Shares in Karoon Energy Ltd (ASX: KAR) have been under pressure in recent months, having fallen 22% from a share price just over $2 in June this year to $1.62 at the time of writing.
With that backdrop, you might wonder, is now the time to buy Karoon shares? Not quite, says Macquarie.
According to a new research note from Macquarie, it's not yet the time to pull the buy trigger on Karoon shares, with the broker instead maintaining a neutral rating at a $1.70 price target.
With Karoon shares up 3% today to $1.62 at the time of writing, this implies a modest 5% upside from the current share price.
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What's behind Macquarie's view?
Macquarie analysts view Karoon shares as trading at a reasonable valuation but stopped short of turning bullish. Their caution comes down to three key reasons:
- Leadership transition: Karoon is in the middle of appointing a new managing director and CEO, creating some near-term uncertainty about leadership direction.
- Softening oil price outlook: Macquarie holds a below-consensus view on 2026 oil prices, which impacts expected profitability.
- Heavy operational year ahead: 2026 will bring significant maintenance and upgrade work, including a life extension for the Baúna FPSO and two pump replacements. These are both expensive and operationally complex.
Operational update: Steady but unspectacular
Karoon's September-quarter production was in line with expectations, but there were some technical issues at its Baúna field in Brazil, where electrical and subsea connection faults temporarily affected output. Production is expected to recover by mid-2026.
Meanwhile, the company has expanded its exploration acreage in Brazil, securing new blocks through the national concession rounds. Management believes these assets could represent a "significant new post-salt exploration play," though investors will have to wait for an independent review before more details are released.
The bottom line
Macquarie's analysts see no compelling reason to buy Karoon shares right now, preferring to wait for greater clarity on leadership, oil prices, and Brazil operations.
Their $1.70 target price offers around 5% potential upside from the current share price, suggesting that the market is already pricing in much of Karoon's recovery story.
I think the big potential upside could come from a surprise in the oil price. The story changes each day depending on the news headlines, and so I wouldn't rule out oil prices rising again.
Despite the recent fall, Karoon shares are still up 15% year to date, which, all things considered, is a pretty solid return.
