Karoon to exit Great Australian Bight

Karoon Energy is abandoning exploration plans at two opportunities in Australia, including at its licence in the Great Australian Bight.

The company will instead focus on progressing a number of South American assets, according to chairman Bruce Phillips.

Speaking at the company’s annual general meeting (AGM), Phillips said the company was focussed on ensuring its broader asset portfolio was appropriately sized for its capital capabilities and corporate values.

“In Australia we have relinquished WA-314-P after failing to attract a suitable farminee,” Phillips said.

“We have also listened to our broader stakeholder groups and have initiated actions to relinquish EPP46 in the Great Australian Bight.”

Karoon is evolving from a pure exploration company into an embryonic global exploration production entity after the acquisition of the Bauna oil project in the southern Santos Basin of Brazil for $950 million in July.

The strategic acquisition is set to offer long-term cash flows and projects for Karoon, along with very good infield growth opportunities.

Phillips said the project would also provide synergies for development of the nearby Neon and Goia oil fields, and in the long term, any success from its adjacent exploration prospects.

“Coupled with the drilling of the large Marina project in Peru in Q1 2020, we are all excited about the opportunities in front of us,” Phillips said.

“The board is clearly delighted with the Bauna acquisition and the financial and strategic benefits it delivers for shareholders.”

Karoon, which holds a 100 per cent position in the Bauna, Neon and Goia assets, now has considerable flexibility and optionality in its asset portfolio.

Phillips said the company’s primary path was self-financing, but it also had the flexibility to farmout or sell down if more attractive demands for capital arise.

“Karoon has been focussed on ensuring its broader asset portfolio is sized for its capital capabilities and corporate values,” Phillips said.

He said making an asset acquisition like Bauna, which was four to five times the market capitalisation of the company, was always going to be a “major challenge”.

“The board needed to balance the requirements of seeking significant debt and equity capital at reasonable of, against ensuring the company has a stable platform to thrive and grow in the future,” Phillips said.

“Over the next few years, the board’s priority for capital allocation will be firstly to invest in growth, then debt reduction and dividends to shareholders, with any excess capital thereafter allocated to initiatives such as share buy-backs or capital returns.”

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