Karoon Gas Australia Ltd., listed as a possible takeover target by Citigroup Inc., rose the most in 15 months in Sydney after making a discovery off Brazil, where it may bid for more blocks.
The shares rose 14 percent, the most since Oct. 6, 2011, to A$6.15, while the S&P/ASX 200 Index gained 0.5 percent. That gives Mt. Martha, Victoria-based Karoon a market value of A$1.36 billion ($1.4 billion).
Karoon found oil at the Kangaroo-1 exploration well in Brazil’s Santos Basin, providing “confidence in the other prospects within Karoon’s blocks,” the company said today in a statement. The explorer will consider bidding on multiple oil blocks in Brazil in an auction scheduled for May, Chief Financial Officer Scott Hosking said today in a phone interview.
“We are reviewing the prospectivity of those blocks, and the decision whether or not to participate will come in the next few months,” Hosking said. “The appeal is that we have a business unit in Brazil, and we’ve built a good knowledge base in Brazil, and we’d like to apply that to new blocks.”
Karoon was ranked among 19 potential Australian takeover targets for 2013 in a Dec. 17 report from Citigroup’s hedge fund sales desk. Possible buyers for Karoon include BG Group Plc and Petroleo Brasileiro SA, Citigroup said.
The May auction will be the first time Brazil has sold offshore oil licenses in six years, allowing energy companies to expand in waters that may hold more than 50 billion barrels of oil.
Colombia’s Pacific Rubiales Energy Corp. agreed in September to acquire a 35 percent stake in Karoon’s exploration blocks off Brazil. Karoon plans to find a partner to develop its holdings in Peru by mid-year before drilling later in 2013.
Karoon said today it plans to evaluate the Kangaroo prospect through February and to drill the Emu and Bilby wells next. It’s too early to call the Kangaroo result announced today a commercial discovery, according to Hosking.
“While it wasn’t the primary target in this well, what we’ve discovered from this target is that it is potentially much bigger than we had thought,” Hosking said. “This will help us with the next two wells,” he added.
Success at Emu or Bilby “would in combination with Kangaroo make Karoon a major oil producer,” Ivor Ries, a Melbourne-based analyst at Wilson HTM Investment Group, wrote in a note to clients today. The Kangaroo find may be about 60 million barrels, said Ries, who values Karoon shares at A$8.26.
The Australian company is exploring off the coasts of Brazil and Peru after scrapping a proposed initial public offering of its South American business in November 2010. Karoon is also a partner with Petrobras, the state-run oil company in Brazil, in the Maruja discovery in the Santos Basin.