Key highlights

  • Karoon confirmed an electrical fault in one of three phases of the new ESP power cable on the SPS-92 well at Baúna, per its 28 September 2026 release.
  • About 3,500 bopd will be deferred until the cable system is replaced, and Baúna 2026 production guidance fell to 5.4–5.7 MMbbl from 6.0–6.7 MMbbl.
  • Total 2026 production guidance is now 6.6–7.2 MMboe, with unit production cost guidance of US$15–16 per boe.

During the Trading session on 21 October 2026, Karoon Energy Ltd (ASX:KAR) was priced at $1.73, down 0.29%. The S&P/ASX 200 Energy [XEJ] index traded at 11,167.20 (+0.014%, +1.60 points) while the S&P/ASX 200 [XJO] was at 8,806.90 (−0.11%, −10.00 points) at 2:32 pm GMT+11. On the energy-market side, Brent Crude oil added 0.60% to US$109.48, with continued Middle East friction involving Iran, Saudi Arabia and Yemen’s Houthis in view, while a reported draw on US oil stockpiles added to signs of tightening supply. Karoon is an oil and gas producer with operations in Brazil’s Santos Basin and the Gulf of Mexico.

What Karoon Energy does

Karoon Energy Ltd is an independent oil and gas company with two producing assets: the Baúna project offshore Brazil in the Santos Basin, and a net Revenue interest in the Who Dat field in the United States Gulf of Mexico. It reports production in barrels of oil and barrels of oil equivalent and discloses unit production costs on a net working interest basis. Baúna production is delivered through floating production infrastructure and subsea wells, including SPS-92, which was fitted with a new electrical submersible pump (ESP) system.

The SPS-92 electrical fault

In an ASX release dated 28 September 2026, Karoon reported that on 21 September 2026 (BRT time) it noted a fault on the monitoring system of the SPS-92 well at Baúna. The company shut the well down in a controlled manner on 22 September to preserve pump integrity and investigate. Analysis and testing confirmed a fault in one of the three electrical phases in the newly installed power cable for the downhole ESP.

The pump is currently operating on two phases in a conservative manner. Karoon believes a rig-based well intervention to replace the faulty cabling system will be required to reinstate full operability. It holds an existing option over a suitable drilling rig and has begun planning, including permitting, equipment and services, with timing dependent on permit approvals and services. The company estimates that about 3,500 bopd will be deferred until the cable system is replaced and said the deferral is currently not expected to affect Baúna reserves.

Revised 2026 guidance

Karoon lowered its 2026 full-year Baúna production guidance to 5.4–5.7 MMbbl from 6.0–6.7 MMbbl, with the lower end reflecting a conversion to gas lift if necessary. Who Dat guidance of 1.2–1.5 MMboe is unchanged. Total 2026 production guidance moved to 6.6–7.2 MMboe from 7.2–8.2 MMboe. Because of lower production against a relatively Fixed Cost base, unit production cost guidance rose to US$15–16 per boe from US$12–15 per boe. All other guidance is unchanged.

Insurance and warranty

Karoon stated that it maintains an insurance program covering equipment damage and associated lost production income. While it investigates the root cause and assesses the event against policy terms, the company believes, based on preliminary non-binding advice from its insurance advisers, that insurance may partially offset lost production revenue and reimburse substantially all intervention and repair costs, subject to deductibles, policy terms and final confirmation of coverage. The company is also pursuing equipment warranty recoveries. It noted that the ESP and cable system had been operating for less than three months.

Operating background at Baúna

The SPS-92 well forms part of the Baúna field’s subsea production system. Before the electrical fault, the release states, the well was performing in line with expectations and benefiting from increasing reservoir pressures following the resumption of water flood operations. The newly installed ESP and cable system had operated for less than three months when the fault occurred.

The release describes the production deferral as relating to barrels that are deferred rather than lost, noting that the deferral is currently not expected to affect Baúna reserves, and that the company plans to capture deferred barrels once the well is returned to full production while maximising output from other Baúna wells.

Sector context

Oil producers’ revenue is linked to crude benchmarks, and Brent was at US$109.48 per barrel during the session, up 0.60%, while the S&P/ASX 200 Energy index was at 11,167.20. Offshore operators also face equipment, intervention and rig availability variables that can influence production timing, as in the SPS-92 event.

Risks and uncertainties

The release identifies several uncertainties: the root cause of the fault is under investigation, intervention timing depends on permits, equipment, services and rig availability, and insurance coverage remains unconfirmed and subject to deductibles and policy terms. If conversion to gas lift becomes necessary, production would be at the lower end of the range. Production is lower and unit costs are higher than previously guided, and production deferral volumes depend on the length of the outage.

Catalysts to watch

Items referenced include confirmation of intervention timing and permits, the rig-based repair, the result of the root cause analysis, insurance and warranty outcomes, the return of SPS-92 to full production, and further guidance updates as more clarity emerges.

Wrapping up

Karoon’s 28 September 2026 release set out the fault, a revised production and cost outlook and the repair pathway. The company said it will update the market when intervention timing is clearer.