Karoon talks to Poseidon prospects by: Paul Garvey From: The Australian March 08, 2012 12:00AM Increase Text SizeDecrease Text SizePrintEmail Share Add to DiggAdd to del.icio.usAdd to FacebookAdd to KwoffAdd to MyspaceAdd to NewsvineWhat are these? KAROON Gas Australia has already had approaches from parties interested in buying gas from its significant but early-stage Poseidon discovery off the north of Western Australia, according to executive director Mark Smith. Speaking to The Australian in Hong Kong amid a series of investor briefings in the region, Mr Smith said the company could strike its first offtake deal in latter stages of the huge drilling campaign about to take place.
"We're getting inquiries and interest from prospective offtake partners who can see what's coming up," he said.
Karoon, Mr Smith said, could be prepared to sell up to a 10 per cent stake in the project, which would reduce its interest to 30 per cent. US oil and gas giant ConocoPhillips owns a 60 per cent interest in the field.
"Various groups are establishing relationships with us," Mr Smith said.
A deal with an offtake partner could help Karoon realise some of the value in the project ahead of its development. It also would provide certainty that Karoon will have a customer if and when it goes ahead with a costly development of the field into a liquefied natural gas project.
...The inquiries have come ahead of the imminent launch of a big drilling campaign that will include up to 16 wells in Australia, Brazil and Peru during the next 18 months.
The drill rig earmarked for Poseidon has been sitting at Dampier since late last year as it underwent maintenance, but Karoon believes the rig should leave port in the coming days.
The drilling at Poseidon will look to better define the size and nature of the gas in the field, and provide the certainty needed to assess the commerciality of the project.
At present, the Poseidon project is believed to contain up to 425 billion cubic metres of gas.
The Poseidon program was originally scheduled to start last year, but a delay on the receipt of environmental approvals pushed back the campaign.
Drilling is scheduled to start on Karoon's oil prospects in Brazil's prolific Santos Basin during the June quarter, with Karoon working to secure a joint venture partner for the campaign.
Karoon executive chairman Bob Hosking is heading up discussions with possible joint venture partners for the company's assets in Brazil and Peru, with more than 20 companies having been through data rooms in Melbourne and Rio de Janeiro so far.
"We're currently in discussions with some of those, we're negotiating with some others, and there's some latecomers who are going through the data room in the Rio office as we speak," Mr Smith said.
Karoon will test at least three oil prospects in Brazil during this campaign, and success at any of the targets could, Mr Smith said, be a "company-maker".
Karoon hopes to start drilling at its prospects in Peru by the end of this year or early next year. The building excitement around Karoon's upcoming drilling campaign has helped its shares rise from a low of $2.62 last September to $5.90 at present.
Mr Smith said the $US266 million ($251.9m) in cash held by the company should be enough to cover Karoon's share of drilling costs during the next 12 months.
The rort will contiues.... i just bought a few more like some of you guys...great line haggis. if you can't beat them join them...reckon that is right. Lots can go wrong but seems lots of people think we have something!
KAR Price at posting:
$5.50 Sentiment: Buy Disclosure: Held
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