Story By Rocky Teodoro|RigZone.com|Australia’s Karoon Energy Limited is acquiring a 30 percent interest in the Gulf of Mexico’s Who Dat and Dome Patrol fields and associated infrastructure, including the Who Dat floating production system, plus approximately 16 percent interest in the Abilene field, from LLOG Exploration Offshore, L.L.C. and LLOG Omega Holdings, L.L.C.
Further, Karoon will acquire exploration and appraisal opportunities in adjacent acreage to the assets. The company will acquire 40 percent interest in Who Dat East, 35 percent in Who Dat West, and 30 percent in Who Dat South.
The total acquisition consideration is $720 million (AUD 1.15 billion), the company said in an Australian Stock Exchange announcement Thursday, adding that the acquisition remains subject to customary conditions.
Who Dat is a conventional deepwater oil and gas operation located in approximately 2624.7 feet (800 meters) of water offshore Louisiana within the federal waters of the U.S. Gulf of Mexico. The assets are expected to add approximately 4.0 million to 4.5 million barrels of oil equivalent (MMBoe) to Karoon’s 2024 production on a Net Revenue Interest (NRI) basis and increase the company’s total pro forma 2024 production to 12.0 MMboe to 14.5 MMboe, according to the announcement.
Karoon said it plans to fund the acquisition and transaction costs with a $300 million (AUD 480 million) equity raising, a $274 million (AUD 438 million) drawdown from a new $340 million debt facility with a syndication of banks, and existing cash of $171 million (AUD 274 million). The company noted that it would have $80 million cash on hand remaining after the acquisition.
Upon closing of the acquisition, Karoon said it would have “a diversified production base in two prolific hydrocarbon basins and material near-term organic growth potential”. The transaction will reduce LLOG’s interest to 45 percent. Private investment firm Westlawn Group owns the remaining 25 percent of Who Dat and Dome Patrol.
“This transaction meets our strategic objectives to acquire a material, value, and earnings accretive, producing asset with expansion opportunities in either Brazil or the Gulf of Mexico (GoM)”, Karoon Managing Director and CEO Julian Fowles said. “The GoM is a Tier 1 jurisdiction with a stable and well-understood regulatory and fiscal regime. The Who Dat assets provide Karoon with both geographical and asset diversification, complementing our existing Brazilian business with a second high-quality operation”.
“Production from Who Dat will help offset the natural decline from Baúna and, with a unit operating cost of less than US$6 per boe [barrel of oil equivalent] in [fiscal year 2023], will add a high margin, long-term cash flow stream to Karoon”, Fowles continued. “There are significant development and exploration opportunities in our view analogous to Who Dat within the associated acreage. These provide the potential for future infrastructure-led developments, to increase production and extend the Who Dat field life. Importantly, sustaining capital requirements are low, and development and exploration activities are expected to be funded from Who Dat cash flows”.
“We are delighted to have secured a high-quality debt and equity funding package to underpin this acquisition. Following the transaction, we will have a robust balance sheet and the flexibility to deliver on our organic growth opportunities, including the potential Neon development. Strong pro forma cash flows are expected to enable repayment of drawn debt from our new facility within two years. Our long-term strategy remains to maintain low leverage and high liquidity to enable value-accretive organic growth, M&A, and returns to shareholders. We look forward to working closely with LLOG, a very well respected and established offshore GoM operator, and joint venture partner, Westlawn Group, on this exciting asset”, Fowles concluded.
The Who Dat development, which came on stream in 2011, has current production of 42,000 barrels of oil equivalent per day (boepd), consisting of approximately 60 percent oil and 40 percent gas, from nine wells. The output is processed through a floating production system facility and transported to markets through common carrier pipelines, Karoon noted.
Karoon said the development’s natural decline has been largely offset by an active in-field development program. Most recently, two wells and a subsea pump were brought online in 2023, which added approximately 10,000 gross boepd to production, with an additional 6,000-8,000 gross boepd expected in 2024 from two more wells.
Further, Karoon said the acquisition “provides significant opportunities for potential expansion”. A potential appraisal well could be developed in the second quarter of 2024 on the Who Dat East oil accumulation, which has gross 2C contingent resources of 17 MMboe and unrisked 2U prospective resources of 34 MMboe. The company added that several other nearby exploration targets were analogous to Who Dat has been identified, including Who Dat South and Who Dat West, which contain combined unrisked gross prospective resources of 108 MMboe. Exploration wells are scheduled to be drilled on the Who Dat South and Who Dat West prospects in the second and third quarters of 2024, respectively, subject to approvals from the joint venture of the three companies. Drilling costs for the prospects are estimated at approximately $60 million per well on a gross, dry-hole basis, according to the announcement.
Karoon announced a fully underwritten equity raising to help fund the acquisition, consisting of an institutional placement of $109.81 million (AUD 170 million) to new and existing eligible institutional investors and a fully underwritten 1-for-3.75 accelerated non-renounceable entitlement of $200.24 million (AUD 310 million). Up to approximately 234 million new shares will be issued under the equity raising representing approximately 41 percent of the current issued capital of the company.
To contact the author, email rocky.teodoro@rigzone.com
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