Karoon Energy Ltd (ASX:KAR) announced on 28 September 2026 that an electrical fault has been identified in the newly installed power cable system for the downhole Electrical Submersible Pump (ESP) at the SPS-92 well in the Baúna Project offshore Brazil. The company undertook a controlled shutdown of the well on 22 September to preserve pump integrity and investigate the issue.

Following analysis and testing, Karoon confirmed that one of the three electrical phases in the new power cable system had failed. The pump is currently operating on two phases under a conservative operating approach while the company plans a rig-based intervention to replace the faulty cabling system and restore full operability.

The operational issue has resulted in revised 2026 production guidance, although Karoon stated that the production deferral is not currently expected to affect Baúna reserves.

SPS-92 Electrical Fault Identified and Intervention Planning Underway

The SPS-92 well fault was first identified through the well monitoring system on 21 September 2026 (BRT time). Karoon subsequently conducted a controlled shutdown and investigation process to assess the issue and protect equipment integrity.

The company confirmed that the fault relates to the newly installed power cable for the ESP system. While the pump continues operating on two phases, Karoon believes a rig-based well intervention will be required to replace the damaged cabling and return the well to full production capability.

Karoon has an existing option over a suitable drilling rig and has commenced intervention planning, including securing required permits, equipment and services. The timing of the intervention remains dependent on regulatory approvals and service availability.

The company estimates that approximately 3,500 barrels of oil per day (bopd) will be deferred until the cable system replacement is completed.

Baúna Production Guidance Revised Following SPS-92 Impact

As a result of reduced SPS-92 production, Karoon has updated its 2026 full-year Baúna Project production guidance.

The company revised Baúna production guidance from 6.0–6.7 million barrels (MMbbl) to 5.4–5.7 MMbbl. The lower end of the revised range reflects a potential conversion to gas lift if required.

Who Dat production guidance remains unchanged at 1.2–1.5 million barrels of oil equivalent (MMboe). Total 2026 production guidance has been revised from 7.2–8.2 MMboe to 6.6–7.2 MMboe.

Due to lower expected production volumes and a relatively Fixed Cost base, Karoon has also revised unit production cost guidance from US$12–15 per Barrel of Oil Equivalent (boe) to US$15–16/boe. All other guidance remains unchanged.

Insurance Review Underway to Address Potential Financial Impact

Karoon stated that it maintains a comprehensive insurance program designed to mitigate financial impacts arising from operational events, including equipment damage and production income losses.

The company is assessing the SPS-92 event against applicable policy terms and has received preliminary non-binding advice from insurance advisers. Based on current understanding, Karoon believes its insurance program may partially offset lost production Revenue and reimburse substantially all costs associated with intervention and repair, subject to deductibles, policy conditions and final insurer confirmation.

The company continues investigating the root cause of the SPS-92 failure while pursuing potential warranty and insurance recovery options.

Baúna Project Performance Prior to Fault Remained in Line With Expectations

Karoon noted that before the electrical fault occurred, SPS-92 was performing in line with expectations.

The company highlighted that the well had benefited from increasing reservoir pressures following the resumption of water flood operations.

Karoon’s current focus is restoring SPS-92 to full production, recovering deferred production volumes and maximising output from other Baúna wells while intervention planning progresses.

The Baúna Project remains a key producing asset within Karoon’s portfolio, with the company continuing to manage operational activities and production optimisation efforts.

Operational Recovery Becomes Key Near-Term Focus

The next phase for Karoon will involve completing the required intervention work and returning SPS-92 to normal operations.

The company has begun preparations for the rig-based repair program, but timing will depend on obtaining permits, securing equipment and finalising service arrangements.

Karoon’s ability to restore production levels will be an important Factor in determining the timing of deferred production recovery and future operational performance.

Risks and Uncertainty Factors

The SPS-92 repair process involves operational and timing uncertainties.

The intervention schedule depends on regulatory approvals, equipment availability and service provider coordination. Any delays could affect the timing of production recovery.

The final financial impact of the event also depends on insurance coverage confirmation, applicable policy terms and recovery outcomes.

Oil production operations remain subject to technical, operational and reservoir-related risks, including equipment performance, maintenance requirements and production variability.

What to Watch Ahead

Investors may continue monitoring Karoon Energy’s progress following the SPS-92 electrical fault.

Key areas of focus include:

  • Timing and completion of the SPS-92 well intervention.
  • Restoration of full ESP operation.
  • Recovery of deferred production volumes.
  • Confirmation of insurance and warranty recovery outcomes.
  • Updated production performance across the Baúna Project.

Karoon Energy’s latest update highlights a temporary operational challenge at the SPS-92 well while the company works through repair planning and production recovery measures. The company remains focused on restoring well performance, managing the financial impact and maintaining output from its broader production portfolio.