Why is this ASX 200 energy share sinking 5% today?

This energy company is ending the week deep in the red.

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The Karoon Energy Ltd (ASX: KAR) share price is on course to end the week in a disappointing fashion.

At the time of writing, the ASX 200 energy producer's shares are down 5.5% to $2.26.

This compares unfavourably to the 0.2% gain by the benchmark S&P/ASX 200 index (ASX: XJO).

Why is this ASX 200 energy share sinking?

Investors have been hitting the sell button on Friday after Karoon Energy released an update on its Baúna operations in Brazil.

These operations were shut-in at the end of March due to a loss of containment incident associated with the high pressure flare on the FPSO, Cidade de Itajaí.

At the time, the company's FPSO operator, Altera&Ocyan (A&O) was sent in to identify the source of the leak and undertake repairs. And while these repairs were completed a couple of days after the incident, things weren't quite right with its flow rates.

As a result, management decided to keep the operation shut down to undertake a full inspection and to bring forward planned maintenance. This was expected to be completed by mid-April, allowing for production to restart.

Mid-April has arrived

Unfortunately, we have now reached the middle of April and things are not looking good.

According to the release, the suspension of Baúna production, including from the Patola field, is expected to be extended into the month of May. This follows a decision to undertake both essential and proactive works.

Management advised that the timing of when production will restart is dependent on the completion of the inspections and the final scope of works undertaken.

But as things stand, if all goes to plan, the company is expected to achieve FY 2023 production at the low end of its current guidance range (7.5 – 9.0 MMbbl). Management is still assessing the impact of these activities on its unit production costs guidance. However, it currently expects costs to be at the upper end of its guidance range (US$13-17/bbl).

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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