Highlights

  • Karoon Energy shares jumped 3.85% to AUD 1.62 on 23 July 2026, following the release of latest operational update.
  • Karoon produced 1.08 million barrels of oil equivalent on a net revenue interest basis and generated second-quarter sales revenue of US$116.4 million.
  • Baúna production has recovered to approximately 22,000 barrels of oil per day after the SPS-92 and PRA-2 wells returned online.
  • The Baúna FPSO achieved 97% operating efficiency, exceeding the company’s targeted range of 90% to 95%.
  • Karoon ended the quarter with US$363.6 million in total liquidity and expects higher free cash flow in the second half of 2026.
  • Strategic projects advanced, with a Who Dat East investment decision expected in the third quarter and the next Neon milestone planned for the fourth quarter.

Karoon Energy Ltd (ASX:KAR) shares rose 3.85% to AUD 1.62 during the morning session on 23 July 2026 after the company released its report for the three months ended 30 June 2026. The stock remains down 17.77% over the past year. Investor attention appeared to focus on the completion of major maintenance and revitalisation work at Baúna, the restoration of approximately 10,000 barrels per day of production and management’s expectation of higher free cash flow during the second half of the year.

The update was favourable from an operational recovery perspective, although second-quarter production and sales were lower than in the March quarter because of a planned 28-day shutdown at Baúna and reduced output from Who Dat. Higher realised oil prices partially offset the volume decline, while substantial first-half capital investment increased net debt.

Karoon’s International Oil and Gas Portfolio

Karoon Energy is an international oil and gas exploration and production company with assets across Brazil, the United States and Australia.

Its principal producing asset is the 100%-owned Baúna Project in Brazil’s Santos Basin. The company also holds interests in the Who Dat development and nearby opportunities in the US Gulf Coast. Its prospective growth portfolio includes the Neon discovery in Brazil, Who Dat East and Who Dat South in the United States, and several deepwater Santos Basin exploration blocks.

During the June quarter, Karoon concentrated on completing a major operational program intended to improve Baúna reliability, reduce operating costs and establish a more stable production platform.

Quarterly Revenue Supported by Higher Oil Prices

Karoon generated total sales revenue of US$116.4 million in the June quarter, down 9% from US$128.2 million in the March quarter and below US$159.7 million in the prior corresponding period.

The decline primarily reflected lower production and sales volumes during planned maintenance and well intervention activities. Total sales fell 33% quarter on quarter to 1.23 MMboe.

However, higher oil prices provided meaningful support.

The average realised price for Baúna crude increased 33% from the March quarter to US$94.56 per barrel. Baúna generated US$93.1 million of revenue from sales of 0.98 million barrels.

The average realised price for Who Dat oil, condensate and natural gas liquids increased 55% to US$101.93 per barrel. Revenue from Who Dat liquids rose 7% to US$22.5 million despite lower sales volumes.

Who Dat gas prices moved in the opposite direction, falling 47% to US$4.08 per thousand cubic feet. Gas revenue declined to US$0.8 million from US$2.7 million in the previous quarter.

Baúna Maintenance Program Reaches Completion

Baúna produced 0.84 million barrels during the second quarter at an average rate of 9,202 barrels per day, compared with 1.56 million barrels and 17,350 barrels per day in the March quarter.

The reduction reflected the planned 28-day FPSO shutdown and the temporary closure of the SPS-92 production well while Karoon replaced its electrical submersible pump.

Despite the lower headline production figure, Karoon completed several important operational milestones.

The company transferred operatorship of the Baúna FPSO on 27 May 2026, giving it greater operational control. The planned shutdown, which included maintenance, inspections, a hull inspection and replacement of the production header, was completed on 13 May.

A broader flotel-supported revitalisation campaign concluded in June.

FPSO efficiency reached 97.2% during the quarter, compared with 96.1% in the March quarter and above Karoon’s target range of 90% to 95%.

All Baúna Production Wells Return Online

Production from the SPS-92 well resumed on 24 June after replacement of its electrical submersible pump.

Karoon subsequently restored the PRA-2 well on 6 July after reconnecting its umbilical and re-establishing connectivity to the pump.

With both wells operational, all Baúna production wells are now online and total project output has increased to approximately 22,000 barrels per day.

The two returning wells restored around 10,000 barrels per day of production capacity.

This recovery is central to the company’s expectation of improved second-half operating performance and cash generation, provided production remains within guidance and oil prices remain supportive.

Who Dat Output Affected by Riser Issue

Gross Who Dat production declined to 1.03 MMboe from 1.67 MMboe in the previous quarter, with the average production rate falling from 18,300 boepd to 11,360 boepd.

Karoon’s production on a net revenue interest basis was 0.24 MMboe, compared with 0.38 MMboe in the March quarter.

