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.
When Karoon Gas ((KAR)) failed to proceed with an IPO of its Brazilian assets more than a year ago, the market predictably reacted in a negative way. Stockbroker Moelis expects the company’s extensive drilling program over the next 12 months is poised to reignite interest from investors.
For Karoon Gas Australia ((KAR)), the key elements of the group’s quarterly production report related to timing expectations for future work on both the Browse Basin appraisal program and permits in the Santos Basin in Brazil.
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Petrobras has withdrawn the appeal process for Bauna and Tartararuga Verde, effectively ending the sales process for the final negotiation rights.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.