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Karoon Energy eyes acquisitions, dividends

The ASX's fourth-biggest oil producer is cashed up and eyeing potential acquisitions and its possible first-ever capital returns to shareholders.

Karoon Energy had $US180 million ($A266m) in cash and cash equivalents at the end of September, despite capital intensive drilling programs, with its balance sheet boosted by better-than-expected production and high oil prices.

It has recently managed to boost production of the 10 wells off the coast of Brazil it bought two years ago from state-owned oil giant Petrobras for $US380 million.

The wells are now producing another 11,000 barrels per day, to an average of 24,000 barrels.

Chief executive and managing director Dr Julian Fowles told shareholders this "excellent outcome" reflected many months of hard work by Karoon's team and contractor Maersk Drilling.

Its production costs are less than $US40 a barrel, while Brent crude has been changing hands around $US90 to $US100 a barrel for much of the year.

For 2021/22, Karoon posted an underlying US$90m ($A133m) net profit after tax, up from $US21m ($A31m) the year before.

The company is in the middle of drilling more wells off the coast of Brazil and expects to take its total production to 30,000 to 35,000 barrels a day by early next year.

It's also actively exploring merger and acquisition opportunities, Dr Fowles told AAP in a telephone interview after the AGM.

It's looking at some assets in the Gulf of Mexico but most are also in Brazil, a country he said has the potential to become the fifth-biggest oil-producer by the end of the decade, up from eighth today.

"For us it's the centre, the core of our operations," he said of Brazil.

"We see an industry that is well-supplied with services (and) we see a regulator that is actively encouraging safe and and reliable operations."

Dr Fowles said he expects Brazil's incoming centre-left president to pursue the middle ground when he takes office in January, given Luiz Inacio Lula da Silva's relatively narrow victory over incumbent right-wing president Jair Bolsonaro.

Karoon chairman Bruce Phillips told shareholders once expenditures on two gas fields have finished, the company intends making returns to shareholders a priority.

It's investigating various forms of capital returns, which it anticipates commencing the second half of 2023.

Karoon shares closed down 3.4 per cent to $2.30 on Thursday, having risen 11.1 per cent in the past month.