Karoon Gas Australia Ltd. expects to raise as much as $773 million in an initial public offering of its South American unit to fund exploration in Brazil and Peru.
Karoon, also ConocoPhillips’ partner in a gas venture off northwest Australia, plans to sell 31.9 percent of the South American business, listing the assets in Brazil, it said in a document filed today with the Australian stock exchange.
The Australian explorer has holdings in Brazil’s Santos Basin, where Petroleo Brasileiro SA, or Petrobras, has made discoveries. The Rio de Janeiro-based company has said its Tupi field may hold as much as 8 billion barrels of crude, making it the largest oil find in the Americas since 1976.
“In keeping with our modus operandi in Australia, we’re exploring and drilling in prolific basins close to proven reserves and production,” Executive Chairman Robert Hosking said by phone from Hong Kong. Mt. Martha, Victoria-based Karoon aims to start the drilling campaign in late 2011, with about eight to 12 wells planned over two to three years, he said.
The company’s assets in Brazil and Peru have prospective resources of 589 million barrels of oil equivalent, Karoon said last month, citing a report by DeGolyer & MacNaughton.
OGX Petroleo & Gas Participacoes SA, controlled by Brazilian billionaire Eike Batista, raised $4.1 billion in a 2008 IPO, and its stock market value has surged to more than $40 billion after a series of discoveries in the Campos Basin.
‘Run of Success’
“There has been a well-documented, long run of exploration success” off the coast of Brazil, Ivor Ries, an analyst at EL & C Baillieu Stockbroking Ltd. in Melbourne, said by phone today.
China Petrochemical Corp., known as Sinopec Group, agreed this month to pay $7.1 billion for a 40 percent stake in Repsol YPF SA’s Brazilian unit. The Spanish oil company has stakes in blocks in Brazil’s Santos and Espirito basins and plans to invest as much as $14 billion in those areas through 2019.
The Australian explorer plans to price the shares in Karoon Petroleo & Gas SA on Nov. 10. It expects to sell 1.03 million shares at between $603 and $750 apiece, listing them on the BM&FBovespa Novo Mercado exchange. That would raise $621 million to $773 million and value the unit at as much as $2.4 billion.
“This would leave Karoon the most cashed up of all the second-tier oil and gas companies,” the analyst Ries said.
Cash on Hand
Karoon would have as much $950 million after offering the shares in Brazil and raising about A$186 million ($181 million) selling shares to investors in Australia last month.
“They’re rolling in it,” Ries said.
The company intends to use the proceeds from the IPO to drill in five Peruvian prospects and seven in Brazil.
Karoon hired Morgan Stanley to manage the share sale, a September filing to the Brazilian exchange shows. Today’s filing in Sydney didn’t name any companies involved in the IPO.
The explorer’s executives have sought to list the South American unit in Brazil because they believe that the company’s shares in Sydney don’t reflect their value.
The stock has declined 11 percent this year in Sydney, compared with a loss of 4.6 percent for the benchmark S&P/ASX 200 Index. The shares declined 6 percent today to A$9.49, valuing the company at about A$1.95 billion.
Karoon almost tripled in 2009 on optimism that the venture with ConocoPhillips, the third-largest U.S. oil company, may be able to support a liquefied natural gas project.
Karoon and ConocoPhillips may spend $500 million to $600 million in the next phase of their Browse Basin drilling campaign evaluating the potential of the Poseidon gas discovery, Hosking said today. A five- to six-well program is set to start in the first or second quarter of next year, he said. Karoon owns a 40 percent stake in the venture, while ConocoPhillips has the rest.
There is “less obvious upside for the shares,” which rose more than 50 percent to A$10.88 on Oct. 22 from A$7.22 on June 7, Adrian Wood, an analyst at Macquarie Group Ltd., said in an Oct. 25 report. Karoon Gas said on June 8 that it was considering a listing of the South American assets in Brazil.