stevo,KAR in the Dark?Why do you say that KAR was unaware of LOC...

stevo,

KAR in the Dark?
Why do you say that KAR was unaware of LOC changes to production (reduce gas sales)?
KAR didn't announce it, but it is very likely that they were informed, and may or may not have been consulted.

Accretive Acquisition
Assuming that KAR/Brazil market cap was significantly below NPV of projected production profile and cashflows (which are more difficult to predict due to commodity price fluctuations).

it may NOT be possible to make an accretive acquisition based on projected production profiles (and cashflows), i.e., an asset that is/was more undervalued than Brazil. Unlikely in the GOM (country risk, infrastructure and fiscal regime).

Does it make sense to make a non-accretive acquisition?
Firstly, the option to go for Cash Harvesting and Distribution would theoretically deliver more value,
but only if expected production is delivered at expected levels.
Delivery is most definitely NOT certain, and especially so with an ageing Brazilian asset.
In other words, how do you accurately assess the underlying value of KAR Brazilian assets.

Which brings us to a primary advantage of the Who Dat acquisition, as stated by KAR, that being diversification, thereby reducing production risk. In other words, the Company is much less likely to go completely pear shaped.

There is a lot of Who Dat 2U resource too. Long term, and high very risk, but plenty of potential upside if they strike it lucky .

As I stated earlier, I would be more comfortable with the risk profile of 3+ assets rather than 2 assets.