Karoon Energy Ltd (ASX:KAR) revised its production guidance after identifying an electrical fault in the newly installed power cable serving the SPS-92 well at the Baúna project offshore Brazil. The company shut the well down in a controlled manner while investigating, then resumed operation on two of the cable’s three electrical phases at a conservative rate. Full operability is expected to require a rig-based intervention.

Production effect

Karoon estimated that approximately 3,500 barrels of oil per day would be deferred until the cabling system is replaced. It lowered Baúna full-year production guidance from 6.0–6.7 million barrels to 5.4–5.7 million barrels. With guidance for Who Dat unchanged, expected group production became 6.6–7.2 million barrels of oil equivalent. The lower end of Baúna’s new range incorporates a possible switch to gas lift if needed.

Repair and financial considerations

The intervention timetable depends on permits, equipment and services. Lower output against a relatively Fixed Cost base can lift unit production costs and reduce operating cash inflows. Karoon said its insurance program may partly offset lost production income and cover substantial repair costs, subject to policy terms, deductibles and insurer confirmation. The production deferral was not expected to affect Baúna reserves.

What comes next

Investors will look for confirmation of the fault’s root cause, the repair schedule and the pace at which SPS-92 production returns. Actual group output will also depend on performance at other producing wells and oil prices. The revised guidance gives a measurable range, while the duration and cost of the intervention remain uncertain.