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Australia’s Karoon renegotiates

Brazil oilfield acquisition

FINANCE & AUSTRALIAN independent Karoon Energy
INVESTMENT has renegotiated payment terms with Brazil’s
state-run Petrobras for the acquisition of the off-
shore Bauna oilfield.
Karoon agreed in 2019 to pay $665mn for
a 100% stake in the producing field, which lies
in the Santos Basin. However, the company
launched a strategic review of its operations
following this year’s oil and gas price collapse,
prompting it to seek new sale and purchase
agreement (SPA) terms.
The independent said that the previously
announced “headline” payment would now be
split into two payments, the first being a “firm”
consideration of $380m and the second a “con-
tingent” consideration of $285mn. Karoon said the new payment structure
The $380m includes a $50mn down payment allowed it to preserve its financial position while
Karoon has already made and a $150mn pay- allowing it to begin the immediate workover
ment once the transaction closes. Karon said the of Bauna’s production infrastructure. This is
remainder of the firm payment would depend expected to boost production materially without
on any of the asset’s operating and investing requiring further debt raising.
cashflows relating that it is owed, given that the Karoon CEO and managing director Robert
deal has an effective transaction date of January Hosking, who has announced plans to retire at
1, 2019. Once the final figure has been deter- the 2020 annual general meeting (AGM), said
mined it will then be paid out over an 18-month the revised agreement “delivers the benefits
period from the day the deal is finalised. we always wanted from acquiring a producing
The Australian developer said it would pay asset including immediate cash flow, reasonable
the contingent $285mn payable based on the terms, management of risk, and opportunity for
average annual daily Platts Dated Brent oil price the future”.
using thresholds of between $50 per barrel and The executive told local daily The Age
$70 per barrel during 2022-2026. that the revised terms would allow it to pro-
The original SPA’s bonus payment of $50mn, ceed with the deal even though the asset had
which depends on average Brent prices exceed- lost some its value.
ing $100 per barrel this year, remains in place. “If we had to write a cheque based on the full
Karoon said it would use existing cash and $665mn on day one, lenders probably wouldn’t
organic cashflows from the asset to fund the acqui- have provided that debt at the current oil price ...
sition, which was now simplified and significantly and we would have had to pull out of the deal,”
de‐risked thanks to the amended terms. he said.™

P12 www. NEWSBASE .com Week 30 30•July•2020