Highlights

• Roughly 3,500 barrels of daily oil output could remain unavailable until work on SPS-92 is completed.
• CY26 total production guidance has been lowered to 6.6–7.2 MMboe from 7.2–8.2 MMboe.
• Unit production cost guidance has increased to US$15–US$16/boe from US$12–US$15/boe.

Karoon Energy Ltd (ASX: KAR) faced sharp selling pressure after releasing an operational update on 28 September 2026 concerning an electrical issue at the SPS-92 well in Brazil’s Baúna Project. The stock’s current market price stands at AU$1.560, down nearly 12%, as investors reacted to weaker production expectations and higher unit costs. Attention is now turning to how quickly the company can complete repairs and restore the affected well.

SPS-92 Fault Disrupts Baúna Output

Karoon detected a monitoring-system issue at SPS-92 on 21 September and carried out a controlled shutdown the following day. Further testing identified a fault in one of the three electrical phases within the newly installed cable supplying the downhole Electrical Submersible Pump.

The pump is currently operating cautiously on two phases. Karoon expects a rig-based intervention will be required to replace the faulty cable and return the well to normal operation.

Until the repair work is completed, approximately 3,500 bopd of production is expected to be delayed. However, the company does not currently expect the issue to reduce Baúna reserves.

Production Guidance Revised Lower

The operational setback has led Karoon to reduce its full-year Baúna production forecast to 5.4–5.7 MMbbl from the previous range of 6.0–6.7 MMbbl.

Who Dat production guidance remains unchanged at 1.2–1.5 MMboe. As a result, total CY26 production is now forecast at 6.6–7.2 MMboe, compared with the earlier expectation of 7.2–8.2 MMboe.

The lower production outlook has also affected cost expectations. Unit production costs are now projected at US$15–US$16/boe, up from the previous US$12–US$15/boe range.

Insurance Could Ease Repair Costs

Karoon believes its insurance arrangements may soften part of the financial impact. Preliminary advice suggests the policy could offset some lost production revenue and potentially cover most intervention and repair expenses, subject to deductibles, policy conditions and insurer approval.

What Could Drive Karoon Shares Next?

The market is likely to focus closely on the timing of the SPS-92 intervention. Karoon is working on permits, equipment, services and rig planning while also pursuing potential warranty and insurance recoveries.

Until the company provides greater clarity on the repair schedule and production recovery, uncertainty around output and operating costs could continue to influence Karoon Energy shares.

Note- All data presented is based on information available at the time of writing.

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