in Mauritania in anticipation of contracting requirements.
• Seismic data collection programme completed in Egypt with exploration drilling beginning in Q1 2023.
• Introduction of the ambition to deliver No Net Biodiversity Loss in areas where we operate.
• Revised approach to competency management.

Third-Party Assurance

We have commissioned Deloitte to provide independent third-party assurance of our operated Greenhouse Gas (GHG) emissions data, and have commissioned a study on next steps to be able to assure a wider set of data, including equity GHGs.

Our Corporate Responsibility Management System (CRMS)

We continue to review our CRMS annually to ensure our policies, procedures and guidance match regulatory requirements. The annual review is high-level with a focus on continual improvement year-on-year, and the following actions took place in 2022 to support our CRMS ambitions:

• Continued to update our own reporting to match the evolving Task Force on Climate-related Financial Disclosure (TCFD) requirements, and extended our assessment to cover physical risks from climate change.
• More clearly set out our net zero pathway for all stakeholders, highlighting a 15% and 30% reduction in emissions by 2025 and 2030 respectively with a focus on zero emissions by 2040, if not sooner.
• Progressed our carbon capture and storage study, with candidate storage and screening phases completed.
• Incorporated a new five-step human rights guidelines to help better define how we identify, assess and manage potential issues.

Once they have been developed, our asset managers are responsible for ensuring all of our operations adhere to the CRMS guidelines.

Our Sustainability Strategy

Environment

People

Society

Governance

Net working interest oil and gas production averaged (boepd):

~34,200

(2021: ~36,500)

Egypt oil and gas sales revenue:

US$229m

(2021: US$56m)

Capital expenditure:

US$162m

Year end net Group cash:

US$597m

(2021: US$314m)

Emissions:

14,176tCO2e

Total operated location-based Scope 1, 2 and 3 (2021: 1,469**)

269,635tCO2e

Total equity Scope 1 and 2 (2021: 146,686)

Energy:

117,628 GJ

Total direct energy consumption (2021: 14,299)

Waste:

2,444 tonnes

Total operated hazardous and non- hazardous waste (2021: 39)

Water:

21.26 megalitres

Total water withdrawal (2021: 1.13 megalitres)

Spills:

Zero

Spills of oil, fuel, chemicals or waste to the environment from operated activities (2021: Zero)

Health and safety:

Zero

Lost Time Injuries (LTIs) per million hours worked across the Group (2021: Zero)

Training:

36 hrs

Average number of hours training by each employee (2021: 31)

Diversity and inclusion:

15.7%

Capricorn employees from minority groups (2021: 5.88%)

Female employees:

49%

(2021: 47%)

Human rights:

98%

Personnel completed refresher training in human rights and modern slavery (2021: 94%)

Social investment:

£340,420

(2021: £112,197)

Charitable giving within the UK:

£370,106

(2021: £328,307)

Energy transition:

Strengthened our climate and energy transition roadmap, committing to 15% equity GHG emissions reduction by 2025, 30% reduction by 2030 and net zero status by 2040 or earlier.

Frameworks and standards:

We improved both our annual climate and water disclosures to CDP from B- to B.

Employees trained in Capricorn Energy's anti-corruption policies and procedures:

97.84%

(2021: 96.19%)

Read more about our governance arrangements on pages 46-58.

Our Sustainability Strategy

Environment

People

Society

Governance

Frameworks and Standards

We commit to complying with the regulations set by the authorities in the countries where we operate,

and continue to seek to provide meaningful contributions to the United Nations Sustainable Development Goals (UN SDGs). Our culture of working responsibly is reinforced by global management frameworks and standards that promote good working practices and responsible corporate behaviour, as outlined on this page.

Our rigorous approach to safety has led to an excellent safety record that we are proud of and determined to maintain as we enter territories that are new for us, such as Egypt and Suriname.

1. Organisations can report in accordance with the GRI Standards at one of two levels (Core or Comprehensive), depending on the degree to which the Standards have been applied. The Standards were updated in 2021 for adoption by companies by January 2023. From FY22, Capricorn will adopt these new requirements and transition to fully reporting against them by 2023.
2. The IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector in developing countries.
3. IOGP/IPIECA, 2014: Operating Management System Framework for controlling risk and delivering high performance in the oil and gas industry, IOGP Report 510.

Environment

• Our CRMS is aligned with the international environmental management systems standard ISO 14001 and verified against the management system issued under the Oslo/ Paris Convention for the Protection of the Marine Environment of the North-East Atlantic (OSPAR).
• We do not operate in UN World Heritage Sites or International Union for Conservation of Nature (IUCN) Ia (Strict Nature Reserve) and Ib (Wilderness Area) category locations.
• We have undertaken resilience modelling to understand the impact the energy transition could have on our assets under different scenarios: International Energy Agency (IEA) Stated Policies Scenario (STEPS); IEA Announced Pledges Scenario (APS); and IEA Net Zero Emissions by 2050 (NZE).
• Our carbon offset strategy is based on the acquisition of verified, high-quality carbon credits that are aligned with the International Carbon Reduction and Offset Alliance (ICROA), Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and certified by Verified Carbon Standard (Verra), Gold Standard and American Carbon Registry.
• We are now regularly using the Integrated Biodiversity Assessment Tool (IBAT), together with an in-house geographical information system (GIS)-based biodiversity risk screening tool, developed with the United Nations Environment Programme's World Conservation Monitoring Centre (UNEP WCMC).

People

• Our CRMS is aligned with ISO 45001:2018, the international standard for occupational health and safety management systems.
• We operate in accordance with the UK Modern Slavery Act and in line with international labour standards - see our Modern Slavery Statement.

Society

• We support the principles contained within the Universal Declaration of Human Rights (UDHR) and meet the requirements of the Voluntary Principles on Security and Human Rights (VPSHR).
• Our CRMS is aligned with ISO 26000 guidance on operating in a socially responsible way.

• The UN SDGs (pages 59-60) guide us in minimising our negative impacts and maximising the social, economic and environmental benefits of our activities.
• Supporting the above, we have compliance with, or consideration of, the UN UDHR; the UN Guiding Principles on Business and Human Rights; and the International Finance Corporation (IFC) Performance Standards.

Governance

• We use the latest guidance from the Financial Reporting Council (FRC) and the International Petroleum Industry Environmental Conservation Association (IPIECA) to inform our stakeholder engagement (pages 13 and 14) and materiality (page 15) processes.
• We assess our reporting of climate-related risks and opportunities against the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, with clear disclosure of our workings (pages 61-66).
• We report our sustainability information in accordance with the Global Reporting Initiative (GRI) Standards (Core option)1
  - see our GRI Content Index on our website.
• Our reporting is aligned with the Sustainability Accounting Standards Board (SASB) Oil & Gas - Exploration & Production Standard and International Standard on Assurance Engagements (ISAE) 3000/3410.
• We work to the IFC2 Performance Standards on Environmental and Social Sustainability.
• We align our CRMS with international best practice, including the International Association of Oil & Gas Producers (IOGP) standards and guidance. Our CRMS is based on the IOGP/ IPIECA Operating Management System Framework3.
• We are a member of the Extractive Industries Transparency Initiative (EITI), a coalition that promotes payment transparency in the oil, gas and mining sector.
• As a signatory to the United Nations Global Compact (UNGC), we have integrated universally accepted principles on human rights, labour, the environment and anti-corruption into our policies and Code of Ethics - see our UNGC Index.