Karoon to Acquire FPSO in Brazil's Bauna Project

Karoon Energy Ltd is acquiring the Cidade de Itajaí floating production, storage and offloading facility (FPSO), the production facility for Karoon’s 100 percent owned Baúna Project in the southern Santos Basin, Brazil, from Altera & Ocyan (A&O).

The sales and purchase agreement, signed by Karoon’s Brazilian subsidiary Karoon Petróleo & Gás Ltda. (KPG), is for consideration of $115 million plus approximately $8 million in transaction costs.

The agreement is subject to customary approvals. Karoon expects to close the transaction by April 30 and become the vessel’s owner, it said in a news release.

The acquisition is expected to be funded from existing cash on hand, subject to the timing of closing and near-term cashflow, the company said. A deposit of $30 million has been paid into an escrow account and the balance is payable at closing, it added.

Karoon said it intends to contract a new operations and management contractor to operate and maintain the FPSO, while KPG will take over the ownership and strategic optimization plans for the vessel. Karoon said it 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 vessel, according to the release. The duration of the transition period is expected to be six to nine months and remains subject to further planning and regulatory approvals, Karoon said.

The Cidade de Itajaí FPSO has been operating on the Baúna Project production since the field came onstream in 2013. 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, according to the release.

Karoon Managing Director and CEO Julian Fowles 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 percent. Most importantly, it provides certainty on the availability of the FPSO for the Baúna Project through to the end of field life,” Fowles continued.

“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 million to 16.4 million barrels] of Baúna Project Contingent Resource (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,” he said.

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