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Karoon Energy Ltd (ASX:KAR) (Karoon or KAR) is an Australian oil and gas producer with offshore operations in Brazil (Santos Basin) and the United States (Gulf of Mexico).

For most of its 20 years as a listed company, Karoon was focused on exploration.  In recent years, the acquisition of the Baúna project in deep waters off Brazil has turned Karoon into a fully-fledged oil and gas producer.

In 2023, Karoon raised a significant amount of equity by issuing new shares at a price of $2.05 per share to fund an acquisition of a producing asset in the Gulf of Mexico.

The Opportunity

Karoon’s shares trade at a substantial discount to its listed Australian peers that pay regular dividends. Globally, oil and gas producers have recognised the importance of dividends and returns of capital in delivering superior shareholder returns.
We expect the valuation gap would narrow considerably if Karoon were to allocate free cashflow from its producing assets to regular dividend payments.
We believe Karoon prefers to continue to grow its hydrocarbon base, through exploration and further acquisitions.

COMMENCED

April 2024

OPENING PURCHASE PRICE PER SHARE

~$0.39

THE ACTIVIST CAMPAIGN

Sandon Capital formed an association with another Karoon shareholder, Samuel Terry Asset Management Pty Ltd, on 30 April 2024. In disclosing that association, we also detailed our voting intentions for Karoon’s 2024 Annual General Meeting to be held on 23 May 2024.

On 1 May 2024, we wrote to Karoon’s chairman detailing the reasons for our voting intentions.  You can read that letter here.

We have begun actively campaigning to convince other Karoon shareholders and stakeholders of the merits of our voting intentions.

INVESTMENT STATUS

Current

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Past performance is not indicative of future performance. The content of these case studies constitutes the views and opinions of Sandon Capital. They have been prepared without taking into account the objectives, financial situation or needs of any particular individual. The case studies do not constitute advice.

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