Karoon Energy Restores Baúna Well and Raises 2026 Capex Guidance

Baúna SPS-92 Well Back Online at Strong Rates

Karoon Energy (ASX:KAR) has breathed new life into its Baúna Project, restoring production from the SPS-92 well to 8,600 barrels of oil per day (bopd) following a rig-based intervention to replace a failed electrical submersible pump. This revival lifts the total Baúna output to approximately 20,500 bopd prior to natural decline, a notable recovery after the well’s partial pump failure in August 2025 had halved production to around 4,500 bopd.

The company anticipates an additional 1,000 to 2,000 bopd boost once the PRA-2 well is reconnected, with operations to restore the umbilical now underway. This production rebound marks a transition from a heavy investment phase to one focused on cash flow generation, underpinned by strong operational performance and a target FPSO efficiency of 90–95% that Karoon recently exceeded.

Higher Intervention Costs Push Up Baúna Capex Guidance

While the SPS-92 intervention succeeded, final costs overshot initial estimates due to weather delays, wellbore debris, and equipment downtime. As a result, Karoon has revised its 2026 Baúna capital expenditure guidance upward to between US$89 million and US$97 million, up from the prior range of US$61 million to US$74 million.

Offsetting this, the Who Dat project’s capex guidance has been trimmed to US$72 million–85 million from US$76 million–94 million, reflecting updated project estimates and contingencies. Meanwhile, exploration and appraisal costs for Neon in the Santos Basin have nudged higher to US$14 million–16 million, up from US$9 million–11 million, as the company advances engineering and commercial work ahead of the next decision gate.

Karoon stresses that with the substantial completion of the FPSO revitalisation and well intervention campaign, sustaining capital requirements at Baúna are expected to fall materially over the coming years, excluding new growth projects. The company projects strong operating cash flow at Brent oil prices of US$60–70 per barrel, supported by annualised operating cost savings of US$30–40 million post-FPSO transition and a low break-even production profile.

Share Buyback Resumes as Board Sees Undervaluation

In parallel with operational updates, Karoon announced it will kick off a third phase of its on-market share buyback program in July 2026. To date, the company has repurchased and cancelled 94.3 million shares at an average price of A$1.57 per share, spending approximately US$97 million.

The buyback will proceed at a measured pace, respecting market conditions and Karoon’s capital needs, including funding future project sanctions. The Board retains discretion over timing and volume, with purchases capped at 10% of issued capital over a 12-month period, complying with Australian Corporations Act regulations.

Chairman Peter Botten highlighted the Board’s view that Karoon shares remain significantly undervalued, presenting an attractive opportunity to enhance value for remaining shareholders. The buyback forms part of a disciplined capital allocation framework balancing shareholder returns with ongoing business investment and maintaining a strong balance sheet.

Operational Excellence and Cost Discipline in Focus

CEO Carri Lockhart framed the recent operational achievements as a foundation for sustainable value creation. She noted that despite higher-than-expected intervention costs, the restored SPS-92 well is a high-margin, low break-even asset that strengthens Baúna’s long-term cash-generating capacity. Lockhart emphasised ongoing efforts to maintain FPSO production efficiency above 90%, improve operating model excellence, and drive further cost savings following the operatorship transition.

These developments come amid a backdrop of evolving project timelines and capital expenditure adjustments across Karoon’s portfolio, including delays at Who Dat and increased exploration activity at Neon. The company’s ability to navigate these shifts while maintaining operational momentum will be critical to its 2026 performance trajectory.