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KAROON ENERGY - Near Term Catalysts Pending.


At current prices ($5.29), Karoon trades at a significant discount to both our valuation ($13.56) and 12month target price of $11.00.

Following a quiet CY2011 due to a lack of news, we believe the company now faces a number of significant catalysts (outlined below) over the coming weeks/months which may have a significant impact on its share price.

We recommend investors look to purchase shares at around the current levels ahead of both their Browse drilling campaign (joint ventured with ConocoPhillips) and Brazil/Peru farm out deals.

Key Catalysts


Browse Basin
• 5-7 well drill campaign commencing as soon as March,
• Best Estimate 7Tcf with a range of 3-15Tcf of gas/condensate,
• Drill campaign expected to last until mid to end of calendar year 2013.
Brazil
• Currently finalising the farm-in process.
• In excess of 20 global oil and gas companies have undertaken due diligence,
• Decision / announcement on the successful JV partner is expected over the coming 6-8weeks,
• Recent farm-in deals near KAR’s blocks include global majors SinoChem, BP, Sinopec. A total of $24bil has been invested in the Santos Basin since Mar10 via farm in or acquisition,
• Recent farm-in deals suggest a possible 100% payback in costs and free carry through the early stages of the drill campaign,
• Drilling is expected to commence in June/July.