S&P/ASX 200 Index (ASX: XJO) energy stock Karoon Energy Ltd (ASX: KAR) is under heavy selling pressure today.
Karoon Energy shares closed yesterday trading for $1.395. At time of writing on Tuesday, shares are swapping hands for $1.295 apiece, down 7.17%.
For some context, the ASX 200 is up 0.78% at this same time.
As you can see on the chart above, it's been a rough year for Karoon shareholders, with shares down around 38% year to date.
Like all ASX 200 energy stocks, the company has been under pressure amid lacklustre oil prices, with many analysts forecasting an excess global supply for 2025.
Here's what's spurring today's sharp sell-off.
Image source: Getty Images
Why are investors selling the ASX 200 energy stock?
The Karoon Energy share price is taking a tumble after the ASX 200 energy stock reported that two of sixteen chains securing its FPSO (floating production storage and offloading) Cidade de Itajaí had failed.
Following the mooring system incident, management shut down production from the Baúna Project, located offshore Brazil, as per standard operating procedure to minimise risk to personnel onboard and the environment.
Karoon said the FPSO remains stable and on station. The company has mobilised an anchor-handling vessel and is sourcing materials to repair the anchor chains.
"Current expectations are that this will take place during the week of 23 December 2024. Once the chains are repaired, the failure mechanism will be investigated to mitigate reoccurrence," management stated.
Investors are bidding down the ASX 200 energy stock today, with the anchor chain failure leading to lower full-year production guidance.
Management downgraded Baúna CY 2024 guidance from 7.5 to 7.7 million barrels of oil to 7.2 to 7.4 million barrels "depending on when the repairs are finalised".
The company also noted that year-to-date Who Dat production is 2.7 MMboe (million barrels of oil equivalent) on a net revenue interest basis. Guidance was also lowered here, with Karoon now expecting production for the full 2024 calendar year of 2.9 MMboe. Prior guidance was in the range of 3.0 to 3.1 MMboe.
That downgrade was driven by Hurricane Rafael. Management said the storm extended the scheduled maintenance shut-down period from 10 to 14 days out to 18 days, followed by a slower-than-anticipated ramp-up back to full production.
As a result, the ASX 200 energy stock lowered its total production guidance for CY 2024 to 10.1 to 10.3 MMboe, down from 10.5 to 10.8 MMboe.
Management added that the Baúna Project reservoirs continue to perform in line with expectations.
