Karoon’s share price surged more than 15 per cent following the news to 77¢ in early trading on Monday.
“Despite the changed environment, this revised agreement delivers the benefits we always wanted from acquiring a producing asset including immediate cash flow, reasonable terms, management of risk and opportunity for the future,” Karoon Energy managing director Robert Hosking said.
Morgans analyst Adrian Prendergast described the revised structure of the deal as a “better outcome”.
“The most important aspect for Karoon from the above deal structure is that only paying [the] $US150 million payment upfront means the company can complete the transaction without the need for any debt,” he said.
As a result of the transaction, Karoon would now become a “rare mid-tier ASX oil producer”, analysts from RBC said on Monday. “This development significantly de-risks Karoon as it now becomes an unhedged oil producer that is not affected by restrictive debt financing terms,” the bank said. “Assuming subsequent approvals are obtained, Karoon would become a relatively large scale producer.”
The Bauna field, located in the Santos basin off the coast of Brazil, produces about 16,000 barrels of oil a day and is expected to increase output to as much as 30,000 barrels in the coming two years.
The coronavirus emergency has caused a sharp decline in global demand and prices, putting intense pressure on oil producers with large debts. Prices for benchmark Brent crude oil fell by more than 50 per cent this year to below $US30 a barrel. It was trading around $US43 a barrel on Monday.