Karoon Gas Increases Size of Oil Discovery Offshore Brazil

SYDNEY - Karoon Gas Australia Ltd. Friday raised the size estimate of its Bilby-1 oil discovery off the coast of Brazil, increasing the likelihood of a commercial development.

Further testing has indicated the well has a proven gross oil column of 320 meters and a potential column of 560 meters, up from an initial estimate of 200 meters, Karoon said in a statement.

The net oil-bearing reservoir, or the parts of the column that contain oil, is estimated around 70 meters, with porosity levels, which indicate the oil's ability to flow from rock, up to 23%, Karoon said.

The Australian company has discovered oil in two out of three wells drilled in the Santos Basin, located south of Rio de Janeiro, with joint venture partner Pacific Rubiales Energy Corp. Karoon owns 65% of the venture and analysts expect it to sell more of its interest if there is enough oil to underpin a multibillion dollar development.

The Bilby-1 discovery follows the success of the Kangaroo-1 well offshore Brazil. However, the Emu-1 well was a dry hole.

Karoon is planning to test the Kangaroo and Bilby discoveries with appraisal wells.

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Karoon Finds Oil Offshore Brazil, Shares Jump

SYDNEY - Karoon Gas Australia Ltd. has made its second significant oil discovery offshore Brazil, sending its shares soaring as much as 28% Monday and increasing the possibility of finding another partner to share development costs.

The Australian company has now discovered oil in two out of three wells drilled in the Santos Basin, located south of Rio de Janeiro, with joint venture partner Pacific Rubiales Energy Corp. Karoon owns 65% of the venture and analysts expect it sell more of its interest if there's enough oil to underpin a multibillion dollar development.

Karoon said the Bilby-1 well discovered oil across a 200-meter gross column, although more work needs to be done to determine the size of the find and whether it can be developed commercially.

The rise in Karoon's stock lifted the company's value to 1.1 billion Australian dollars (US $1.1 billion), although doubts remain about its ability to fund projects that include developing natural gas fields offshore Australia in partnership with ConocoPhillips.

Scott Ashton, a senior energy analyst at BBY in Sydney, said it is too early to be sure the Bilby discovery can be developed commercially. "We do not know the net pay, the quality of the oil, and whether it is capable of flowing," he said in a note.

The well hasn't yet reached its target depth of 4,537 meters and Karoon expects further drilling to encounter a different geological structure, which could also contain oil.

The Bilby-1 discovery follows the success of the Kangaroo-1 well offshore Brazil. However, the drilling program hasn't been a complete success, with the Emu-1 well failing to find commercial quantities of oil.

The fluctuating fortunes of the drilling campaign has intensified volatility in the company's shares. Karoon was worth A$1.6 billion as recently as early March, just before it announced the outcome of the Emu-1 well.

Karoon is planning to test the Kangaroo and Bilby discoveries with appraisal wells.

Citigroup analyst Mark Greenwood said earlier this year that Karoon could eventually reduce its holding in the Brazil venture to 20% to raise funds for drilling and development.

Edward Munks, Karoon's chief operating officer, told The Wall Street Journal in March that the company had several funding options. "Having a discovered resource with high equity levels gives you a lot of flexibility," Mr. Munks said.

Options include a further stake sale, issue of new Karoon shares or an initial public offering of the South American assets. Of these, Mr. Munks said the company isn't likely to revisit an IPO after shelving plans in 2010.

The venture's properties are in much shallower water than giant discoveries made by international energy companies further offshore Brazil, such as the Tupi field.

However, significant commercial discoveries have been made close to the coast. Among the most notable is the Piracuca oil field just five kilometers northeast of Karoon's blocks. Petroleo Brasileiro SA, known as Petrobras, and partner Repsol SA in 2009 declared Piracuca a commercial discovery estimated to contain 550 million barrels of light oil.

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Karoon Finds Oil Offshore Brazil, Shares Jump

SYDNEY - Karoon Gas Australia Ltd. has made its second significant oil discovery offshore Brazil, sending its shares soaring as much as 28% Monday and increasing the possibility of finding another partner to share development costs.

