Karoon Energy Completes Baúna Overhaul and Strengthens Cash Flow Outlook

Karoon Energy (ASX: KAR) produced 1.08 million barrels of oil equivalent during 2Q26, generating sales revenue of US$116.4 million as higher realised oil prices helped offset planned operational downtime.

The quarter included the transfer of Baúna floating production, storage and off-loading facility (FPSO) operatorship, completion of a major maintenance and revitalisation campaign, and restoration of production from the SPS-92 and PRA-2 wells.

Baúna is now producing about 22,000 barrels of oil per day (bopd), with all project wells online and FPSO operating efficiency of 97% exceeding Karoon’s 90% to 95% target range.

Karoon expects higher free cash flow in the second half of 2026 as production rises and capital expenditure falls, subject to oil prices, operating performance and other operating risks.

Baúna Work Restores Production

Baúna produced 0.84 million barrels during 2Q26 at an average 9,202bopd, down from 1.56 million barrels and 17,350bopd in the previous quarter because of a planned 28-day shutdown and the temporary SPS-92 shut-in.

The FPSO shutdown covered maintenance, inspections, and upgrades including a hull inspection and production header replacement, while the wider flotel-supported revitalisation campaign was completed in June.

Production resumed from SPS-92 on 24 June after replacement of its electrical submersible pump, followed by the return of PRA-2 on 6 July after its umbilical was reconnected and pump connectivity restored.

“At the start of 2026, we commenced a clear and ambitious program to strengthen Karoon’s operations at Baúna—in the second quarter, we delivered these commitments,” chief executive officer Carri Lockhart said.

“We transitioned FPSO operatorship, completed the largest maintenance and revitalisation program in the company’s history, restored production from the SPS-92 and PRA-2 wells, and established a stronger operating platform for higher operational efficiency, structurally lower operating costs and stronger cash generation going forward.”

Who Dat Recovery Advances

The Who Dat well produced 0.24 million barrels of oil equivalent on a net revenue interest (NRI) basis during 2Q26, down from 0.38 million barrels in the previous quarter after a minor riser leak forced the temporary shut-in of the E manifold.

Operator LLOG plans to begin removing the affected riser for inspection and analysis during the third quarter, with Karoon’s base case assuming one or both E risers will require replacement and manifold production resumes in the fourth quarter of 2027.

The A1 sidetrack entered production on 13 July and was producing about 1,700 barrels of oil equivalent per day on an NRI basis, while a proposed G1 sidetrack could provide another near-term contribution subject to technical assessment and joint venture and regulatory approvals.

Average 2Q26 realised prices for Baúna crude and Who Dat liquids increased 33% and 55% respectively, supporting the quarterly sales revenue increase.

A final investment decision for Who Dat East is expected during the third quarter after the operator issued an authorisation for expenditure, while Neon work is focused on improving capital efficiency before its next project milestone in the fourth quarter.

Capital Allocation Framework

Total 2Q26 capital expenditure reached US$126.6m, including US$37.2m for the Baúna revitalisation, US$56.6m for the SPS-92 intervention, and US$34m for the Who Dat A1 sidetrack, partly offset by vendor credits.

Karoon ended June with US$80.3m in cash, US$350m of drawn debt, and US$363.6m in total liquidity after investing about 85% of its full-year capital budget during the first half.

Full-year production guidance stands at 7.2 million to 8.2 million barrels of oil equivalent and capital expenditure guidance at US$178m to US$202m, while Karoon bought back 2.8 million shares during 2Q26 for US$4m and plans a further on-market buyback.

“We will deploy surplus funds in line with our capital allocation framework, balancing growth, shareholder returns and balance sheet strength,” Ms Lockhart said.

“Potential development decisions on Who Dat East and Neon will be evaluated against the same disciplined return thresholds.”