PERTH (miningweekly.com) – The share price of ASX-listed Karoon Energy increased by more than 11% on Monday as the company announced plans to continue its investment in Brazil, and to amend the sale and purchase agreement (SPA) of the Bauna field, in the Santos basin.
Karoon told shareholders that a wide-ranging strategic review of the options available in the current global market environment had confirmed that the company should pursue its Southern Santos basin strategy in Brazil.
The first step in implementing this strategy is to renegotiate a revised transaction to acquire the producing Bauna oil field, which consists of two producing oil reservoirs with reserves of 46.8-million barrels of oil equivalent, which are both tied back to a leased floating production, storage and offloading facility, as well as the Patola discovery which has a contingent resource of 15.6-million barrels of oil equivalent.
The amendments to the SPA have now split the headline $665-million consideration into $380-million of firm consideration and $285-million of contingent consideration.
The $380-million firm consideration will consist of $150-million that will become payable at the close of the transaction, a closing adjustment offset which comprises the operating and investing cashflows to the assets in the period between the transaction effective date and the closing date, and a deferred firm consideration payable 18 months after closing.
Up to a further $285-million of contingent consideration will be payable based on the average annual daily oil price between 2022 and 2026, and an additional $50-million in the event that the oil price exceeds $100/bl in 2020.
“Despite the changed environment, this revised agreement delivers the benefits we always wanted from acquiring a producing asset including immediate cashflow, reasonable terms, management of risk and opportunity for the future,” said Karoon MD Robert Hosking.
“Karoon has assessed several opportunities as part of its broad ranging strategic review, and this revised deal for Bauna has proven the best outcome for shareholders on an overall valuation and returns basis. Karoon is always looking to create value wherever it can be found for its investors, and we will continue to work towards delivering Karoon’s operational plan to expand its production footprint in Bauna and surrounds, including Neon.”
Post acquisition, Karoon will have $130-million in cash and 2P contingent resources of 101.8-million barrels and reserves of 46.8-million barrels, and 16 000 bl/day of production, with no debt.
Karoon shares were trading at a high of 82.5c a share on Monday, up from a low of 72.5c each.