Karoon Faces Production Risks Amid Baúna Well Issues and Who Dat Maintenance Shutdown

Production Challenges and Operational Resilience

Karoon Energy’s third quarter report for 2025 reveals a mixed operational picture. Production on a net revenue interest basis fell 12% to 2.59 million barrels of oil equivalent (MMboe) compared to the previous quarter. This decline stemmed primarily from technical issues at two Baúna Project wells, including an electrical submersible pump failure and an unexpected subsea umbilical disconnection, alongside a scheduled maintenance shutdown at the Who Dat facility in the US Gulf Coast.

Despite the production setback, Karoon’s sales revenue rose 3% to US$164.1 million, buoyed by higher realised oil prices at Baúna. Sales volumes were only marginally lower, reflecting timing differences in cargo shipments. The company also reported a strong safety record with no personal or major process safety incidents during the quarter.

Strategic Advances in Project Development

Karoon is progressing its longer-term growth projects with notable momentum. The Neon project in Brazil entered a farm-down phase, targeting a 30-50% stake sale to manage capital exposure while refining its field development plan. The company expects to decide on advancing to the next development stage in early 2026, contingent on ongoing positive results.

Meanwhile, the Who Dat East development in the US has entered the Define phase, including front-end engineering and design work. A final investment decision is anticipated in early 2026, with plans for an initial one-well tieback development. Additionally, a sidetrack operation on the Who Dat E6 well commenced post-quarter, aiming for production startup by late Q4 2025 with an estimated initial output of 700 to 1,200 barrels per day on a net revenue interest basis.

Expanding Exploration Footprint in Brazil

In a significant development, Karoon secured a 100% interest in the Esmeralda block, a deepwater exploration area in the Santos Basin offshore Brazil. This acquisition expands Karoon’s acreage into a potentially promising post-salt exploration play, located approximately 70 kilometres east of its existing deepwater blocks. Formal award of the block is expected in the first half of 2026, subject to regulatory approvals and financial guarantees.

Financial Discipline and Shareholder Returns

Karoon narrowed its full-year 2025 production guidance to between 9.8 and 10.4 million barrels of oil equivalent, reflecting the operational challenges encountered. Capital expenditure guidance was also reduced to US$95-111 million, down from previous estimates, due to deferrals and cost adjustments. The company’s net debt position improved significantly, falling from US$237.9 million to US$148.7 million by the end of September, supported by strong cash flows and ongoing share buybacks. Karoon completed the first phase of its US$75 million on-market buyback program and plans to commence the next tranche shortly.

Looking ahead, Karoon aims to take operational control of the Baúna FPSO by mid-2026, a move expected to enhance operational efficiency and cost management. The company remains focused on optimising production from its existing assets while advancing its development pipeline and maintaining capital discipline.