Karoon Energy Share Price Up on Acquisition News (ASX:KAR)

Melbourne-based oil and gas exploration company Karoon Energy Ltd [ASX:KAR] saw it’s share price shoot up over 15% to 76 cents, at the time of writing, on the back of news the company had finalised its most recent acquisition.

ASX KAR Share Price Chart 1 - Karoon Energy

Source: Optuma

What’s happening at Karoon Energy?

In a recent announcement Karoon announced it completed the acquisition of the Bauna oil field.

Being in the Santos basin in the Atlantic Ocean, the oil field was previously owned by Brazil’s state-run Petrobras oil.

Karoon will pay $665 million for the oil fields, with the terms of the deal being that Karoon pays $380 million initially and the remaining $285 million to be paid through to 2026.

In conjunction with this, Karoon also announced it had struck a five-year deal with oil and gas giant Shell.

Shell will trade and ship crude oil that is produced from Karoon’s area in the Bauna field. As part of the deal, Karoon will have access to Shell’s global marketing and shipping platform.

The completion of the Bauna acquisition still leaves the company in good shape.

With no existing bank debt and US$280 million in cash reserves as of 30 June 2020.

Where to from here for Karoon Energy?

The onset of COVID-19 did nothing to help crude oil prices, trading around US$63 a barrel at the end of 2019, the price today sits at just above US$41 a barrel.

These lower oil prices can put massive pressure on oil producers with debt. Karoon being free of bank debt puts the company in a nice position for the future.

ASX KAR Share Price Chart 2 - Karoon Energy

Source: Optuma

Looking at the technical aspects, the price is sitting at 76 cents, just below the resistance level of 79 cents. As can be seen, the recent move up took place on improved volume.

If this momentum can be sustained and price can pop through the 79-cent level, then the level of 94 cents may come into focus for future resistance.

On the downside, should the price start to retrace from the 79-cent level, then it may find future support at 67 or 55 cents.


Carl Wittkopp,
For The Rum Rebellion

PS: Four Well-Positioned Small-Cap Stocks: These innovative Aussie companies are well placed to capitalise on post-lockdown megatrends. Click here to learn more.

Carl Wittkopp writes for The Rum Rebellion and has a diploma in Financial Planning. He specialises in the technical analysis of stocks.

The Rum Rebellion