Key Highlights

• Baúna accounted for US$158.6 million of third-quarter revenue.

• The company also has a non-operated interest in the Who Dat field in the US Gulf of Mexico, which produces oil, Natural Gas liquids and gas and contributed US$33.0 million, of which US$31.0 million was oil and US$2.0 million gas.

• Realised prices in the quarter were US$80.60 per barrel for Baúna oil and US$87.23 per barrel for Who Dat liquids, each about 14% to 15% lower than in the prior quarter.

• Who Dat gas was US$5.00 per thousand cubic feet, up 22%.

What does Karoon Energy's (ASX:KAR) September 2026 quarter tell us about its recovery from a difficult first half? In short, production more than doubled on the previous quarter as maintenance work in Brazil finished, but a new equipment fault at a Baúna well has tempered the improvement and keeps operational delivery in focus.

The central development: a rebound from a low base

In its 3Q26 report, released on 22 October 2026 for the quarter ended 30 September, Karoon reported net Revenue interest production of 2.27 million barrels of oil equivalent (MMboe), up 110% on the 1.08 MMboe produced in the June quarter.

The rebound matters because the first half was constrained by planned and unplanned work at both of the company's producing assets. Quarterly production therefore started from a depressed base, which flatters the percentage change.

What Karoon does

Karoon is an independent oil and gas producer. Its main revenue source is Crude Oil from the Baúna field offshore Brazil's Santos Basin, which it operates. Baúna accounted for US$158.6 million of third-quarter revenue. The company also has a non-operated interest in the Who Dat field in the US Gulf of Mexico, which produces oil, natural gas liquids and gas and contributed US$33.0 million, of which US$31.0 million was oil and US$2.0 million gas.

Earnings therefore depend on oil prices, production volumes, costs and the US dollar, in which it reports. Realised prices in the quarter were US$80.60 per barrel for Baúna oil and US$87.23 per barrel for Who Dat liquids, each about 14% to 15% lower than in the prior quarter. Who Dat gas was US$5.00 per thousand cubic feet, up 22%.

Operating performance

Baúna oil production reached 1.83 million barrels, an average of 19,930 barrels a day, compared with 9,202 a day in the June quarter. The company said its revitalisation and maintenance campaigns on the floating production vessel were complete, the PRA-2 well returned on 6 July and water injection resumed in August. FPSO efficiency was 96.3%, against a target range of 90% to 95%.

Who Dat contributed 0.44 MMboe net, up 83%.

However, a late-September electrical fault in the power cable of the SPS-92 well pump cut output by about 3,500 barrels a day. Karoon is pursuing insurance recovery, though the timing and amount are uncertain. CEO Carri Lockhart called the failure disappointing.

Guidance, spending and balance sheet

Calendar 2026 production guidance was unchanged from 28 September at 6.6 to 7.2 MMboe, comprising 5.4 to 5.7 million barrels from Brazil and 1.2 to 1.5 MMboe from Who Dat. Unit production costs are guided at US$15 to US$16 per boe and Capital Expenditure at US$193 million to US$222 million.

At 30 September, cash was US$80.8 million against drawn Debt of US$350.0 million, leaving net debt of US$269.2 million. The reserve-based lending Facility is undrawn, with US$226.7 million available after a scheduled redetermination, and total Liquidity was US$307.5 million. Third-quarter capital expenditure was US$35.7 million, with US$197.8 million spent year to date.

Karoon also paid a 1.2 Australian cent Interim Dividend on 30 September, costing US$6.0 million, and bought back 13.3 million shares during the quarter at a weighted average of A$1.71.

Growth projects

At Who Dat East, in which Karoon holds 40%, the partners sanctioned development on 12 August. Net capital expenditure is expected at US$155 million to US$165 million between the second half of 2026 and the second half of 2028, with first production targeted in the second half of 2028 at about 6,000 barrels of oil equivalent a day net. A G1 sidetrack is expected to be drilled in the fourth quarter, and remediation of the E-field risers is planned for 2027.

In Brazil, the Neon discovery is wholly owned by Karoon. The concept has been revised to use a redeployed FPSO and phased development to lower upfront spending. A memorandum of understanding names TechnipFMC as preferred subsea contractor, and a decision on entering front-end engineering design is expected in the fourth quarter. If it proceeds, farm-out discussions that were paused in early 2026 would resume.

Sector conditions and risks

A further local Factor is Brazil's crude export tax, which is 12% (7.92% after tax) or 6% for European Union-bound cargoes. It was extended to 7 November 2026, and all four third-quarter cargoes are expected to be subject to it.

Key risks and uncertainties include:

• the cause, repair cost and duration of the SPS-92 fault;

• Who Dat riser remediation and timing of restored output;

• execution on Who Dat East, which relies on a non-operated partnership;

• Neon funding and concept approval;

• oil-price and exchange-rate swings;

• the safety record, with one lost-time incident in the quarter, the first in more than 600 days.

Investors may also watch how quickly Baúna output stabilises, the fourth-quarter Neon decision and whether the unit cost guidance holds as volumes recover.