Karoon Energy Revises Terms for Baúna Field Acquisition in Brazil
ASX-listed independent Karoon Energy Ltd. has announced amended terms for the acquisition of a 100% interest in the BM-S-40 Concession (containing the offshore Baúna field) from Brazilian state-owned Petroleo Brasileiro SA (Petrobras).
In July last year, Karoon’s wholly-owned subsidiary, Karoon Petróleo e Gás Ltda. signed an agreement to acquire the Baúna field for US$665 million in cash plus additional contingent payments of up to US$100 million linked to future oil prices. Karoon will now acquire the concession for a reduced cash consideration of US$380 million, plus certain contingent payments.
Under the terms of the revised deal, the previous cash consideration of US$665 million has been split into US$380 million of “firm” consideration and US$285 million of “contingent” consideration. Karoon will now pay US$150 million in cash upfront, and an additional US$230 million (less closing adjustments) within 18 months from closing.
The contingent payments of US$285 million (plus interest at 2% p.a) will be payable based on the future Brent oil prices for years 2022 till 2026. An additional contingent payment of US$50 million in the event the average Brent oil price exceeds US$100 per barrel (/bbl) in 2020 remains in place from the original agreement.
The BM-S-40 Concession is located in the Santos basin off the coast of São Paulo State, in water depths ranging from 230 to 295 meters. The Baúna field comprises the Baúna and Piracaba reservoirs, and the Patola discovery. The field was discovered in 2008 and commenced production in 2013. According to Karoon’s latest estimates, the field contains 1P reserves of approximately 35.6 million barrels of oil (MMbbls) and 2P reserves of approximately 46.8 MMbbls as of January 1st, 2020. During 2019, the concession produced approximately 19,000 barrels of oil per day (bbls/d).
“Despite the changed environment, this revised agreement delivers the benefits we always wanted from acquiring a producing asset including immediate cash flow, reasonable terms, management of risk, and opportunity for the future. Karoon has assessed several opportunities as part of its broad ranging strategic review and this revised deal for Baúna has proven the best outcome for shareholders on an overall valuation and returns basis,” said Robert Hosking, Karoon’s Managing Director.
The transaction is subject to customary closing conditions, including the receipt of approval by Brazil’s Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (ANP), and is expected to be completed in Q3-2020.
RBC Capital Markets and Banco BTG Pactual are acting as financial advisors to Karoon, while Bank of America Merrill Lynch is acting as financial advisor to Petrobras on the deal.