Karoon Energy Ltd (KAR)
BUY

Plenty in reserve

 23 Jan 2023
Sector: Energy

RESERVE UPGRADE

Need To Know

  • 13.6mmboe increase to Bauna 2P reserves
  • Approval received to drill Neon

A meaningful reserve upgrade is the latest in a series of catalysts for Karoon Energy. The upgrade was well anticipated yet underscores the growing confidence in management’s ability to execute.

Reserve upgrade. KAR had been re-analysing its 3D seismic survey data with a view to updating its Reserves and Resources. This has resulted in a 23% lift to the 2P Reserves at Bauna to 55mmbbls as at 31 December 2022. The upgrade considers the recent production data, recent data from the intervention wells and drilling at Patola. The field life has now also been extended to 2032.

Neon approval. KAR has also received approval from the Brazilian Government to drill two wells at the Neon field. A drilling rig in en route with the first well to commence drilling imminently.

Investment view

We have been expecting this announcement and the news is unequivocally positive. The company has been setting out its development pathway very clearly, and more importantly, delivering on each step.

The next catalyst is expected from news on the Patola field as first production is expected in the first quarter of 2023.

Now that the drilling rig is heading to Neon, news flow from that activity could also contribute to the conga line of small but positive steps achieved at KAR.

KAR’s balance sheet is flush with cash and operational efficiency is seeing unit costs falling from US$25/bbl towards guidance of US$15-20/bbl. Operating cash flow is solid with a small uptick in oil prices likely to assist.

We continue to like the pure oil exposure at KAR, supported by an excellent management team.

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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.

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