Q225 production averaged 24,959 bbl/day, benefiting from the SPS-88 well coming back online inQ1. A good Q3 and management should be guiding to top end of its range (6.7-7.7m bbls) of its 2025 estimates.
2.Bauna, Cash flow, Margins, profitability and Reserves upgrade
With the purchase of the FPSO (4 year payback), efficiency has improved to 94.5% in 1H25from 85.3% last year. Excluding scheduled Q225 maintenance this was 97.5% in Q1which bodes well for cash flow and profits at Bauna. Long term efficiency target is 90-95% . At the AGM management expects “to mature” a portion of Contingent Resources to Reserves based “on extended economic field life”.
3.Who Dat production growth 25/26
Productionfrom existing wells in 1H25 is steady after allowing for natural decline (down3% yoy).
However, preparations are underway for a sidetrack well on “well E6”that will commence production in Q425 providing low CAPEX production growth. In addition, debottlenecking and reliability studies are underway to accommodate production from the contiguous Who Dat East (now entered Define Phase) and Who Dat South discoveries. 4.Who Dat Gas – 1 TCF?
Management has made references in the past to natural gas at Who Dat that could be a large as 1 tcf. Natural Gas is now the most importantenergy commodity to provide efficient, low cost, stable and sustainable energy for the AI world. Expect any announcements on natural gas at Who Dat to rerate the stock.
5.Neon Define Phase and Reserves upgrade.
The Q225 report announced a significant 44% upgrade to its Contingent Resources from 60m to 86.5m bbls. The acquisition of 6 new blocks on 17 June 2025 provides additional reserves within tie back distance of a Neon project adding to the commercial viability of a stand-alone FPSO. Discussions have already commenced with 2 FPSO owners.
A farm-out is targeted of 30-50% of this Neonis scheduled to commence in Q325 and be concluded by end 2025. A successful farm down is a pre-requisite to moving to progressing to Phase 2 of the define phase and will send a strong message to the market of the feasibility of Neon.
Success at Neon will create a 3rd producing asset and extend the production profile of Karoon into the next decade that would underpin a higher valuation multiple for Karoon.
6.Capital Management – Buybacks
The company has bought back 70m shares as at the end of June at an average price of $1.51or 9% of share capital. Management has indicated it will continue to do so up to its approved amount of another US$53m in buybacks or 46m shares at the current stock price. This would reduce the number of shares from 735m to 686m or6% of current outstanding capital.
7.Conservative & Sustainable Dividend
Management has been careful to construct a half yearly dividend policy that is sustainable at 5 cents per share or 10 cents per share per annum. This translates to A$73m per annum at the current share count which is conservative when measured against underlying NPAT of over US$200m / A$300m.
8.Relocation to Houston, new CEO and Strategic Review towards US
It is clear the board is positioning the company, its new CEO search and its senior management towards the US. This will provide clear management advantages given that substantially all Karoon’s assets are now located in offshore Atlantic production in Brazil and the US.
Ultimately, a relisting onto the US market would make sense to not only realign the company with its asset’s geographic location but also capture a higher public valuation multiple. A US listing would also position Karoon as a low to mid-tier producer for possible future M&A in a more energy friendly market with a deeper understanding of the value of its assets.
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