Karoon Gas gets sweet release

Having spent close to 18 months searching for a farm-out agreement for its 40% holding in its Browse basin project Poseidon, a deal has finally been struck.

The deal has lifted KAR out of its month-and-a-half long trading halt.

Origin Energy (ORG) has agreed to buy the stake for US$800 million, subject to pre-emptive rights by ConocoPhillips and PetroChina. The deal has been a long time coming and has caused many-a-shareholder to sell out over the farm-out period, seeing the share price lose over 63% in the past year alone before heading into a trading halt on April 30 ‘as a deal was being finalised’.

The re-opening of the register this morning saw the shares up 63% to $4.05, however it has pulled back strongly to $3.55 as investors burnt by the lockout since April 30 cash out, however there is no doubt the cash will be seen as investor-positive and the first step in the right direction.

The money raised from the sale is likely to be used to develop its South American assets as the company can finally return to its core business of asset development and exploration - its Brazil assets are the most promising here.

Having seen the difficulty KAR has had with farming-out its Tier-1 Poseidon, the questions remains; will investors be willing to fund further risk activities knowing the struggles it has had?

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