karoon sa, page-38

Its a tried & tested formula for Bovespa & seems to work allright.

The recent 2 IPO's by HRT & KAR r modelled after OGX's listing in June '08, wherein OGX had issued a small amt of stk at a higher value (in Brazilian Reais, R$) & 18 mths later (Dec'09) did a 100:1 split to make it easier for others to afford the share.

So at a 4-digit SP, it was meant for 'sophisticated' insto's initially & now at SP of R$22, it looks more affordable to the average investor.

See illustration below:

1) OGX IPO 12/6/08:
- 5192473 sh @ R$1131 = R$5.872 bil
- Share split on 18/12/09 for 100:1
- On 13/9/10: Annc'd a spin-off (aka 'sale') of 30% equity to other interested cashed-up operators. This should get them few billions in the bank.

2) HRT's Oct'10 placement:
1,938,789 shares @ R$1200 = raised R$2.332b

3) KAR SA's proposed IPO:
1,030,000 @ R$1025-1275 = R$1.055-R$1.32b

Another pattern here is, that all 3 explorers (besides PBR) have a resource certification frm DeMac & a $/boe valuation.

Enough time has already been spent on acquiring state of the art 3D seismics, which gives their prospects a 24-35% average CoS within the same geological formations in the Cretaceous (Albian & Aptian Sands).

So all that's reqd nxt, is to:

- Raise some capital (note: 3D seismics r cheaper max $15-20mil Capex),
- Source a rig &
- Drill & discover the prospects
- Development will follow eventually & will need more Capex (FPSO hire etc).