B razil IPO Abandoned�� Unfavourable market...

B razil IPO Abandoned
�� Unfavourable market conditions leads to with drawl of Brazil IPO
Karoon has abandoned the proposed Brazil IPO of its South American assets due
to unfavourable financial market conditions. Karoon will now consider waiting
for conditions to improve before reassessing the best value creation opportunities.
While the failure of the market to support the Brazil IPO is undeniably a let down,
we think this has already largely been factored into Karoons share price.
�� Santos Basin remains attractive plus Poseidon area drilling from 2Q 2011
In our view, the new Santos Basin Maruja (KAR 20%) oil discovery adds
confidence to the potential of Karoons highly attractive Santos Basin prospect
inventory. A major five-plus Greater Poseidon area back-to-back
exploration/appraisal drilling program in support of its potential commercialisation
is also expected to begin from 2Q 2011.
�� Buy rating maintained
We think Karoon has highly attractive acreage located on trend and adjacent to
major hydrocarbon discoveries in the Browse (gas) and Bonaparte (oil) Basins,
offshore Western Australia and Santos Basin (oil), offshore Brazil. Relatively high
equity levels in focused exploration blocks provide strong leverage to drilling
results and potential future project developments.
�� Valuation
Our share price target of A$11.64 is based on a Poseidon backed NAV of A$6.88,
plus A$4.76 for a 32% weighting of Karoon's already risked South American
exploration assets and our estimated value of a 138 mmbbl discovery at Maruja
(pre Brazil IPO).
Highlights