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- Oil and gas developer Karoon Energy (KAR) has officially made the decision to develop its offshore Patola Project in Brazil’s southern Santon Basin region.
- The company announced the final investment decision (FID) today following and will now move to the construction phase of the project
- Patola will be tied to the existing Baúna Floating Production, Storage and Offloading (FPSO) vessel, Cidade de Itajaí, next to the producing Baúna and Piracaba oil and gas fields
- All up, Karoon expects the project’s development to cost between US$175 million and US$195 million (between A$227 and A$253)
- To help fund the project, the company has signed a US160 million (around A$207 million) loan deal with Deutsche Bank, ING, Macquarie and Shell
- Under the terms of the loan, Karoon will need to hedge a portion of Patola’s future oil production to protect cash flow in case oil prices dip in coming years
- Karoon shares spiked on the ASX to close 7.45 per cent higher this afternoon at $1.37 each
Oil and gas developer Karoon Energy (KAR) has officially made the decision to develop its offshore Patola Project in Brazil’s southern Santon Basin region.
The company announced the final investment decision (FID) today following what it called “comprehensive analysis and due diligence” by KAR and its advisers and financiers.
The company will now begin constructing the project, which will be tied to the existing Baúna Floating Production, Storage and Offloading (FPSO) vessel, Cidade de Itajaí, next to the producing Baúna and Piracaba oil and gas fields.
According to Karoon, the Patola project is expected to produce at an initial rate of more than 10,000 barrels of oil per day (bopd) from high-quality reservoirs, with first production slated for early in 2023.
All up, Karoon is expecting to fork out between US$175 million and US$195 million (between A$227 and A$253) to build up the project, of which US$17 million (roughly A$22 million) has already been invested.
Karoon CEO and Managing Director Julian Fowles said today’s FID is a “major milestone” in the company’s journey to becoming a substantial oil producer.
“The decision to proceed with this development is testament to the hard work and strong collaboration between our teams in Brazil and Australia,” Julian said.
“Together with the Baúna intervention program, Patola is expected to add materially to our production base, with total output forecast to reach approximately 30,000 bopd in early 2023, more than double current production rates,” he said.
To pay for the development project, Karoon has struck a US160 million (around A$207 million) loan deal with Deutsche Bank, ING, Macquarie and Shell.
Under the terms of the loan, Karoon will need to hedge a portion of Patola’s future oil production to protect company cash flow in case oil prices dip in coming years.
As it stands, Karoon will need to hedge 40 per cent of its forecast oil production for the first year of the loan, and 30 per cent of its forecast oil production for the second.
Julian said these hedging arrangements will help the company “manage prudently any downside risk in the price of oil”, as well as to ensure it has enough cash available to repay its debts.
Following the news of the final investment decision, Karoon shares spiked on the ASX to close 7.45 per cent higher this afternoon at $1.37 each.
