Karoon Energy extends losses after guidance downgrade
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The news: Karoon Energy extended losses on the ASX after the oil explorer cut its full-year production guidance on Tuesday.
The numbers: Karoon shares were down 2.4% to $1.23 by 11:40am AEDT, having slumped 9.7% in the previous session.
Jarden kept its 'buy' rating on Karoon but trimmed its target price from $2.15 to $2.
The context: Jarden analysts said the impact on Karoon's valuation from lower calendar year production is "negligible". However, it represents a continuation of production disruptions experienced in Brazil throughout the year, they said.
Karoon reduced its production guidance for both its Who Dat site in the Gulf of Mexico, which was hit by Hurricane Rafael earlier this year, and its Baúna project in Brazil, which experienced an anchor chain failure at its floating production storage and offloading (FPSO) system last week.
Jarden analysts noted that Karoon is working with the owners of the FPSO owners to address the performance issues via a life extension project. They see Karoon's formal commitment to these works as a key catalyst for the stock and a step towards the market regaining confidence in asset performance and production guidance.
What they said: "[Karoon] ends CY24 with more operational issues in Brazil and production downgrades at both assets," Jarden analysts Nik Burns and Michael Thomolaris said.
"While the impact to guidance is small, we expect the market to remain cautious on production expectations in CY25 until a formal plan to resolve these ongoing challenges is announced and executed."
The source: Jarden research
