last throw of the dice

Feb. 8 (Bloomberg) -- Karoon Gas Australia Ltd.s next well in a drilling campaign with ConocoPhillips may be the last throw of the dice as the partners evaluate the potential of a natural gas field off the northwest coast, Credit Suisse said.

The investment remains at the best of times highly subjective and will live and die on the next well, Andrew Williams and Jenny Wong, Melbourne-based analysts at Credit Suisse, wrote in a report. Fail to define a gas resource and there is significant downside to the stock. If the Kronos-1 well succeeds, the upside is significantly greater than the current share price.

Karoon fell 11 percent on Feb. 4 on concern it may cut size estimates for the resource. The explorer didnt report any conclusive findings in a Feb. 3 statement and recorded weak gas flow rates, analysts said. Its target of 7 trillion cubic feet of gas looks increasingly aspirational, Adrian Wood, a Macquarie Group Ltd. analyst in Sydney, said Feb. 4.

The stock traded at A$5.74, down 1.5 percent, at 1:00 p.m. Sydney time, compared with a gain of 0.3 percent for the benchmark S&P/ASX 200 Index.

Shares in the Mt. Martha, Victoria-based explorer almost tripled in 2009 as the company expressed confidence its venture with ConocoPhillips has the potential to become a major resource and support a liquefied natural gas plant. Karoon has slumped 46 percent in 2010.

The Poseidon-2 results do not affect the companys reserves estimates, Scott Hosking, the company secretary, said after the Feb. 4 announcement. Karoon said it will shift its focus to the Kronos-1 well after completing tests at Poseidon-2.

While the Credit Suisse analysts said Karoons drilling results were disappointing, they upgraded the companys shares to neutral from underperform after the notable fall in price, according to the report, dated Feb. 5.






--Editors: Alex Devine, Jane Lee.



To contact the reporter on this story: James Paton in Sydney +61-2-9777-8698 or [email protected].



To contact the editor responsible for this story: Amit Prakash at +65-6212-1167 or [email protected].