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Karoon Energy share price climbs 5% on acquisition confirmation


The Karoon Energy Ltd (ASX: KAR) share price has climbed 5% after it confirmed that it is the highest bidder for the Petrobras-owned Bauna asset off the Brazilian coast.

What did Karoon announce yesterday?

Petrobras is a semi-public Brazilian petroleum company that is looking to offload its entire stake in the Bauna oil field located in shallow waters in the Santos Basin off the coast of Brazil.

After weeks of media speculation, Karoon yesterday entered a trading halt and responded to speculation published by industry website Upstream Online on 12 July 2019, which reported that Karoon had edged out another Brazilian oil giant, PetroRio, in its bid for the Bauna asset.

Karoon confirmed that it has been notified that it has presented the highest bid in the process to acquire a 100% operating interest in Santos Basin off-shore Brazil concession BM-S-40, which contains the producing Bauna light oil project.

The transaction remains subject to approval by Petrobras’ Board and governance bodies.

According to Karoon management, the Bauna bid is in line with the company’s stated strategy to create value for shareholders by acquiring a high-quality, transformational production asset.

What’s the story behind the Bauna sale?

On 10 October 2016, Petrobras announced that it had started negotiations with Karoon for the sale of stakes in the Bauna and Tartaruga Verde fields in Brazil.

The Bauna field has been in operation since February 2013 and currently produces about 45,000 bbl per day, while Karoon currently holds five exploration and production (E&P) licenses in Brazil.

Following yesterday’s 5% share price climb, Karoon shares are currently trading 39% higher than they were at the start of the year.

This strong share price performance has seen Karoon shares edging closer to a new 52-week high (current high is $1.22 per share) and boasting a market capitalisation of $270 million as at the time of writing.

Should Karoon’s bid receive the required clearances, the share price could climb higher on the prospect of expanded production and further diversification of oil and mining assets around the globe.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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