Bloomberg News

Karoon IPO on Hold as Company Seeks to Boost Brazil Asset Values

June 30, 2011

July 1 (Bloomberg) -- Karoon Gas Australia Ltd., the energy company that scrapped the initial public offering of its South American unit in November, will hold off selling shares for at least another year as it seeks new finds to boost its value.

Karoon will spend $150 million drilling three wells in the shallow waters of Brazil’s Santos Basin near recent discoveries by state-controlled Petroleo Brasileiro SA to help boost the potential value of its assets, Tim Hosking, Karoon’s executive director for South America, said in an interview. The company will wait until it completes drilling in about the middle of next year before deciding to proceed with a share sale, he said.

Karoon, which is also ConocoPhillips’ partner in a venture off northwest Australia, cancelled the share offer last year after failing to get its target price, Hosking said. The company had sought to raise as much as $773 million and planned to use the proceeds to fund exploration in Brazil and Peru.

“We would wait for a discovery before an IPO,” Hosking said in the interview in Rio de Janeiro. “We have many potential prospects.”

Karoon’s Brazil licenses are 25 kilometers from Petrobras’s Tiro field and 5 kilometers from the Piracuca discovery, while the company also has a 20 percent stake in Petrobras’s Maruja discovery in the area. Rio de Janeiro-based Petrobras’s discoveries in the so-called pre-salt area off the coast of Brazil are the largest in the Western Hemisphere in more than three decades.

Seismic research commissioned by the Mt. Martha, Victoria- based company shows five areas of the Santos basin that may contain oil and natural gas, he said.

“Equity Swap”

Karoon is seeking a “major” oil company to take as much as a 30 percent stake in its Brazil blocks and also handle operations once it completes exploration drilling, Hosking said. The company, which owns 100 percent of the five blocks where it is seeking a partner, is also open to an “equity swap” to expand its exploration areas in Brazil, he said.

“It would preferably be a company with experience here in Brazil, a Petrobras or a Statoil,” said Hosking. “Or a company such as Conoco that has development experience all over the world.”

Karoon will open a so-called data room to market the exploration areas in September, and expects 20 “mid- to major- sized” companies will review the information, he said. Karoon may sell up to a 25 percent stake of its offshore assets in Peru after it completes exploration drilling there that will start in late 2012, he said.

“We have seven to eight prospects greater than 100 million barrels” in Peru, he said.

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--Editors: Dale Crofts, Jessica Brice

To contact the reporter on this story: Peter Millard in Rio de Janeiro at Pmillard1@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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