KAROON GAS AUSTRALIA LIMITED (KAR)



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General Information
Company Name: Karoon Gas Australia Ltd
Stock Code: KAR
Website: www.karoongas.com.au
GICS Sub-Industry: Oil & Gas Exploration & Production
Market Cap ($M): 698
Equiv. Shares (M): 256

Current Price Data+
Current Price Open High Low Last Close Volume Price Movement
$ 2.730 $ 2.790 $ 2.800 $ 2.690 $ 2.730 800,247 0%

Current Broker Consensus Recommendation more
Recommendation: Buy
Recommendation Date: 3rd Apr 2014
12 Month Target Price (average): $6.973
Brokers Surveyed: 3

Company Overview

Business Description:
Karoon Gas Australia Limited (KAR) invests in exploration and evaluation projects for hydrocarbons offshore in Australia, Brazil and Peru. KAR currently has 4 projects, the producing Browse Basin offshore gas reservoirs (Western Australia), the Tumbes and Maranon Basins (Peru) and the Santos Basin (Brazil).

Strategy Analysis:
The Karoon Board and management are committed to securing high quality hydrocarbon exploration areas with the right partner. KAR is currently in a JV with ConocoPhillips in regards to the WA-389-P permit, with Karoon contributing 40% equity. The Board believes that the Browse Basin permits are ideally located and will continue to take advantage of continuingly favourable hydrocarbon prices. The company strategy will focus around capitalizing on oil prices and accelerating exploration programs. KAR has completed processing seismic surveys of WA-314P and WA-316-P and is now interpreting the data set in preparation for the selection of drilling targets. The Poseidon Prospect remains a high grade source of production, with other areas in that region, anticipated to result in important additions to the potential resource base Karoon Gas Australia reported positive cash flow of $27.63m for the quarter ended 31 December 2012. Operating cash flow for the period was $(53.17m). Payments for exploration and evaluation were $(51.98m). Investing cash flow was $80.8m. Financing cash flow was nil. Cash in hand at the end of the quarter was $228.25m. Key activities during the quarter included the successful testing of the first well in the phase two Browse Basin drilling campaign, with the Boreas-1 exploration well achieving an equipment constrained stabilised gas flow rate of 30.2 million standard cubic feet per day through a 40/64" choke at a well head pressure of 3,300 psia and an associated condensate rate of 18 barrels per million standard cubic feet. In addition, drilling in Brazil commenced with the Kangaroo-1 exploration well, which spudded during December 2012.


Financial Summary
Year to Jun NPAT EPS EPS chg (%) PER DPS Yield (%) Franking (%)
2013  A -10.9 -4.9 -- 0.0 0.0 0.0 --
2012  A -3.2 -1.4 -- 0.0 0.0 0.0 --
2011  A -17.6 -8.5 -- 0.0 0.0 0.0 --
Source: Aspect actuals / Thomson IBES estimates

Peer Comparison
EPS Growth (%) P/E (%) Dividend Yield (%)
Company Mkt Cap 2011 A 2012 F 2013 F 2011 A 2012 F 2013 F 2011 A 2012 F 2013 F
Beach Energy (BPT) $2,167 M 0.0151 0.9460 -0.2710 15.6279 8.0306 11.0164 0.0164 0.0235 0.0361
Karoon (KAR) $706 M -- -- -- -- -- -- 0.0000 -- --
Oil Search (OSH) $12,931 M 0.5489 0.4474 1.5782 50.5263 34.9091 13.5402 0.0052 0.0046 0.0144
Santos (STO) $13,108 M 0.1518 0.1963 0.6210 25.9109 21.6600 13.3625 0.0223 0.0250 0.0375
Woodside Petroleum (WPL) $32,619 M -0.0512 0.2304 -0.0830 17.1296 13.9215 15.1814 0.0703 0.0575 0.0527

Market Comparison
Earnings P/E Ratio P/B Ratio P/E Growth P/S Ratio
KAR -- -- 1.01 -- --
Market 1.09 15.9 1.26 2.00 1.69
Sector 1.48 14.0 0.78 0.95 6.67

Directors
Name Position Start Date
Mr Robert (Bob) Michael Hosking Executive Chairman 11 November 2003
Mr Mark Alexander Smith Executive Director,Exploration Manager 01 December 2003
Mr Clark Davey Non-Executive Director 01 October 2010
Mr Geoff Atkins Non-Executive Director 22 February 2005
Mr Stephen Power Non-Executive Director 28 June 2005
Mr Jose Coutinho Barbosa Non-Executive Director 31 August 2011

Management
Name Position
Edward Munks Chief Operating Officer
Scott Hosking Company Secretary
Lino Barro Engineering Manager
Tim Hosking South American General Manager and Chief Executive Officer Brazil

Substantial Shareholders
Holding Name
14,554,497 (5.69%) FMR Corporation
35,152,430 (13.74%) Wellington Management Company
13,446,549 (5.26%) Paradice Investment Management Pty Ltd
26,358,356 (10.30%) Talbot Group Holdings Pty Ltd

Calendar of Events
Date Event
30 January 2015 Report (Quarterly)
30 October 2014 Report (Quarterly)
12 September 2014 Report (Annual)
30 July 2014 Report (Quarterly)
29 April 2014 Report (Quarterly)
© 2011 Morningstar, Inc. All rights reserved. The data and content contained herein are not guaranteed to be accurate, complete or timely. Neither Morningstar, nor its affiliates nor their content providers will have any liability for use or distribution of any of this information. To the extent that any of the content above constitutes advice, it is general advice that has been prepared by Morningstar Australasia Pty Ltd ABN: 95 090 665 544, AFSL: 240892 (a subsidiary of Morningstar, Inc.), without reference to your objectives, financial situation or needs. Before acting on any advice, you should consider the appropriateness of the advice and we recommend you obtain financial, legal and taxation advice before making any financial investment decision. If applicable investors should obtain the relevant product disclosure statement and consider it before making any decision to invest. Some material is copyright and published under licence from ASX Operations Pty Limited ACN 004 523 782 ("ASXO"). DISCLOSURE: Employees may have an interest in the securities discussed in this report. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/fsg.asp.

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