Karoon's production rebound puts Who Dat growth in the spotlight

Production rebound lifts Karoon revenue

Karoon Energy Ltd (ASX:KAR) more than doubled production in the September quarter, delivering 2.27 million barrels of oil equivalent on a net revenue interest basis, up 110% from the June quarter. Sales revenue rose 64% to US$191.6 million, even as lower global oil prices and higher freight costs pushed realised oil prices lower.

The improvement came as the Baúna FPSO revitalisation campaign completed, the PRA-2 well returned to service and Who Dat benefited from its A1 sidetrack. Baúna produced 1.83 million barrels during the quarter, compared with 0.84 million in the prior quarter, while Who Dat production rose 80% to 0.53 MMboe on a net working interest basis. Facility performance was also strong, with Baúna operating efficiency at 96% and Who Dat at almost 100%.

SPS-92 fault keeps Baúna recovery incomplete

The quarter's sharp rebound is complicated by a late-September electrical fault in the newly installed power cable serving Baúna's SPS-92 electric submersible pump. The well is operating on two of its three electrical phases and producing at about 55% of its pre-fault rate, reducing output by approximately 3,500 barrels a day.

The root cause remains under investigation, with Karoon assessing intervention options, equipment availability and regulatory approvals. The company is pursuing insurance recovery for physical damage, repair and intervention costs, as well as lost production income, although the timing and extent of any recovery remain subject to the investigation, policy terms and insurer confirmation. The issue was previously associated with a reduction in guidance in the SPS-92 cable fault update, but Karoon left its 2026 production and cost guidance unchanged in this report.

Who Dat adds production and sanctioned growth

Who Dat's A1 sidetrack was producing approximately 2,400 boepd on a net revenue interest basis at quarter end, up from 1,700 boepd in early July. A G1 sidetrack is expected to begin drilling in the fourth quarter and reach production in the second quarter of 2027, with a forecast contribution of about 1,900 boepd to Karoon before natural decline.

The Who Dat East joint venture has also moved from approval into execution following the Who Dat East development approval. The one-well project is expected to begin production in the second half of 2028, targeting an initial net rate of approximately 2,600 barrels of oil a day and 20 million standard cubic feet of gas a day. Karoon's share of estimated capital spending is US$155 million to US$165 million, with geotechnical work complete and long-lead item and installation contracts progressing.

Neon advances as capital returns continue

Karoon is also refining its 100%-owned Neon development in Brazil around a redeployed FPSO and phased development plan. It has signed a memorandum of understanding with TechnipFMC as preferred subsea supplier and is in detailed discussions over an option on a topside host facility. A decision on whether to enter front-end engineering and design is expected in the fourth quarter; farm-out talks are intended to resume if Neon proceeds into FEED.

Cash ended the quarter at US$80.8 million, while net debt stood at US$269.2 million. Total liquidity was US$307.5 million, down from US$363.6 million at June 30 after the scheduled reduction in available reserves-based lending capacity. The facility remained entirely undrawn, leaving Karoon with flexibility that it says it is reviewing alongside possible changes to funding tenor and cost.

That flexibility sits beside an active capital-return program: Karoon spent US$16.0 million buying back 13.3 million shares during the quarter and paid a US$6.0 million interim dividend. It has now bought back and cancelled 107.7 million shares since the program began in the second half of 2024. The immediate test is whether SPS-92 can be repaired without further disruption while Karoon funds Who Dat East, evaluates Neon FEED and maintains shareholder distributions.