The Australian company has now discovered oil in two out of three wells drilled in the Santos Basin, located south of Rio de Janeiro, with joint venture partner Pacific Rubiales Energy Corp. Karoon owns 65% of the venture and analysts expect it sell more of its interest if there's enough oil to underpin a multibillion dollar development.

Karoon said the Bilby-1 well discovered oil across a 200-meter gross column, although more work needs to be done to determine the size of the find and whether it can be developed commercially.

The rise in Karoon's stock lifted the company's value to 1.1 billion Australian dollars (US $1.1 billion), although doubts remain about its ability to fund projects that include developing natural gas fields offshore Australia in partnership with ConocoPhillips.

Scott Ashton, a senior energy analyst at BBY in Sydney, said it is too early to be sure the Bilby discovery can be developed commercially. "We do not know the net pay, the quality of the oil, and whether it is capable of flowing," he said in a note.

The well hasn't yet reached its target depth of 4,537 meters and Karoon expects further drilling to encounter a different geological structure, which could also contain oil.

The Bilby-1 discovery follows the success of the Kangaroo-1 well offshore Brazil. However, the drilling program hasn't been a complete success, with the Emu-1 well failing to find commercial quantities of oil.

The fluctuating fortunes of the drilling campaign has intensified volatility in the company's shares. Karoon was worth A$1.6 billion as recently as early March, just before it announced the outcome of the Emu-1 well.

Karoon is planning to test the Kangaroo and Bilby discoveries with appraisal wells.

Citigroup analyst Mark Greenwood said earlier this year that Karoon could eventually reduce its holding in the Brazil venture to 20% to raise funds for drilling and development.

Edward Munks, Karoon's chief operating officer, told The Wall Street Journal in March that the company had several funding options. "Having a discovered resource with high equity levels gives you a lot of flexibility," Mr. Munks said.

Options include a further stake sale, issue of new Karoon shares or an initial public offering of the South American assets. Of these, Mr. Munks said the company isn't likely to revisit an IPO after shelving plans in 2010.

The venture's properties are in much shallower water than giant discoveries made by international energy companies further offshore Brazil, such as the Tupi field.

However, significant commercial discoveries have been made close to the coast. Among the most notable is the Piracuca oil field just five kilometers northeast of Karoon's blocks. Petroleo Brasileiro SA, known as Petrobras, and partner Repsol SA in 2009 declared Piracuca a commercial discovery estimated to contain 550 million barrels of light oil.

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Karoon Strikes Oil Offshore Brazil with Kangaroo-1 Exploration Well

Karoon Gas revealed Friday that it has made an oil discovery in its Kangaroo-1 exploration well, in the Santos Basin offshore Brazil.

Mudlog, wireline petrophysical and MDT pressure data confirmed that Kangaroo-1 had intersected an 82 foot (25 meter) gross light oil column with an oil water contact in Eocene aged rocks.

"A wireline program is underway and full results are expected in the coming days. A decision to run a drill stem testing program will be assessed at the completion of the wireline evaluation program," Karoon said in a statement.

Karoon added that, while the oil column is not its primary target at Kangaroo-1, the discovery provides additional confidence in the other prospects within the company’s blocks, including the Emu/Cassowary and Bilby exploration targets.

Kangaroo-1 is located within Blocks S-M-1101 and S-M-1165. The evaluation program is expected to continue through February with results being released as they become available.

After completing drilling works in Kangaroo-1, Karoon will move on to drill the Emu-1 and Bilby-1 wells in blocks S-M-1102, S-M-1137 and S-M-1166. These wells will evaluate multiple targets at Miocene, Eocene, Maestrichtian, Campanian and Santonian levels.

Karoon’s Santos Basin blocks BM-S 1037, 1101, 1102, 1165 and 1166 are sited 124 miles (200 kilometers) off the coast of the Santa Catarina region of Brazil, south of Rio de Janeiro. The blocks, in shallow water depths of around 984 feet (300 meters), are on trend with oil and gas fields such as the Piracucá, Caravela, Vampira, Merluza and Mexilhão fields.

Karoon is the operator and the sole owner of all the blocks.

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