Karoon Gas Australia Limited

By Jason Fittler

If you like to speculate on the market here is a company which dropped 20% last Thursday on the back of poor drilling results.

This means that around $1.68 per share of value was wiped from our valuation. The price has fallen around $1.90 since the start of the financial year.

KAR was trading around $2.00 on Friday after starting the day at $2.60.

Karoon Gas Australia is a mid-cap oil and gas exploration company based in Melbourne, Australia. Founded by Bob Hosking and Mark Smith, it was listed in early June 2004.

Karoon's exploration portfolio includes offshore acreage in Brazil, Peru and the Carnarvon Basin, Western Australia.

In Brazil, Karoon discovered oil at the Kangaroo and Bilby prospects in 2013; follow-up appraisal drilling at Kangaroo is expected to continue in 2015, with exploration drilling planned in the Carnarvon Basin in 2015.

The share price for KAR has not been this low since the bottom of the GFC, since then it has been above $11.50 and back.

So, is the company cheap at these levels?

Our current valuation on the company is $3 per share so it is trading at a discount of 50% to our valuation.

However, before you jump in, keep in mind that it pays no dividend and has no forecast to pay one.

This company runs on its drilling results and the ability to find a development partner once reserves are found. 

At present, oil is at an oversupply that which POEC seem unwilling to manage. Over time, the oil price will stabilise but any recovery is still years away. 

This is highly speculative company.

Only invest money you do not need and if lucky enough to see a good profit, take it.

For more information about Karoon Gas Australia Limited please contact us on 07 4771 4577.