The decline followed the temporary shutdown of the E manifold after a minor riser leak was identified in February. The interruption affected approximately 15,000 boepd of gross production from seven wells.

Operator LLOG plans to remove and inspect the riser, with work expected to begin in the third quarter of 2026. Karoon’s current base case assumes that one or both E risers will require replacement, with E manifold production expected to resume in the fourth quarter of 2027.

A1 Sidetrack Adds Near-Term Production

The Who Dat A1 sidetrack commenced production on 13 July and was producing approximately 1,700 boepd on a net revenue interest basis at the time of the update.

Karoon said the well was ramping up in line with expectations and would provide a near-term contribution while E manifold remediation continues.

A further G1 sidetrack is expected to begin drilling during the second half of 2026, subject to final technical assessment and joint venture and regulatory approvals.

If approved and successful, the G1 sidetrack could provide another production contribution before the E manifold returns to service.

Capital Expenditure Peaks During Major Work Program

Karoon incurred second-quarter capital expenditure of US$126.6 million, compared with US$39.5 million in the March quarter.

Development, plant and equipment spending was US$124.0 million. This included US$37.2 million for the Baúna flotel revitalisation campaign, US$56.6 million for the SPS-92 intervention and US$34.0 million for the A1 sidetrack, partly offset by vendor credits.

Exploration and appraisal expenditure totalled US$2.6 million, including US$1.7 million for Who Dat seismic acquisition.

Management said approximately 85% of the company’s full-year budgeted capital expenditure was invested during the first half, meaning expenditure is expected to decline during the remainder of the year.

Liquidity Remains Available as Net Debt Rises

Karoon ended the quarter with US$80.3 million in cash and cash equivalents, down from US$169.4 million at the end of March.

Drawn debt remained unchanged at US$350.0 million, resulting in net debt of US$269.7 million, compared with US$180.6 million three months earlier.

Total liquidity was US$363.6 million, comprising cash and US$283.3 million of undrawn available facilities.

The undrawn reserves-based lending facility is scheduled to reduce to US$226.7 million on 30 September 2026 under its existing amortisation profile.

Quarterly cash inflows included US$123.4 million from hydrocarbon sales. Major outflows included operating expenditure, royalties, capital investment, Baúna maintenance, SPS-92 work and US$4.0 million spent on share repurchases.

Share Buyback Continues

Karoon purchased 2.8 million shares during the quarter at an average price of AUD 2.02 per share for a total cost of US$4.0 million.

Since the buyback program began in the second half of 2024, the company has acquired and cancelled 94.3 million shares at an average price of AUD 1.57, representing approximately US$97 million of expenditure.

Following completion of the second phase of its US$75 million program, Karoon planned to commence another on-market buyback in July 2026.

The Board views buybacks as an attractive near-term use of capital, although future purchases remain subject to liquidity, credit arrangements, market conditions and the prevailing share price.

Growth Projects Approach Key Decisions

Karoon expects the Who Dat East joint venture to make a final investment decision during the third quarter of 2026. Operator LLOG issued an authorisation for expenditure after completing the project’s final evaluation.

At Who Dat South, seismic reprocessing continued to help optimise a possible future development location and refine potential infill drilling opportunities.

In Brazil, work on Neon advanced across subsurface interpretation, subsea design, cost estimates and host facility evaluations. The company is reviewing the development concept to improve capital efficiency before the next project milestone, expected in the fourth quarter.

Production Guidance Maintained at 7.2–8.2 MMboe

Karoon’s calendar-year 2026 production guidance stands at 7.2–8.2 MMboe, comprising 6.0–6.7 million barrels from Brazil and 1.2–1.5 MMboe from Who Dat on a net revenue interest basis.

Unit production costs are forecast at US$12–15 per boe, while total capital expenditure guidance is US$178–202 million.

Guidance excludes US$49–53 million of flotel and FPSO integrity costs, US$6 million of one-off FPSO transition expenditure and US$3–4 million associated with relocating corporate roles from Melbourne to Houston and Rio de Janeiro.

Management expects higher free cash flow in the second half, assuming oil prices average US$60–70 per barrel and operations perform in line with guidance.

What Could Investors Watch Next?

Karoon enters the second half with Baúna maintenance substantially complete, all production wells operating and capital expenditure expected to decline.

Investors may monitor whether Baúna sustains production near its current rate of approximately 22,000 barrels per day, as well as the ramp-up of the Who Dat A1 sidetrack.

The Who Dat E riser remediation schedule, the proposed G1 sidetrack, the Who Dat East investment decision and the next Neon milestone will also influence the company’s medium-term production outlook.

Higher oil prices supported second-quarter revenue, but future cash flow remains exposed to commodity prices, operational reliability, development decisions and the extended Brazilian export tax.