Karoon Energy Cuts Neon Oil Project Costs to US$950 Million, Targets 2030 Production

Highlights:

• Karoon reduces Neon development costs, strengthening project economics ahead of a crucial investment decision.

• Phase 1 targets 60 million barrels of oil, with production potentially reaching 30,000 barrels daily.

• A planned 30–50% stake sale could determine Neon's financing and development prospects.

Karoon Advances Brazilian Oil Development

Karoon Energy Limited (ASX: KAR) announced on 9 November 2026 that its revised Neon oil development project in Brazil had progressed to Front-End Engineering Design (FEED), following a comprehensive cost and technical review. The company reduced estimated Phase 1 capital expenditure to US$800–950 million, compared with its previous US$900 million–US$1.2 billion estimate in April 2025.

The revised strategy aims to improve capital efficiency, reduce development risks and strengthen the project's commercial viability.

Lower Investment Requirements Strengthen Project Economics

Located approximately 75 kilometres northeast of Karoon's Baúna project in Brazil's Santos Basin, Neon will adopt a phased development strategy. The initial development comprises three subsea production wells and one gas injection well, targeting approximately 60 million barrels of recoverable oil. Peak production is projected at 25,000–30,000 barrels per day, with first oil anticipated in 2030.

Preliminary financial modelling indicates a post-tax, unlevered internal rate of return in the mid-20% range, assuming long-term Brent crude prices of US$73.50 per barrel. Capital payback is estimated within two years of initial production.

Strategic Agreements Support Development Progress

Karoon signed a subsea engineering memorandum of understanding with TechnipFMC and secured an exclusivity agreement with Altera Infrastructure concerning the Piranema Spirit production vessel. These arrangements aim to improve execution certainty while supporting further engineering assessments. The company expects FEED expenditure of approximately US$25 million, including detailed technical evaluations and supplier negotiations.

Outlook: Partnership Decision Remains Critical

Karoon plans to restart its farm-down process before the end of 2026, seeking a partner for a 30–50% project interest. A final investment decision is targeted for the second half of 2027, subject to securing acceptable partnership terms and completing engineering assessments.

Meanwhile, Brazil's extended 12% temporary crude oil export tax, expected to expire on 31 December 2026, presents an additional consideration for realised revenues. Neon's reduced capital requirements improve its development prospects, although future progress will depend on financing, oil prices and successful project execution.

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

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