Karoon Energy Ltd (ASX: KAR) is an oil and gas explorer and producer with assets in Brazil.
The company's key producing asset is its wholly owned Baúna oil field in the southern Santos Basin, offshore Brazil. Karoon acquired and took over operations at Baúna from the Brazilian state-owned Petrobras SA in November 2020.
Its share price has risen an impressive 35.71% since the beginning of 2025, making it one of the best performing energy shares this year.
For context, the S&P/ASX 200 Energy (ASX:XEJ) index is up roughly 6% over the same span.
However broker Macquarie has updated its price target and guidance, indicating it may now be overvalued.
Lets see what the broker had to say.
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Elevated uncertainty and lacklustre oil outlook
Macquarie has downgraded KAR to Neutral (no longer recommending it as a strong buy) for two main reasons:
- Leadership Uncertainty – There's some doubt around who will lead the company next, which creates uncertainty for investors.
- Weak Oil Outlook – The future price and demand for oil don't look very strong, which could hurt KAR's profits.
However, there are still some positives according to the broker.
At the Baúna Oil Field, maintenance is complete, and production has improved. The system (FPSO) is now running more efficiently, with oil output hitting solid levels.
Additionally, Karoon Energy is studying a new project that could expand production, but any decision to go ahead likely won't happen until late 2025 or 2026.
Whilst hiring in US/Brazil (relocating roles from Melbourne) is sensible (and consistent with AGM), the departure of the current MD/CEO is new. With so much change & uncertainty, we expect KAR share sentiment struggle given the still largely Australia domiciled investor base.
Updated price target for Karoon Energy shares
The broker has updated its guidance on Karoon Energy shares:
Our TP -16% (-35¢ps) to A$1.80/sh which is mainly lower average oil prices and production phasing revisions (mainly Bauna, to a lesser extent Who Dat), and to a lesser extent higher WACC of 11.1% (was 10.3%) on an increased Beta.
Karoon Energy shares closed last week at $1.90 a piece.
Based on Macquarie's updated price target of $1.80, there is an estimated 5.26% downside for Karoon Energy shares.
In summary, Macquarie sees some short-term risks for Karoon, especially with leadership changes and oil market conditions, so they're advising a more cautious view.
