KAR (ASX) Ann: Karoon Completes Bauna Debt Facility Agreement

Originally posted by mrposhman: ↑

Haven't posted here in a while, interested to see the same posting who was downramping and bagging the company for not realising their strategy of looking for producing assets is now also bagging the company out for doing that exact that he was bagging them for not completing. Some people live in a strange world.

I've finally got around to pulling estimated financials for this, and to make it simple I didn't factor in the expansion of Patola. I'll add that in at a later date but it seems it would be very value accretive.

Current resources estimated to be exhausted within 2027. I've used $60 oil price, 10% royalties (as I'm not sure what they are in Brazil), 30% Brazil tax (offset 1st $65m with tax losses) and operating cost of $18.50 / barrel. I've also amortised the purchase price over the remaining barrels to bring in a depreciation estimate and also provided $15m / year for depletion.

Overall I get a very solid net cashflows over the period (only taken from FY20 onwards as FY19 will reduce purchase price) of around US$1.3bn and contribution (including FY19) of US$1.1bn. With that contribution averaging about A$150m over the first 3 years prior to workover completion and then rising to about A$233m, then with circa A$30m of corporate expenses (excluding exploration writeoffs / impairments) then there are healthy margins and particularly cashflows to be made here.

As I said I haven't included Patola ramp up in here so there is upside to these figures.

Financing is pretty simple IMO.

Purchase price = $665m
Less deposit = $50m
Less cash offset = $180m (I'd be looking at the high end, purely based on finals for the 1st 6 months of FY19 being $99m)
Total to source = $435m
ING Loan = $275m
Remaining payable = $160m

With $178m in the bank I wouldn't think that the CR would be that high. I know you know who has claimed it will be $150m and they won't withdraw the full $275m, I'd ask why. Cashflows from ops will clearly be enough to fund the planned workovers. KAR will need to ensure that they have enough to pay for Peru but well cost estimates and KAR funding is below).

$27.5m well costs - KAR - $15.5m
$30m well cost = KAR - $17.1m
$35m well cost = KAR - $20.3m
$40m well cost = KAR - $23.6m

So I'm thinking about $50m equity raise to cover the remaining funding and also the commitments into FY20 with peru. Maybe $70m tops. The $50m Shell facility is a working capital facility and would not be used for funding the purchase but reduces the requirement for short term cash for operational activities at Bauna.

What I really like about this though is the statement on slide 7 around the 100% ownership of Bauna and 100% ownership of Goia and Neon opening up significant farm-out opportunity. Like it or not developments of these sizes do not entice larger companies, smaller and mid tier firms are only interested in them. Whilst there is no production, it can make it difficult to obtain financing for development, hence one reason why Neon / Goia have gone nowhere over the last few years. Bringing Bauna into the equation changes that, and enables KAR to look at say an overall farmout of the overall asset pool, lets say 30% of all the assets which provides funding for these smaller companies which helps them gain financing, or even smaller amounts of Bauna and larger amounts of Neon / Goia. Capex will likely be in the $400-450m region for them (based on $8 / barrel) so rolling Bauna in brings companies into the equation who may not have been capable in the past to fund this sort of development. A farmout of say 30% of Bauna and 40% of the rest should yield enough cash for a full funding of the development of at least Neon which would be an excellent deal.

Expand

Plenty of ways to skin a cat. Karoon now has options... as long as they look to extract maximum value for long suffering holders, I am happy.

The timing of any farm outs is important. Patola needs to be up and running bringing production up to 40,000bopd.

Ka-ching, Ka-ching, Ka-ching! Was that the dollars rolling in?

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(20min delay)
Last $1.86		Change -0.020(1.06%)		Mkt cap ! $1.490B

Open	High	Low	Value	Volume
$1.89	$1.90	$1.86	$10.23M	5.473M


Last $1.88		Change -0.020 ( 0.30 %)
Open	High	Low	Volume
$1.89	$1.90	$1.86	1114760
Last updated 15.59pm 16/05/2024 ?

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