Karoon Energy Ltd (ASX: KAR) shares are falling on Tuesday.
In afternoon trade, the energy producer's shares are down 3% to $1.57.
Is this a buying opportunity for investors? Let's see what analysts at Macquarie Group Ltd (ASX: MQG) are saying about the energy stock.
Image source: Getty Images
What is the broker saying?
Macquarie has been busy updating its estimates to reflect the latest government data out of Brazil. It has also reviewed its cost estimates for the Bauna operation in response to expectations that operational support from Altera Ocyan may continue for longer than expected. It said:
Bauna production: Clearly positive to see solid near-term production rates at Bauna (~6.5% ahead of our prior estimate), and there hasn't been major hurricane activity at Who Dat this quarter.
Production costs: We expect KAR to require operating support from Altera & Ocyan for longer at the Bauna FPSO, now forecasting US$15.2/ boe for KAR overall in CY26 (prev US$10/boe). We remain within KAR's guide for CY25e (US$14.5/boe at upper end of US$12-15/boe guide).
Outside this, it notes that the board has agreed to buy back Beach Energy shares on-market. Macquarie feels that management should hit pause on future buybacks until oil prices are stronger and its valuation is more appealing. The broker explains:
KAR has approved the next US$25m tranche of its buyback program (part of its US$75m), which would take total buybacks since inception of ~US$100m.
Given our declining oil price outlook, valuation, forward commitments (FPSO life extension & rig work) & pending management change we believe it would be more prudent to pause the buyback program (eg, go slow on the current US$25m, and not extend the last remaining US$28m of the US$125m overall total program since inception). We have reduced assumed buybacks in 2H25 to US$25m (previously ~US$40m).
Are Beach Energy shares a buy?
Macquarie isn't a buyer of the company's shares at current levels. Instead, it thinks investors should wait for a better entry point and has put a neutral rating and trimmed price target of $1.70 on them. This implies only modest upside for investors from current levels.
Commenting on its recommendation, the broker said:
Neutral. Value support around this level, but difficult to be more positive given: (i) transition to a new MD/CEO, (ii) our below consensus view of oil prices in 2026, and (iii) significant operational work in 2026 (FPSO life extension, likely 2 pump replacements).
Valuation: Our 12-mth SOTP-based TP is -2.9% (-5¢ps) to A$1.70/sh, mainly on higher operating expenses arising from the FPSO ownership transition.
