COVID-19 and the crash in global oil and gas prices have helped at least one local energy company. Karoon Energy shares jumped sharply yesterday after it revealed better terms to buy a Brazilian oil field than those originally announced.
Last week FNArena highlighted Karoon Gas ((KAR)) given upside potential from extensive drilling programs in both Australia and South America (see: Karoon Offers Cause For Optimism) and this week broker coverage of the company has increased.
The broker notes Karoon Energy was just about to make transformational acquisition before oil prices collapsed in March. The broker now sees the Bauna deal as unlikely to progress, with valuations and debt markets severely impacted.
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.
Karoon Gas posted a first-half loss in line with the broker's forecast. The good news is the new chairman has highlighted a need for a clear strategy, to maximise value from existing assets and improve capital management.
Petrobras has withdrawn the appeal process for Bauna and Tartararuga Verde, effectively ending the sales process for the final negotiation rights. Despite the disappointment, Karoon’s management believes the assets will be back on the market in the future.