- Sale and Purchase Agreement signed to acquire Baúna CDI FPSO for US$115 million.
- Strategic operations reset, aimed at re-establishing reliable production from the Baúna Project.
- IRR from investment well above Karoon’s mid-teens post tax hurdle rate.
- Potential to significantly improve Baúna profitability through better FPSO efficiency and reduce unit operating costs by US$4-6/bbl from 2026.
- Removes uncertainty over long term availability of facility, increasing confidence in extending field life well into 2030s and maturing high-value Contingent Resources, as well as deferring abandonment.
- Acquisition expected to be funded from existing cash reserves.
- Consistent with capital allocation framework, maximising value of existing assets.
Karoon’s wholly owned Brazilian subsidiary, Karoon Petróleo & Gás Ltda. (KPG) has signed a Sale and Purchase Agreement (SPA) with Altera & Ocyan (A&O)to acquire 100% of the Cidade de Itajaí Floating Production, Storage and Offloading facility (FPSO) for US$115 million plus approximately US$8 million of transaction costs. The FPSO, owned and operated by A&O and leased by KPG, is the production facility for Karoon’s 100% owned Baúna Project in the southern Santos Basin, Brazil.
The SPA is subject to customary approvals, which are expected to be received to allow the transaction to close by 30 April 2025, at which time Karoon will become the vessel owner.
Karoon intends to contract a new O&M contractor to operate and maintain the FPSO on its behalf, while KPG will take over the overall ownership and strategic optimisation plans for the FPSO. The process of selecting a new O&M contractor has commenced, and the Company expects to award a contract to the successful tenderer by mid-2025. A&O will continue to operate the FPSO until KPG has fully absorbed FPSO management and the new contractor is ready to assume integrated operations and maintenance services for the FPSO. Karoon has established a transition team to work with A&O and the new O&M contractor(once selected), aiming to facilitate safe, efficient and reliable production during the transition period and the earliest transfer of operational control. The duration of the transition period is expected to be 6-9 months and remains subject to further planning and regulatory approvals.
The acquisition is expected to be funded from existing cash on hand, subject to timing of closing and near term cashflow. A deposit of US$30 million has been paid into an escrow account and the balance is payable on closing.
Dr Julian Fowles, Karoon’s CEO and Managing Director said:
'We are delighted to have reached agreement with A&O on the acquisition of the Cidade de Itajaí FPSO. The FPSO is critical to our operations at Baúna, and ownership will provide us with direct strategic control over the facility, allowing us to enhance operational efficiencies according to a timetable determined by Karoon. We will also be able to implement Karoon’s safety standards and processes to further reinforce the already strong safety culture. The transaction aligns with the Company’s long-term strategic objectives, to expand the reserves base of existing assets and improve operational efficiency.
The purchase is economically attractive, generating significant value for shareholders with an expected rate of return comfortably above our mid-teens post tax hurdle rate and potentially more than 20%. Most importantly, it provides certainty on the availability of the FPSO for the Baúna Projectthrough to the end of field life.
The purchase of the FPSO does not impactthe current and near term activities associated with the flotel, the annual maintenance program and planned intervention in SPS-88. The flotel (a floating hotel positioned adjacent to the FPSO) arrived on-site at Baúna in mid-February and the maintenance campaign, aimed at substantially reducing the maintenance backlog and improving equipment reliability, is now underway. This work is being carried out by A&O as part of the existing FPSO contracts, with the costs of the flotel and associated logistics borne by Karoon, and manpower and materials funded by A&O.
The aim of the flotel campaign and the revitalisation work is to improve FPSO efficiency to our longer termtarget range of 90 - 95%.
The acquisition of the FPSO is also expected to result in approximately a US$4-6/bbl net unit operating cost reduction, reflecting the termination of A&O vessel lease payments. The savings are anticipated to be realised from 2026 onwards, with additional operating costs expected to be incurred in 2025 related to the transition from A&O to a new O&M contractor. Annual sustaining capex is expected to increase by up to US$5 million in relation to FPSO hull, fabric and systems owned by KPG. In addition, Karoon expects to incur future capital expenditure associated with potential revitalisation and life extension activities.
The expected decrease in operating costs and certainty on the long-term availability of the vessel should allow the field to operate profitably well into the 2030s. This would enable us to access a portion of the 8.7 – 16.4MMbbl of Baúna Project Contingent Resource1 (1C to 3C), subject to further technical and commercial evaluation. Moving these resources into the Reserves category would reduce unit depreciation charges as well as defer field abandonment and vessel decommissioning liabilities.
Karoon expects to update 2025 guidance no later than the acquisition close date.
The cost of the FPSO transaction was taken into account when determining the additional onmarket share buybacks of up to US$75 million recently announced by the Company.'
Background on the FPSO
The Cidade de Itajaí Floating Production, Storage and Offloading facility (FPSO) has been operating on the Baúna Project production since the field came onstream in 2013. The vessel was built in 1985 and converted to a floating production, storage and offloading facility in 2012. It has a nameplate fluid handling capacity of approximately 80,000 barrels of liquid per day and a nameplate storage capacity of approximately 631,000 barrels of oil.
The facility is subject to marine class certification by Det Norske Veritas (DNV), a leading vessel classification society and recognised advisor for the maritime industry. The most recent class certificate was issued, with conditions on 8 January 2025, with an updated class certificate expected in early April, subject to the completion of planned maintenance activities. The facility is operated in compliance with all relevant local laws and regulations which are administered and monitored by a number of regulators in Brazil.
Source: Karoon Energy
