The company will acquire the Bauna oilfield for US$665m, becoming the fourth largest liquids producer on the ASX. Macquarie suggests a US$100-120m capital raising may be required to fund the acquisition shortfall and strengthen the balance sheet.
The broker assesses the company’s three-year wait to obtain the field appears to have paid off. Seller Petrobras is undergoing an extensive divestment program to reduce debt.
Macquarie believes the field is more suited to a company such as Karoon Gas, which has the ability to focus on lifting production volumes. Rating is upgraded to Outperform from Neutral. Target rises to $3.00 from $1.15.
Target price is $3.00.Current Price is $1.61. Difference: $1.39 – (brackets indicate current price is over target). If KAR meets the Macquarie target it will return approximately 46% (excluding dividends, fees and charges – negative figures indicate an expected loss).