who's at the agm & can fill in some detail?, page-29

I'll try to fill in a few points that the team hasn't covered in detail. Maybe Cato, Swannie, Golfie and the rest were journo's in an earlier life, hitting afternoon deadlines for the Melbourne Herald. They got a lot of good info out fast.

First let me just say that Norbert (Cato) is a distinguished, creditable and experienced share market investor. When he indicated his buys a few days ago of 10,000 share per trade, I can believe that. He kindly introduced me to Jose Coutinho Barbosa, ex Acting President and CEO of Petrobas. He said he was very happy with joining Karoon and expected great things to come by shortly. I don't think we appreciate how lucky we are to have him on our Board, nor the fact that such an important man in Brazil sees Karoon as worthy of his time.

Cato has already mentioned the reason Wellington sold down recently. They invest on behalf of about 120 fund managers and as some reach their dollar limit for a particular company (part of their derisking process of not having too many eggs in one basket) the funds have to sell down. So it's not Wellington's decision, but the fund managers it acts for. If I were a fund manager without a dollar limit on investing in a company, I wouldn't be easing off KAR with what's coming up in the next couple of weeks and next few months.

Golfie and others have noted that the Canario well is nearing or has reached its depth for the Santonian primary target, but will keep drilling to TD. By Brazilian law, the JV must announce to the public the results of the well, so we should know soon. Refer to Mark Smith's comments when he said KAR first considered the Sabia and Canario leases, but thought the amplitudes were better on the leases we chose, with Kookaburra and others.

The Canario/Kookaburra reservoir is forecast to possibly contain ~ 300-350 mm bbls, of which most is in our leases (say 60% - my guess - and KAR at 65% equity gives possible 120 mm bbls net to KAR, worth ~ $1 bill, or ~ $5 per KAR share.) If the prospect comes good, we will be already at a (joint JV) volume to justify the 250 mm bbls reserves outlined for the Brazil development plan. We still will have excellent other prospects, so sooner rather than later I think the market and insto's will finally wake up.
(By the way, first cash from Brazil is forecast in 2017 from our leases and now 2020 from Browse.)

Pre-salt prospects are very interesting and large and have the same signature as other presalt discoveries. But as Gashunter pointed out, the costs and risks are high, so KAR won't proceed until after it has developed its post salt prospects, got some good cash flow, done a lot more seismic and by which time further significant progress will have been made concerning reducing the risk and technical difficulty of very deep drilling.

Some comment on Maruja (20% equity) and we were told that KAR doesn't know much because we still haven't been granted a share in the lease by the government (appears only an admin hold-up)and so we are not legally entitled to have any results or even any knowledge of development plans.

Peru has 'enormous potential' but the region hasn't been tested with comparable wells, so ours will be wildcat and so a low COS of 16%. Will drill in 12 months (the plan!)Getting good interest from potential JV partners, but we won't get such a good deal as we did with Brazil. Our potential JV partners in Canario/Kooka are being considered as one of several partners for Peru.

Re Browse, as mentioned already by our KAR journo's, we have a significant cost benefit from our condensate levels (18% note for Boreas yesterday, but further testing is likely to indicate it is ~ 20%, but not less than 18%). The Carnarvon, East Africa and Coal Seam Methane gases have no, or almost no, condensate. The extra value of the condensate was enough to pay for Woodsides capex. Also, our CO2 level is good, at 16% yesterday's announcement comparing with up to 30% for Carnarvon gas. (Our new leases in the North Carnarvon basin should also be wet gas - Middle Jurassic structure.)

As well as Poseidon, Mark said we will still have 20 TCF of gas potential. 6 TCF would be necessary to be proved for an LNG plant - if we get the results expected in Zephyeus and Proteus over the next six months we should be up to 6 TCF.

Finally, it seems that there is developing greater competition among the Browse potential gas producers. COP aren't keen on divulging much info because of the possible benefits to Woodside and Inpex. With our delay in drilling Boreas and other reasons, the timing of first gas is now forecast for 2020. The NPV is a little lower, mainly due to the time discounting effect, but it is still $5.8 bill for the project, $2.3 bill to KAR, or $10 per share.

Re our languishing share price - I don't know more than anyone else. But we should remember we've been (in Aust) a bear market for five years and KAR is a high beta stock - so it's harder to get some acceleration. Also, in US investor terms (Aussies own less than half the shares) KAR shares have rise by maybe 50% in the last few year because of the strong A$. Get Wayne Swan/Reserve Bank to lower our interest rates and we will have a higher KAR price.

Overall, looking very good, especially if you aren't in the day trader category. (More like a year-trader stock!)