ASX:KAR
Karoon Energy Ltd
Investment Summary
The fund managers believe that Karoon Energy Ltd offers a compelling opportunity in the oil & gas sector, supported by strong cash generation and low production costs. They assert that its recent acquisition of the Who Dat asset in the U.S. Gulf of Mexico enhances scale and diversification, providing significant growth potential through upcoming drilling activities. However, they acknowledge challenges, including a 9% decline in share price following a downgrade in production guidance and shareholder activism pushing for strategic changes. Despite these hurdles, fund managers view the activism as a potential catalyst for improved governance and operational value. Ultimately, they noted a decision to exit their position due to spot valuation and weakened cash flow outlook, driven by production issues and increasing capital intensity. They express a belief in Karoon's undervaluation relative to peers, yet caution investors regarding near-term uncertainties.
Commentary From The Managers
Endeavor Asset Management
31 July 2024
$1.87
- Endeavor Asset Management exited their position in Karoon Energy (KAR) at $1.78 per share.
- The decision was influenced by the current spot valuation.
- A weaker near term cash flow outlook was identified.
- The exit was partly due to ongoing production issues.
- There is a concern regarding increasing capital intensity.
Endeavor Asset Management
31 May 2024
$1.81
- Karoon Energy’s (KAR) share price fell 9% due to downgraded production guidance.
- Shareholder activism is influencing changes in the strategic direction and governance practices.
- Despite current challenges, Karoon is positioned as a key player in the energy sector.
- Recent acquisitions and ongoing projects offer significant growth potential.
- The activism could serve as a positive catalyst for improvements in operations and governance, potentially unlocking further value for shareholders.
Endeavor Asset Management
31 Mar 2024
$2.18
- Karoon Energy presents a compelling opportunity for exposure to the oil & gas sector.
- The company boasts strong cash generation and low production costs.
- Significant growth potential is anticipated for Karoon Energy.
- Recent acquisition of the Who Dat asset in the U.S. Gulf of Mexico enhances scale and diversification.
- Upcoming drilling activity and potential development projects offer exciting possibilities.
- Endeavor Asset Management believes Karoon is currently undervalued compared to its peers.
- Represents a better long-term investment opportunity than BPT at this time.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.