{"id":61787,"date":"2013-05-07T14:06:52","date_gmt":"2013-05-07T04:06:52","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2013\/05\/07\/brokers-keen-on-karoon-after-second-success\/"},"modified":"2013-05-07T14:06:52","modified_gmt":"2013-05-07T04:06:52","slug":"brokers-keen-on-karoon-after-second-success","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2013\/05\/07\/brokers-keen-on-karoon-after-second-success\/","title":{"rendered":"Brokers Keen On Karoon After Second Success"},"content":{"rendered":"

\n\t-Encouraging oil shows at Bilby<\/span> prospect
\n\t-Adds potential to Santos commerciality
\n\t-Deeper targets to be tested<\/strong>
\n\t <\/p>\n

\n\tBy Eva Brocklehurst<\/span><\/p>\n

\n\tOil and gas explorer Karoon<\/span> Gas ((KAR<\/span>)) has announced a discovery at Bilby<\/span> prospect in the Santos Basin, Brazil. [Nothing to do with Santos, the company] Preliminary signs are encouraging for brokers and a number have de-risked estimates on the discovery, noting the company's success with another well, Kangaroo-1, in the same basin.<\/p>\n

\n\tBilby-1<\/span> intersected a 200 metre<\/span> gross hydrocarbon column in the Maastrictian<\/span> age interval. The section is sand and shale and therefore considerable uncertainty remains regarding the net to gross ratio. Macquarie does point out that there was little commentary on the Eocene intervals which were successful intersected at Kangaroo. Karoon<\/span> described the primary Eocene target in this part of the basin as poorly developed. The ultimate resource size is also uncertain. Recoverable volume will need to increase from the 60 million barrels pre-drill estimate for secondary targets in this discovery to be commercial on a standalone basis.<\/p>\n

\n\tCiti<\/span> notes the major risk to the Bilby<\/span> oil discovery so far is the quality of the sands, which will determine the flow rates that are achievable and whether it can be commercial. A better assessment of reservoir and oil quality is expected in the next few days. Nevertheless, many are hopeful. The well was optimised<\/span> for the Eocene and Santonian<\/span> intervals and BA-Merrill Lynch finds the presence of oil in Maastrictian<\/span> partly de-risks the migration path to the deeper Santonian<\/span> prospect. Bilby<\/span> should reach this target in coming weeks.<\/p>\n

\n\tCampanian<\/span> targets are also yet to be tested. The pre-drill resource estimate for this interval was around 50m<\/span> barrels and Macquarie thinks this may provide further opportunity to add resources at Bilby<\/span>, underpinning the commerciality of the shallower discovery. Having said that, there has been limited success with Campanian<\/span> and Santonian<\/span> targets in both Kangaroo and the, ultimately unsuccessful, Emu well. Given the encouraging results to date at both Kangaroo and now Bilby<\/span>, Karoon<\/span> is working towards securing a rig to undertake appraisal drilling. Further appraisal drilling will be required to delineate a commercial resource at Kangaroo and, potentially, Bilby<\/span>.<\/p>\n

\n\t Karoon<\/span> has highly prospective acreage across three major hydrocarbon basins, in Australia, Peru and Brazil. The most significant is the Poseidon gas discovery in the offshore Browse Basin, Western Australia. The company also farmed into the North Carnarvon<\/span> Basin's WA-482-P last year. Macquarie is concerned that, with a Poseidon farm-down yet to be delivered, it leaves Karoon<\/span> with a 90% funding interest in the upcoming Grace well. The broker suspects the healthy $228m<\/span> cash balance could be eroded by year-end.<\/p>\n

\n\tThere is over two billion barrels of un-risked prospective resource in the company's Latin American prospects. This is the key differentiator for Karoon<\/span>, in Merrills<\/span> view. The deepening prospect inventory of the portfolio offers multiple exploration targets, thus lowering the risk of failure. Deutsche Bank flags two successes out of three wells – Kangaroo-1 and Bilby-1<\/span> – as an outcome well above average global exploration success rates, which are closer to one in five. There is potential for over 100m<\/span> barrels at Kangaroo and similar prospects are emerging at Bilby<\/span> so the broker thinks commercial potential is increasingly likely.<\/p>\n

\n\tCiti<\/span> observes that Karoon<\/span> is not optimistic about a flow test. Bilby-1<\/span> has been drilled with a high mud-weight to ensure control of the well but this has likely affected the reservoir near the well bore and Karoon<\/span> intends to mobilise<\/span> another rig by year end for further appraisal drilling. Upcoming drilling plans are for the Kangaroo-2 appraisal well, Wallaby-1 prospect and now, the Bilby-2<\/span> appraisal well.<\/p>\n

\n\tAs with most discoveries like this, brokers are not counting the beans into forecasts just yet. Deutsche Bank has a Buy rating on the stock, joining another four brokers on the FNArena<\/span> database. Citi<\/span> has a Hold rating. The consensus target price is $7.52, suggesting 50.3% upside to the last share price. Reflecting the risks, the range of targets is from Citi's<\/span> $6.03 to Macquarie's $9.00.
\n\t <\/p>\n

\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Karoon has discovered oil at the Bilby prospect, making it a successful number two out of three wells drilled in Brazil’s Santos Basin.<\/p>\n","protected":false},"author":17,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[6],"tags":[24],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/61787"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=61787"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/61787\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=61787"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=61787"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=61787"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}