Karoon Energy (ASX:KAR) cut its 2026 production guidance after confirming an electrical fault in the power cable serving the SPS-92 well at the Baúna field offshore Brazil. The stock was down 4.5% in morning trade on 29 September as investors assessed deferred output, higher unit costs and the planned rig-based intervention.

A cable fault at a Baúna well

Karoon Energy (ASX:KAR) told the market on 28 September 2026 that an electrical fault in one well offshore Brazil has forced it to lower its 2026 production guidance. According to the company's ASX release, titled "SPS-92 electrical fault, 2026 guidance update", the problem was first noticed on 21 September (Brazilian time), when the monitoring system on the SPS-92 well at the Baúna field showed a fault. ABC News live coverage reported the guidance cut at 9:27am AEST that day.

The well was shut down under control on 22 September to protect the pump. Investigation then confirmed a fault in one of the three electrical phases of a newly installed power cable serving the downhole electrical submersible pump (ESP). The pump is now running conservatively on two phases.

What has changed in guidance

Karoon says about 3,500 barrels of oil per day are being deferred until the cable is replaced. Fixing it needs a rig-based well intervention, which cannot go ahead until permits and services are in place.

The company has revised its 2026 outlook as follows. Baúna production guidance falls from 6.0 to 6.7 million barrels to 5.4 to 5.7 million barrels. Total group production guidance drops from 7.2 to 8.2 million barrels of oil equivalent (MMboe) to 6.6 to 7.2 MMboe. Unit production costs, measured on a net working interest basis, rise from US$12 to US$15 per Barrel of Oil Equivalent to US$15 to US$16.

Karoon reports on a calendar-year basis, so the guidance covers calendar 2026.

Background: a second downgrade this year

This is the second cut to 2026 guidance in a few months. On 16 June 2026 Karoon lowered its outlook after the operator of Who Dat said production through the Who Dat E manifold would not be reinstated in 2026, following a failed riser. That update trimmed Who Dat guidance from 2.1 to 2.5 MMboe to 1.2 to 1.5 MMboe and total production from 8.1 to 9.2 MMboe to 7.2 to 8.2 MMboe, which is the range now being reduced again.

Insurance, management comment and share price

Karoon says it holds insurance covering equipment damage and loss of production income. On preliminary, non-binding advice from its insurance advisers, it believes cover may partly offset lost production Revenue and reimburse substantially all intervention and repair costs. That is subject to deductibles, policy terms and final confirmation from insurers.

Managing Director Carri Lockhart said the fault was "clearly very disappointing, especially given that this new ESP and cable system was in operation less than three months." Karoon says it has secured an option over a suitable drilling rig and is planning the intervention, while maximising output from the other Baúna wells.

On the market reaction, secondary outlets reported that the shares fell by roughly 11 per cent on 28 September; these figures have not been checked against exchange data. ABC News live coverage listed Karoon as the weakest ASX 200 stock in morning trading on 29 September, down 4.5 per cent at 10:15am AEST.

What to watch

The key unknowns are the timing and cost of the intervention, whether gas lift is required, and how much of the loss insurers ultimately cover. Karoon has not given a date for the rig work.