Pacific Rubiales Buys 35% Stake in Karoon’s Brazilian Fields

Pacific Rubiales Energy Corp. (PRE), which operates Colombia’s largest oil field, agreed to buy a 35 percent stake in exploration blocks owned by Karoon Gas Australia Ltd. (KAR) off the coast of Brazil.

Bogota-based Pacific Rubiales will pay $40 million in cash and fund as much as $210 million in exploration costs, Mt. Martha, Victoria-based Karoon said today in a statement. The drilling in the Santos Basin is set to begin in mid-November, Executive Chairman Robert Hosking said in a phone interview.

“A large amount of equity is being retained by Karoon for the up-and-coming drilling campaign,” Hosking said. “We can leverage off the equity in project development in the future.”

The deal with Pacific Rubiales follows the scrapping of Karoon’s proposed initial public offering of its South American business in November 2010. The Australian company is a partner with Petroleo Brasileiro SA (PETR4), the state-controlled oil company known as Petrobras, in the Maruja discovery.

Karoon advanced as much as 10.8 percent to A$5.64 in Sydney trading, the highest since May 8. The shares were up 7.5 percent at 12:50 p.m. local time, compared with a 0.3 percent increase in the benchmark S&P/ASX 200 Index.

Karoon is targeting a potential resource of 100 million to 300 million barrels of oil in each of the three wells in Brazil, Hosking said. It also has exploration holdings off Peru and plans to complete a partnership deal to develop those blocks in the first quarter of next year, he said.

Karoon is in an exploration campaign off Australia with ConocoPhillips. (COP) Karoon in April started a five- to eight-well drilling campaign with the Houston-based company to further evaluate the potential of the Poseidon gas discovery in the Browse Basin. That project targets a potential resource of 3 trillion to 15 trillion cubic feet of gas, Karoon has said.

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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