Oil & gas acquisition worth $720 million opens Gulf of Mexico doors for Australian firm

Australian oil and gas company Karoon Energy has expanded its footprint to the Gulf of Mexico with the closing of a $720 million acquisition, adding stakes in oil and gas fields offshore Louisiana to its asset portfolio.

In November 2023, Karoon disclosed binding agreements for the acquisition of a 30% interest in the Who Dat and Dome Patrol oil and gas fields, along with related infrastructure, including the Who Dat floating production system (FPS) and a 16% stake in the Abilene field, from LLOG Exploration Offshore and LLOG Omega Holdings. Aside from these, the Australian firm was also getting interests in adjacent acreage in the U.S. Gulf of Mexico, containing the Who Dat East (40%), Who Dat West (35%), and Who Dat South (30%).

While Karoon wrapped up the acquisition of these interests at the end of December 2023, the effective date of the transaction is October 1, 2023. Upon completion, Karoon paid $684 million to LLOG, comprising the purchase price of $720 million less a $36 million deposit already paid. In addition, payments totaling $15 million were made in establishment and underwriting fees relating to the debt and equity processes.

According to the Australian company, the closing payment was funded by a $274 million drawdown on its $340 million new debt facility, $312 million raised from a fully underwritten equity issue, and the balance from existing cash reserves. The cash flow net to Karoon between the effective date and completion was $0.1 million, with funds generated from operations used to finance the firm’s share of an infill development program, which is currently underway.

Dr Julian Fowles, Karoon’s Managing Director and CEO, commented: “We are delighted to have completed the Who Dat acquisition. This transaction is expected to be both value and earnings-accretive for Karoon. The Who Dat and Dome Patrol fields are low-cost producing assets with near and medium term expansion opportunities, located in a prolific, world-class hydrocarbon basin in a stable and well-understood regulatory and fiscal jurisdiction.

“The transaction provides a number of strategic benefits to Karoon, including increased scale and both asset and geographic diversification. This long-life-producing asset, together with the appraisal and exploration opportunities, will also help offset the natural decline from the Baúna project in Brazil. We look forward to working closely with LLOG, a well-respected and established offshore GoM operator, and the other joint venture partners to optimize the value of the Who Dat assets.”

The LLOG-operated Who Dat conventional deepwater oil and gas development, which came on stream in 2011, is located in 800 meters of water offshore Louisiana within federal waters of the U.S. Gulf of Mexico. The oil and gas production, comprising approximately 60% oil and 40% gas from nine wells, is processed through an FPS and then transported to markets through common carrier pipelines.

According to Karoon, the natural decline has been largely offset by an active in-field development program. Two walls and a subsea pump were recently brought online, adding around 10,000 boepd (gross) to the production, with an additional 6,000 – 8,000 boepd (gross) expected to be added from two further wells.

Subject to the joint venture approvals, an appraisal well on the Who Dat East oil accumulation, discovered in 2011, is expected to take place in the second quarter of CY24. This discovery which has gross 2C contingent resources of 17 MMboe and unrisked 2U prospective resources of 34 MMboe, is located 27 kilometers east of the Who Dat FPS.

Moreover, several other nearby exploration targets analogous to Who Dat have been identified, encompassing 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 2Q and 3Q 2024, respectively, subject to joint venture approvals. Drilling costs for these projects are estimated at around $60 million per well on a dry hole basis.