Karoon Energy (ASX:KAR) outlined a year of steady production and strong operating cash flow in its FY2025 results webcast, while emphasizing a more capital-intensive first half of 2026 driven by major offshore work programs in Brazil and the Gulf of America.
FY2025 production and cash flow supported shareholder returns
CEO and Managing Director Carri Lockhart said the company produced 10.3 million barrels of oil equivalent (BOE) in 2025, “nearly on par” with the prior year despite well issues and natural decline. While sales revenue and net profit after tax were lower, which management attributed largely to softer oil prices, the company’s assets generated $231 million of operating cash flows.
Safety, flaring reductions and carbon neutrality
Management highlighted improved safety performance during the year. Lockhart said Karoon achieved year-on-year improvement in both personal and process safety. She also said the company reduced flaring by 41% compared with 2024 due to improved operations and FPSO reliability.
Lockhart reiterated Karoon’s commitment to being 100% carbon neutral for Scope 1 and 2 emissions, primarily by surrendering independently verified carbon offsets, which she said has been achieved since 2021.
Financial results: price and volume headwinds, margin resilience
CFO Ray Church said the FPSO acquisition, oil price impacts on the Petrobras contingent consideration provision, and expense treatment of the Floatel campaign made it important to focus on underlying results. On an underlying basis, Karoon reported sales of $628.6 million, down from $776.5 million in 2024, reflecting lower oil prices and a reduction in sales volumes, mostly at Baúna.
Church broke down the revenue decline into:
- $100.4 million from lower realized prices (average liquids price down 14% at Baúna and 17% at Who Dat), and
- $47.5 million from lower sales volumes, mainly at Baúna.
He said costs were largely fixed, so the revenue reduction flowed through to underlying EBITDAX and operating cash flow, partly offset by royalty reductions and FPSO lease savings. Production costs improved by a net $7 million, reflecting $40 million of savings in FPSO lease, DD&A and interest costs, offset by roughly $28 million of temporary FPSO transition support costs and $5 million of logistics and non-recurring mooring line repair costs.
On unit economics, Church said pre-tax cash margin remained above 65% per BOE. Unit production costs decreased to $13.20 and break-even realized price improved from $33 to $31 per BOE (pre-AASB 16 basis). Underlying NPAT was $107.5 million.
Karoon ended the year with $206.1 million of cash and $546.1 million of total liquidity when including its reserve-based lending (RBL) facility. Church said the company closed the year with $143.9 million of net debt, primarily due to funding the FPSO acquisition.
Reserves and resources increased; pipeline spans Brazil and the Gulf of America
Lockhart said reserves increased 7% year-over-year, driven mainly by conversion of Baúna 2C to 2P, which she said was supported by the FPSO acquisition and lower operating costs that increased confidence in producing into the late 2030s. She said reserve life increased to 7.1 years.
She also said 2C contingent resources increased 34%, driven by an upgrade in the Neon resource and the acquisition of licenses containing the Piracucá field.
In Brazil, Lockhart said the Neon team’s subsurface work increased Neon 2C contingent resources by 50% to 90.3 million barrels. Piracucá added 19.6 million barrels of 2C contingent resources, while the nearby Neon West exploration prospect increased its 2U prospective resource by 69% to 25 million barrels unrisked.
Lockhart said Karoon is reassessing and optimizing the Neon development concept after a preferred concept option went off the market late last year. She said the company is evaluating alternative development concepts, including potential synergies from ownership of the Baúna FPSO, and is conducting a competitive farm-down process targeting a 30%-50% sell-down in Neon and surrounding areas. Asked about timing, Lockhart said the company would share more “over the next few months,” and expected to have more to say around mid-year after the review process.
Karoon also discussed its exploration position in the South Santos Basin, where it has accumulated over 7,300 square kilometers of acreage with no associated drilling commitments. Lockhart said the lead drill candidate is the Eta Front prospect, supported by seismic direct hydrocarbon indicators. The company has begun a farm-down process and secured a rig option to potentially drill in 2027, subject to farm-down results and technical and regulatory requirements.
2026 outlook: heavy first-half work program; Who Dat riser leak impacts timing
Lockhart described 2026 as “two distinct halves,” with an intensive investment period in the first half followed by anticipated benefits in the second half. Planned work includes inspections, maintenance, the annual turnaround, and upgrades on the Baúna FPSO, along with production riser reinstatement work at Who Dat. Karoon also plans one well and one subsea intervention in Brazil to restore well production and a sidetrack at Who Dat.
At Baúna, Lockhart said 2025 production was higher than 2024 despite natural decline, supported by improved FPSO efficiencies of 95% versus 84.5% in 2024. She said the FPSO acquisition extended field life by seven years to 2039 and increased 2P reserves. For the first half of 2026, she said a revitalization campaign is planned over a four-month window with a two-month extension option, and that peak offshore workforce could exceed 700 personnel.
In the Gulf of America, Lockhart said Who Dat produced in line with expectations in 2025, with liquids rising to 74% by year-end. The company’s production share was 2.6 million BOE (net revenue interest basis), and the E6 sidetrack well flowed within expectations at 1,050 BOE per day on an NRI basis after coming online in the fourth quarter.
Management also addressed a minor leak detected in early February on one of six production risers at the Who Dat floating production system, which led to a shutdown of that riser. Lockhart said impacted production was “somewhere in the range of 30% ish.” She said the operator’s preliminary plan involves rerouting wells within 1 to 2 months to restore most production, with final riser repairs toward the end of the year, and that Karoon still expects 2026 Who Dat production to be within guidance of 2.1-2.5 million BOE on an NRI basis, “albeit at the lower end.”
On potential near-term growth at Who Dat, Lockhart said the joint venture is progressing Who Dat East toward a potential final investment decision, subject to royalty relief and project commerciality. The preferred concept is a single well tieback, which she said could add 3,500-5,000 BOE per day of initial flow rate net to Karoon (NRI basis). CFO Church noted that royalty relief is not unusual in the region and said the Who Dat field itself has royalty relief.
Separately, Lockhart said Karoon was the apparent successful bidder for Block Mississippi Canyon 587 near Who Dat South and plans to purchase additional seismic once awarded.
About Karoon Energy (ASX:KAR)
Karoon Energy Ltd operates as an oil and gas exploration and production company in Brazil, the United States, and Australia. It holds 100% interest in the Santos Basin located in the Sáo Paulo, Brazil. The company was formerly known as Karoon Gas Australia Ltd and changed its name to Karoon Energy Ltd in December 2018. Karoon Energy Ltd was incorporated in 2003 and is based in Southbank, Australia.
