Karoon Energy shares surge after reserve upgrade at Brazilian oilfields
Shares in Karoon Energy surged on Monday following a positive reserves update at its Santos Basin oilfields off the Brazilian coast.
Shares in Karoon Energy surged on Monday following a positive reserves update at its Santos Basin oilfields off the Brazilian coast.
The company said the 23 per cent increase in the proved and probable reserves estimate at its BM-S-40 concession was a result of better than expected performance from producing wells, updated modelling of its Patola development and an extension to the project’s economic life.
The latest proved and probable reserves estimate of 55 million barrels of oil is up from 44.8 in June, and takes into account production of 3.4 million barrels in the six months to December, and a long-term oil price assumption of $US65 a barrel.
Karoon shares closed 7.4 per cent higher on Monday at $2.32. They have risen 25 per cent over the last 12 months alone.
The company’s chief executive, Julian Fowles, said the extension to the project’s economic life – from 2026 to 2032 – would provide “further opportunities to maximise asset value”.
“The material increase in Baúna reserves follows extensive reprocessing of seismic reservoir modelling and dynamic simulation work undertaken by our technical teams in Brazil and Australia,” Mr Fowles said on Monday. “The resolution of the reprocessed seismic is significantly better than legacy data sets, decreasing the uncertainty on field volumes.
“The results from the three Baúna well interventions recently completed have been very positive and, together with information from the two Patola wells, have provided valuable additional data points, which have also assisted in the reserves definition.”
Karoon increased its proved reserves estimate at BM-S-40 by 17 per cent to 42.8 million barrels, while its proved, probable and possible reserves estimate was also increased by 7 per cent to 65.5 million barrels.
RBC Capital Markets described the reserves upgrade as “a very good result”, but said it would require a four-year contract extension for the floating production storage and offloading vessel that services the Bauna project.
Karoon said it would now undertake work to assess the impact of the reserve increase on its decommissioning obligations and its FPSO and other infrastructure requirements at Bauna, and would announce any impact in its interim financial statements due for release on February 22.
Karoon owns a string of prospects in Brazil, including the Baúna offshore asset, which it snapped up for $US651m ($951m) from Brazil’s national oil company Petrobras in 2020.
It comprises the Baúna and Piracaba producing oilfields in the southern Santos Basin, around 200km off the coast of southeast Brazil, and the Patola field, which is under development.
Production at Patola, which has 16.4 million barrels of proved and probable reserves, is expected to commence within the first three months of the year.
Separately, 60km northeast of Bauna, Karoon is investigating the potential of its Neon development. Regulatory approvals for the drilling of two wells at Neon were secured from the Brazilian government last week, and drilling will continue over the first quarter of 2023 to determine the economic feasibility of the project.
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