Key highlights

  • Karoon Energy Ltd (ASX:KAR) shares closed at $1.745, up 3.87%, on 19 October 2026.
  • A 28 September 2026 release reports an electrical fault in the cable of the SPS-92 well at Baúna, with about 3,500 bopd expected to be deferred.
  • 2026 total production guidance was revised to 6.6 to 7.2 MMboe from 7.2 to 8.2 MMboe.

Karoon Energy Ltd (ASX:KAR) is an oil and gas producer with the Baúna project offshore Brazil and an interest in the Who Dat field in the US Gulf of Mexico. On 19 October 2026, the shares closed at $1.745, up 3.87%. In an ASX release dated 28 September 2026, the company reported an electrical fault at its SPS-92 well and revised its 2026 production and cost guidance.

The SPS-92 fault

On 21 September 2026 (Brazil time), Karoon noticed a fault on the well’s monitoring system, and on 22 September it carried out a controlled shut-down to protect pump integrity. Testing confirmed a fault in one of three electrical phases in the newly installed power cable for the downhole electrical submersible pump. The pump is now running on two phases in a conservative manner. The company says the ESP and cable had been in operation for less than three months.

Karoon believes a rig-based well intervention will be needed to replace the faulty cabling. It has an existing option over a suitable drilling rig and has begun planning, including permits, equipment and services. Timing depends on securing approvals and services. About 3,500 barrels of oil per day are expected to be deferred until the cable system is replaced, and the company does not currently expect the deferral to affect Baúna reserves.

Insurance and guidance changes

Karoon says its insurance program may partially offset lost production Revenue and reimburse substantially all intervention and repair costs, based on preliminary non-binding input from its insurance advisers, and subject to deductibles, policy terms and confirmation by insurers. It is also pursuing equipment warranty recoveries.

Baúna 2026 production guidance was lowered to 5.4 to 5.7 MMbbl from 6.0 to 6.7 MMbbl, with the lower end reflecting a possible conversion to gas lift. Who Dat guidance of 1.2 to 1.5 MMboe is unchanged, so total 2026 production is now 6.6 to 7.2 MMboe, down from 7.2 to 8.2. Unit production cost guidance rose to US$15 to US$16 per Barrel of Oil Equivalent from US$12 to US$15, which the company links to lower production against a largely Fixed Cost base. All other guidance is unchanged.

The announcement explains that SPS-92 is one of the Baúna wells and that the failed component was part of a newly installed electrical submersible pump system. Before the fault the company says the well was performing in line with expectations, helped by rising reservoir pressures after the resumption of water flood operations. Because only one of three electrical phases is affected, the pump can still run on two phases, which the company is doing conservatively while it plans the intervention.

The revised guidance covers production and unit cost only. Who Dat production guidance of 1.2 to 1.5 MMboe is unchanged, as is all other guidance. The unit production cost range of US$15 to US$16 per barrel of oil equivalent excludes carbon costs, non-oil and gas Depreciation and one-off FPSO transition and corporate office relocation costs, according to the guidance footnote.

Sector backdrop

The benchmark index finished the session higher. The S&P/ASX 200 (ASX: XJO) stood at 8,845.70 at 4:25 pm (GMT+11) on 19 October 2026, up 0.44%, or 39.00 points, for the day. On the sector map, Energy rose 2.16%, the largest gain among the labelled segments. More broadly, Energy rose 2.16%, Industrials 0.93%, Financials 0.85%, Utilities 0.38% and Consumer Staples 0.25%, while Information Technology fell 1.35%, A-REIT 0.34%, Consumer Discretionary 0.18%, Telecommunication Services 0.16% and Health Care 0.13%.

Risks shareholders should weigh

The intervention timing is not fixed and depends on permits and services, so the period of deferred production could change. Production guidance has already been cut and sits at a wider cost per barrel. Insurance recovery is described as possible, not certain, and is subject to deductibles and insurer confirmation.

The root cause of the failure is still under investigation. A conversion to gas lift is flagged as a possible outcome at the lower end of guidance. Oil prices, operating conditions at Baúna and Who Dat and currency movements also affect results.

What’s next

Karoon will plan and carry out the rig-based intervention to replace the cable, continue its insurance and warranty claims and update the market once timing is clearer.