Karoon Faces Execution Risks as Baúna Maintenance and Well Work Loom

Strong Production Performance Despite Challenges

Karoon Energy has reported full-year 2025 production of 10.3 million barrels of oil equivalent (MMboe), positioning the company near the upper end of its guidance range of 9.8 to 10.4 MMboe. This result is only marginally below the record 10.4 MMboe achieved in 2024, underscoring operational resilience despite natural reservoir declines and downtime on two Baúna wells.

The fourth quarter production dipped slightly to 2.37 MMboe from 2.59 MMboe in the previous quarter, primarily due to ongoing maintenance and natural decline. However, the Baúna floating production, storage and offloading (FPSO) vessel efficiency surged to 98.8% in Q4, a notable improvement from 92.7% in Q3 and a significant leap from 84.5% in 2024. This efficiency gain reflects enhanced maintenance and equipment redundancy efforts.

Operational Highlights and Leadership Transition

The Who Dat asset in the US Gulf Coast also contributed positively, with the E6 sidetrack well coming online in mid-November 2025, delivering flow rates consistent with pre-drill expectations and helping offset natural decline. Full-year production from Who Dat on a net revenue interest basis was 2.6 MMboe, in line with guidance.

In a significant leadership change, Karoon appointed Carri Lockhart as Managing Director and CEO effective 3 November 2025, succeeding Dr Julian Fowles. Lockhart emphasised the company’s focus on safe, reliable operations and capital discipline amid a challenging oil price environment.

Capital Management and Shareholder Returns

Karoon continued its on-market share buyback program during the quarter, acquiring 9.4 million shares at an average price of A$1.58, bringing total shares bought and cancelled since mid-2024 to approximately 82.5 million, or 10% of shares on issue. The buyback remains under regular review as part of the company’s capital management strategy.

Financially, Karoon ended 2025 with net debt of US$143.9 million, supported by US$206.1 million in cash. Capital expenditure for the year was US$96 to 101 million, excluding the FPSO acquisition, with 4Q25 capex of US$44 million focused on the E6 sidetrack and Santos Basin signature bonuses.

Outlook for 2026 – Maintenance, Growth, and Cost Control

Looking ahead, Karoon’s preliminary 2026 production guidance is set between 8.1 and 9.2 MMboe, reflecting expected lower output in the first half due to a planned 28-day FPSO shutdown and a four-month flotel-supported maintenance and revitalisation campaign at Baúna. Production is anticipated to improve in the second half as well interventions restore output from key wells.

Unit production costs are forecast at US$12 to 15 per barrel of oil equivalent, reflecting lower production volumes spread over fixed costs. Capital expenditure guidance for 2026 is US$110 to 135 million, including investments to reinstate Baúna wells and drill the Who Dat A1 sidetrack. The company also continues to advance exploration and development projects such as Neon in Brazil and Who Dat East and South in the US Gulf Coast.

Sustainability and Safety

Karoon reported strong safety performance with no recordable injuries or process safety incidents during the quarter, marking one year without lost time injuries. Environmental initiatives have yielded significant reductions in flared gas at both Baúna and Who Dat facilities, contributing to a combined emissions intensity of 9.9 kgCO2e per barrel of oil equivalent for 2025, excluding logistics.

The company’s social investment programs in Brazil continue to progress, focusing on community development aligned with UN Sustainable Development Goals.