Karoon’s 4% Production Rise Overshadowed by 61% Profit Drop in H1 2025

Production Growth Amid Profit Challenges

Karoon Energy Ltd reported a 4% increase in production for the first half of 2025 compared to the same period last year, revising its full-year production guidance upward to between 9.7 and 10.5 million barrels of oil equivalent (MMboe). However, this operational success was tempered by a sharp decline in profitability. Underlying EBITDAX fell 25% to US$201 million, while net profit after tax (NPAT) plunged 61% to US$45 million. The profit squeeze reflects lower realised oil prices, reduced sales volumes due to cargo in transit, and higher depreciation and finance costs.

Strategic Asset Acquisition and Operational Control

A major highlight was the completion of the Baúna FPSO (Floating Production Storage and Offloading) vessel acquisition in April 2025. Karoon is transitioning to direct operatorship of the FPSO, aiming to take full control in the first half of 2026, subject to regulatory approvals. This move is expected to reduce operating expenses by US$30-40 million annually and enable the company to implement emissions reduction initiatives. The acquisition also contributed to a 13.7 million barrel increase in 2P reserves and extended the Baúna field life to 2039, deferring decommissioning plans.

Advancing Growth Projects – Neon and Who Dat

Karoon continues to develop its organic growth pipeline with progress on the Neon and Who Dat projects. Neon’s contingent resources grew by 44% to 86.5 million barrels (2C), with the project entering the Define phase in April 2025. The company has initiated a farm-down process targeting a 30-50% stake sale by year-end to balance capital exposure ahead of a final investment decision (FID) expected in the second half of 2026. Meanwhile, Who Dat East has entered its Define phase, with an FID targeted for late 2025 or early 2026. Both projects offer promising tie-back development opportunities that could bolster future production.

Financial Position and Capital Management

Karoon’s balance sheet reflects the impact of strategic investments and operational expenditures. Net debt rose to US$237.9 million at June 30, 2025, from US$8.8 million at the end of 2024, primarily due to the FPSO acquisition and related costs. Liquidity remains strong at US$452.1 million, supporting ongoing capital returns and share buybacks. Since August 2024, the company has repurchased approximately 9% of its issued capital, underscoring its commitment to shareholder value. An interim dividend of 2.4 Australian cents per share was declared, albeit unfranked.

Safety and Environmental Performance

Safety metrics improved notably at the Baúna Project, with no lost time injuries and no Tier 1 or 2 process safety events recorded in the first half of 2025. The company continues to implement its Golden Safety Rules and hazard awareness programs. Environmentally, Karoon offset its 2024 Scope 1 emissions of approximately 128,000 tonnes of CO2 equivalent through carbon credits, while emission intensity decreased due to improved operational reliability.

Looking Ahead

Karoon’s near-term priorities include completing the FPSO operatorship transition, maintaining production reliability, and advancing the Neon and Who Dat projects toward FID. Capital demands are expected to ease in the second half of 2025, potentially improving free cash flow and reducing leverage. The company is also relocating key corporate functions to Houston and Rio de Janeiro to streamline operations and enhance collaboration. While challenges remain, particularly around oil price volatility and operational risks, Karoon’s strategic moves position it well for sustainable growth.