Acquisition on Bauna FPSO
| Stock | Karoon Energy Ltd (KAR.ASX) |
|---|---|
| Release Time | 27 Feb 2025, 9:51 a.m. |
| Price Sensitive | Yes |
Karoon Energy acquires Bauna FPSO for $115 million
- Strategic acquisition to re-establish reliable production from Bauna Project
- Expected to generate IRR well above Karoon's mid-teens post-tax hurdle rate
- Potential to significantly improve Bauna profitability through better FPSO efficiency and reduced operating costs
Karoon Energy's wholly owned Brazilian subsidiary, Karoon Petróleo & Gás Ltda. (KPG), has signed a Sale and Purchase Agreement to acquire 100% of the Cidade de Itajaí Floating Production, Storage and Offloading (FPSO) facility for US$115 million plus approximately US$8 million in transaction costs. The FPSO is the production facility for Karoon's 100% owned Bauna Project in the southern Santos Basin, Brazil. The acquisition is expected to be funded from Karoon's existing cash reserves. The transaction aligns with Karoon's long-term strategic objectives to expand the reserves base of existing assets and improve operational efficiency. The purchase is economically attractive, generating significant value for shareholders with an expected rate of return comfortably above Karoon's mid-teens post-tax hurdle rate and potentially more than 20%. The acquisition is also expected to result in approximately a US$4-6/bbl net unit operating cost reduction from 2026 onwards, reflecting the termination of the FPSO lease payments. The savings and certainty on the long-term availability of the vessel should allow the Bauna field to operate profitably well into the 2030s, enabling Karoon to access a portion of the 8.7 - 16.4 MMbbl of Bauna Project Contingent Resources.
Karoon expects to update 2025 guidance no later than the acquisition close date. The cost of the FPSO transaction was taken into account when determining the additional on-market share buybacks of up to US$75 million recently announced by the Company.
The acquisition of the FPSO is expected to enhance operational efficiencies and profitability of the Bauna field, allowing Karoon to access a portion of the 8.7 - 16.4 MMbbl of Bauna Project Contingent Resources and defer field abandonment and vessel decommissioning liabilities.