The Karoon Energy Ltd (ASX: KAR) share price is down 11% after the gave an electrical update and changed its 2026 guidance.
Karoon is an international oil and gas exploration and production company with assets in Brazil and the USA.
Electrical problems
The company said that on 21 September 2026, it noted a fault on its monitoring system of the SPS-92 well at Bauna. The company did a controlled shut down of the well on 22 September 2026 to preserve pump integrity and investigate the system.
Based on analysis and testing over the past few days. a fault has been confirmed in one of the three electrical phases in the newly installed power cable for the downhole electrical submersible pump (ESP).
Karoon said that the pump is now operating on two phases in a conservative manner to maintain safe and secure operations.
The ASX energy share believes that a rig-based well intervention to replace the faulty cabling system will be required to reinstate full operability.
Karoon said it has an existing option over a suitable drilling rig and has commenced intervention planning, including securing permitting, equipment and services.
The timing is dependent on securing the permit approvals and services. Karoon estimates that approximately 3,500 barrels of oil per day will be deferred until the cable system is replaced.
The production deferral is currently not expected to affect Bauna reserves.
What will the impact of this be?
The company noted it maintains a comprehensive insurance program to mitigate the financial impact of a range of operational events, including equipment damage and associated losses of production income.
Whilst it’s still investigating, Karoon believes its insurance may partially offset the resulting loss of production revenue and reimburse substantially all costs associated with the required intervention and repair, subject to applicable deductibles, policy terms and final confirmation of coverage by insurers.
As a result of the reduced output, Karoon has downgraded its 2026 full-year Bauna Project production guidance to a range of between 5.4 million barrels of oil (MMbbl) to 5.7 MMbbl, down from the previous guidance range of between 6 MMbbl to 6.7 MMbbl.
Karoon said the lower end of the guidance reflects a conversion to gas lift, if necessary.
With Who Dat guidance unchanged, total production for 2026 is now expected to be between 6.6 million barrels of oil equivalent (MMboe) to 7.2 MMboe.
Due to lower production and a relatively fixed cost base, unit production cost guidance for 2026 is now between US$15 to US$16 per barrel of oil equivalent (BOE).
Management comments
The Karoon CEO and Managing Director Carri Lockhart said:
The electrical fault on SPS-92 is clearly very disappointing, especially given that this new ESP and cable system was in operation less than three months. Prior to the electrical fault, the well was performing in line with expectations, benefiting from increasing reservoir pressures following the resumption of water flood operations.
Our key focus now is on planning the intervention and bringing SPS-92 back into full production to capture the deferred barrels, and maximising production from the other Baúna wells. In parallel, the Company is actively pursuing avenues for equipment warranty and insurance recoveries. We will keep the market informed once we have more clarity on intervention timing.
Final thoughts on the Karoon Energy share price
This is of course not ideal for the company or shareholders. However, it seems like a temporary one-off hit to the business, so the decline could be an opportunity for investors who want to buy shares.
It’s not one of the businesses on my watchlist, so it’s not one of the stocks I’m going to buy next, but there’s a chance of a medium-term rebound, in my view.
