The Karoon Energy Ltd (ASX: KAR) share price is rose in late-afternoon trade today. This follows the announcement of a contract with Maersk Drilling.
Founded in 1972, Maersk Drilling is a leading offshore drilling operator. The company supports oil and gas production by providing drilling services to oil companies worldwide.
The Australian oil and gas company's shares closed the day at $1.20, up 1.69%.
Details of the contract
According to its release, Karoon advised it has contracted the Maersk Developer rig for the 2022 Baúna workover campaign. The award follows a competitive tender process that involved 10 different rig owners.
Under the agreement, Maersk Drilling will conduct a workover program, targeting an increased production of between 5 to 10 KBOPD (thousand barrels of oil per day). Additionally, works will include the replacement of downhole pumps in two wells and the installation of a gas lift in one well. The works will also re-open an oil zone in one well.
Karoon stated that the drilling rig is currently located in the Caribbean, and is expected to arrive in Brazil within the first half of 2022.
Once works are completed at Baúna, Karoon has the option to retain the rig for development at the Patola field. This oil site is adjacent to Baúna and lies inside the BMS-40 Production Licence. Karoon noted that the development of the Patola field could yield more than 10 kbopd and provide additional reserves to its Baúna asset. A final investment decision (FID) is expected to be made in Q2 of 2021.
In addition, the company has the flexibility to extend the Maersk Drilling contract on its Neon light oil discovery. The well, located approximately 60 kilometres northeast of Baúna, will be the first subject to subsurface and engineering studies. Should the Neon oil field prove lucrative, Karoon will employ the rig to drill a control well.
The value of the Maersk Drilling contract has a 'firm' price tag of $34 million, which includes rig modifications and a mobilisation fee.
Comments from the CEO
Karoon CEO and and managing director, Dr. Julian Fowles commented:
We are delighted to have signed this contract with Maersk Drilling, a global leader in offshore drilling, with one of the youngest and most advanced rig fleets in the industry. The contract marks another significant milestone in the evolution of Karoon into a substantial production and development company with material near term growth potential.
Karoon share price snapshot
The Karoon share price has jumped over 130% in the last 12 months. It is also up 12% year-to-date. Like most energy shares, Karoon has seen an upwards growth trajectory since its COVID-19 lows in March 2020. The economic rebound in oil prices has predominately driven the company's share price performance.
Karoon has a market capitalisation of roughly $661 million, with more than 553 million shares on issue.
