Karoon Energy Ltd (KAR)
BUY

Deidre Chambers, what a coincidence

 27 Apr 2023
Sector: Energy

3Q23 PRODUCTION

Need To Know

  • FY23 production guidance downgraded to 7.0-7.7mmbbls
  • FPSO outage is fixed, but maintenance brought forward
  • Patola suspended but rearing to go

The FPSO outage and fast-tracked maintenance has suspended production at Patola, thus lowering Karoon’s FY23 production guidance.

KAR is now guiding to FY23 production of 7.0-7.7mmbbls (previously 7.5-9.0mmbbls) while the Patola field awaits the green light to restart. Just prior to the outage, Patola had been delivering flush production rates of 40,000 bopd with stabilised production expected to settle around 33-35k bopd once it restarts, likely in May.

Unit costs have also been revised to US$15-17/bbl while capital expenditure has been revised down to US$245-265m (was US$265-295m).

KAR is working on the data from its two Neon wells drilled in the quarter. Once the field is better understood, this could create further upside on reserves and production.

The ~2mmbbls of production in 3Q23 were matched by oil sales of 1.98mmbls at an average net realised price of US$72.93/bbl, down -11% on the previous quarter, generating revenue of US$144m.

Investment View

“Deirdre Chambers, what a coincidence!”, exclaims Bill Heslop in Muriel’s Wedding. Except we know it isn’t. The FPSO outage at Bauna, which was fixed within two days, coincidentally happened in the midst of the Brazilian Government’s temporary export tax on oil. Nonetheless, KAR will still incur pre-tax costs of US$18-24m while the tax is in place from 1 March to 30 June this year. We cannot definitively say KAR is channelling Bill Heslop, but the opportunity to bring forward a tranche of maintenance has fortuitously helped to lower KAR’s FY23 production.

Despite the FPSO hiccup and subsequent production downtime, FY24f is shaping up as a very strong year for KAR, subject to any other unforeseen events.

Figure 1: QUARTERLY PRODUCTION

View the latest Research Report

Stock Overview

Share Price

Company Overview

KAR is a Brazil-focused oil production company, based in Melbourne. Its main assets are located in the Santos Basin offshore Brazil where the company has 100% interest in the Bauna field and is the operator.

Disclaimers and Disclosures

Issuer

The information and opinions contained within Sandstone Insights Research were prepared by MST Financial Services Pty Ltd (ABN 54 617 475 180, AFSL 500557) ("MST").

Reliance

Whilst MST make every effort to use reliable, comprehensive information in the construction of its reports, MST make no representation, warranty or undertaking of the accuracy, timeliness or completeness of information in this report. Save for any statutory liability that cannot be excluded, MST and MST employees, representative and agents shall not be liable (whether in negligence or otherwise) for any error or inaccuracy in, or omission from, this advice or any resulting loss suffered by the recipient or any other person.

General Advice

Any advice contained within Sandstone Insights Research is general advice only and has been prepared without taking into account any person’s objectives, financial situation or needs. Any person, before acting on any advice contained within Sandstone Insights Research, should first consider consulting with a financial adviser to assess whether that advice is appropriate for their objectives, financial situation and needs. 

General Disclosures

This report should be read in conjunction with MST Disclaimers and Disclosures and is published in accordance with MST Conflict Management Policy which are available on the MST website: https://www.sandstoneinsights.com.au. 

Currency of Research

The recommendations made in a Sandstone Insights Research report are current as of the publication date. If you are reading a report materially after publication, it is likely that circumstances will have changed and at least some aspects of the analysis may no longer hold.

Access and Use

Any access to or use of Sandstone Insights Research is subject to the Terms of Use. By accessing or using Sandstone Insights Research you hereby agree to be bound by our Terms and Conditions and hereby liable for any monies due in payment of accessing this service. In addition you consent to us collecting and using your personal data (including cookies) in accordance with MST Privacy Policy, including for the purpose of a) setting your preferences and b) collecting readership data so MST may deliver an improved and personalised service to you. If you do not agree to MST Terms of Use and/or if you do not wish to consent to MST use of your personal data, please do not access this service.

Equities Research Methodology

Please click here for information about MST equities research methodology.