Karoon Energy Ltd (ASX: KAR) shareholders have been hit with another nasty sell-off on Tuesday.
The Karoon share price has crashed 11.29% to $1.65 at the time of writing after the oil producer revealed a major production setback.
Today's fall takes the stock's weekly decline beyond 20%, wiping out a large part of its recent recovery.
However, Karoon shares remain around 7% higher since the start of 2026.
So, what went wrong?
Image source: Getty Images
Production setback at Who Dat
According to the release, production from the Who Dat E manifold won't restart during 2026 after further checks on the damaged equipment.
Karoon owns a 30% interest in the Who Dat oil and gas assets in the Gulf of Mexico, which is operated by LLOG Exploration Company.
Production was suspended after a problem was found with a flexible riser. This piece of equipment carries oil and gas from the subsea wells to the production facilities.
LLOG is now preparing a repair plan and expects to remove the failed riser during the third quarter of 2026.
Production from the manifold is expected to restart during the first half of 2027, provided testing and repair work go to plan.
Despite the setback, the Who Dat operation is still producing around 3,000 net barrels of oil equivalent per day.
Karoon also said production from the A-1 ST1 well remains on track to begin around the middle of the year. Work on the G-1 ST well is planned for the fourth quarter, subject to final approvals.
Production guidance cut
With part of the operation out of action, the longer outage has forced Karoon to lower its 2026 production guidance.
The company now expects Who Dat to produce between 1.2 million and 1.5 million net barrels of oil equivalent this year, down from the previous range of 2.1 million to 2.5 million barrels.
The reduction has also flowed through to the group outlook. Total production guidance has been cut from a range of 8.1 million to 9.2 million barrels to between 7.2 million and 8.2 million barrels.
On the bright side, guidance for the Bauna operations in Brazil has not changed. Although work at the SPS-92 and PRA-2 wells has faced mechanical problems and weather delays.
Karoon said both wells should return to production around mid-year, which could support output during the second half of 2026.
Why the market is disappointed
The market reaction isn't surprising given how much production has been removed from this year's outlook.
The midpoint of Karoon's group guidance has fallen by around 12%, with the Who Dat outage pushing a large amount of expected production into 2027.
Fewer barrels sold this year could weigh on revenue and cash flow, particularly if oil prices remain under pressure.
After losing more than 20% in a week, investors are unlikely to have much patience for further delays.
