Karoon Energy (ASX:KAR) seeks to acquire 50% stake in Brazilian oil field

Highlights

• Karoon Energy has signed an exclusivity agreement with Enauta, a Brazilian oil and gas explorer for the proposed 50% acquisition of oil field in Brazil.
• The offer presented by Karoon, and the exclusivity agreement is valid till 31 May 2022.
• Karoon already has assets in the Santos basin of Brazil.

International gas and oil explorer and producer, Karoon Energy Ltd (ASX:KAR), has proposed to acquire a 50% non-operated interest in an oil field located in the Santos basin, Brazil.

In connection with the acquisition offer, Karoon has submitted a bid to Enauta Energia S.A. Also, the ASX-listed energy company has signed an exclusivity agreement with Enauta. The financial metrics of the proposed deal are not disclosed yet.

The Atlanta oil field has been referred to as an opportunity that aligns with the company’s strategy of inorganic growth opportunity and value-accretive in the ordinary course of business.

About exclusivity agreement

Exclusivity agreement is signed among companies to ensure that the other company negotiates only with the client for a prospective deal till a prespecified time. The exclusivity agreement between Karoon and Enauta includes confidential negotiating and conducting due diligence.

The exclusivity agreement is valid until 31 May 2022 and can be extended if both parties agree.

Karoon said that the exclusivity agreement is consistent with its strategy to create value from acquisition and take advantage of inorganic growth opportunities to enhance its position in Brazil.

Worth mentioning here is that the offer does not bind Karoon to implement the transaction, and the offer can be modified or withdrawn at any point in time.

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Financial performance of Karoon Energy

In the first half of the financial year 2022, the company reported an underlying net profit after tax of US$21.1 million, despite Covid-19 driven pandemic. Karoon said that profit value is also driven by the rise in oil prices globally.

Image source: © Joingate | Megapixl.com

As of 31 December 2021, the cash and cash equivalents of Karoon stood at US$204 million, reflecting the solid financial position of the company. The management said in a statement that the cash might be sufficient to fund the Patola development program and Bauna intervention campaign. It is noteworthy that the increase in global oil prices generated additional cash flow.

Looking at the performance in 1HFY22, Karoon said that it would fund the sanctioned growth projects of Karoon.

How is Karoon making its operations sustainable?

Karoon has installed a new mooring buoy and replaced a low-pressure flare to ensure sustainability in operations. These two projects would control greenhouse gas emissions. Karoon would buy premium quality carbon credits from 2022 to 2023 from Shell to reduce emissions from the Patola and Bauna.

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Karoon Energy share price

During the early morning trading hours, Karoon’s shares were trading in the green, and at 12:11 PM AEDT, shares were down by 0.47% to trade at AU$2.13 per share. This year, Karoon’s share prices have surged by over 20%, and within a year, the shares rose by approximately 96%. In the last six months, KAR generated a return of 36%.