Karoon Energy (ASX:KAR) obviously thinks it’s onto something super-hot in Brazil’s Santos Basin because it has agreed to sink nearly $1 billion into a new project.

The company told investors today that it would be buying the already producing Baúna light oil field for $US665m ($953.1m).

Investors certainly liked the deal, with shares jumping over 22 per cent to an intraday high of $1.48 on Thursday morning.

The Santos Basin is one of the largest sedimentary basins in Brazil and the site of several giant oil and gas fields discovered since 2007.

The Baúna field consists of two producing oil reservoirs, Baúna and Piracaba, which are both tied back to a leased floating production, storage and off-loading facility, and the existing undeveloped Patola discovery.

The asset is currently producing light sweet crude at a rate of about 20,000 barrels of oil per day (bopd).

And target production is ~33,000 bopd during 2022, with total reserves and contingent resources of ~68 million barrels.

The key thing to note about the deal though is that the purchase price will be offset by immediate operating cash flows, and Karoon will be entitled to any cash flow generated dating back to the start of this year.

Karoon said that would reduce the purchase price by around $US140m to $US200m.

The company plans to fund the acquisition of Baúna with a combination of existing cash, debt, equity and pre-completion cash flows from the acquisition.

At the end of June, Karoon had $US228m cash in the bank and has already paid a $US49m deposit.

Managing director Robert Hosking said Baúna would provide Karoon shareholders with material oil production and a platform for future growth.

“The transaction will be transformational for Karoon shareholders, providing significant exposure to reserves, resources and high margin oil production,” he said.

“It is expected to generate significant operational and logistical synergies with Karoon’s other 100 per cent owned southern Santos Basin exploration and development assets.”

 

In other ASX energy news today:

Carnarvon Petroleum (ASX:CVN) has raised $79m from a fully underwritten institutional placement. “The proceeds provide Carnarvon the opportunity to progress the Dorado
project through to the development phase and will also support the company’s other key strategic initiatives,” managing director Adrian Cook said.

Buru Energy (ASX:BRU) has started drilling its Adoxa-1 exploration well in Western Australia’s Canning Basin. It is being drilled down to 2,400m and is targeting conventional sandstone reservoirs in the Reeves Formation. “This is a new play type for the Canning Basin and follows up the oil recovery from the Reeves Formation in the Ungani Far West 1 well,” chairman Eric Streitberg said. “If the well is successful there are also a number of follow-up locations that would provide attractive targets.”

Enegex (ASX:ENX) and its joint venture partner have decided to withdraw their renewal application for the retention lease over the Cornea WA-54-R permit. The partners didn’t think they would be able to satisfy Australian regulators that the project would we commercially viable within 15 years.

Fremont Petroleum (ASX:FPL) has encountered some “minor operational delays” at its Amerigo Vespucci #1 well. The company said it will now commence stimulation operations early next week.

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