Karoon approves FEED for Echidna oil discovery in Santos basin, Brazil

MELBOURNE -- Karoon Gas Australia Ltd. is pleased to announce that its Board has approved the development concept for the Echidna light oil discovery, progressing the project to the next phase in the development, Front-End Engineering and Design (FEED).

This development milestone is a result of 18 months of subsurface evaluation including reservoir modelling, production scenario analysis, well construction feasibility studies and development optimization. The optimization work has been focused on delivering a capital efficient, risk-weighted development concept for the Echidna oil discovery that is economically robust in the current oil price environment.

The Echidna development concept consists of:

• A leased floating production, storage, and offloading facility
• Two extended horizontal production wells and one gas injection well
• Expected peak production is approximately 28,000 bpd (14,000 bpd per well)

FEED is expected to take approximately nine months and cost less than A$10 million, with completion planned during the March quarter 2018.

A final investment decision (FID) is targeted for the June quarter 2018. During the FEED process Karoon will issue a Request for Tenders to select suppliers with the intention of contracting an Engineering Procurement Construction and Installation (EPCI) work package for the Echidna development.

The dramatic oil industry pull back over the past three years has led to lower vessel utilization rates and higher equipment inventory levels, globally and in Brazil. This cyclical downturn has presented a window of opportunity in which Karoon expects to receive tenders that provide significant funding flexibility.

Based on recent supplier discussions, Karoon expects to receive tenders that substantially reduce upfront capital commitments including deferred payment structures, equipment financing solutions, subsurface risk/reward sharing and equity ownership.

Karoon remains committed to farming down equity in the 100% owned Santos basin blocks prior to FID.