Oil and gas explorer, Karoon Gas Australia Limited (ASX: KAR) is currently in a trading halt, as the company attempts to shore up its financial position.
Shares in Karoon had crashed down 57%, prior to the trading halt. But the question many investors may be asking is, Will the company emerge in a better or worse financial position, if and when it resumes trading?
Here are three reasons that may give shareholders cause for hope…
1) Karoon has managed to farm out a 50% interest in its Carnarvon Basin Permit WA-482-P to US oil and gas giant Apache Corporation. Apache will pay Karoon US$9 million as reimbursement of seismic acquisition costs, and fund 90% of the drilling costs for one exploration well. Apache has a strong record, being a large gas supplier in Western Australia already.
2) Karoon has extensive oil and gas assets, in both Australia’s Carnarvon and Browse Basins, as well as in the Tumbes Basin in Peru and the Santos basin offshore Brazil. Those Australian assets may well be coveted by some of our larger oil and gas producers including Woodside Petroleum Limited (ASX: WPL), Santos Limited (ASX: STO) and even BHP Billiton Limited (ASX: BHP).
3) The company has signalled it is in discussions with potential new investors. That could see potentially one of the larger US or Chinese oil and gas companies take a strategic stake in the company, providing much needed funding.
Karoon expects to make a further announcement on Monday, June 2, which should give investors more comfort about the company moving forward.
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Motley Fool writer/analyst Mike King owns shares in Santos. You can follow Mike on Twitter @TMFKinga