Why Macquarie forecasts this high-yielding ASX 200 energy share could surge 64%

Macquarie expects now could be an opportune time to buy the beaten down ASX 200 energy company.

| More on:
Worker inspecting oil and gas pipeline.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

S&P/ASX 200 Index (ASX: XJO) energy share Karoon Energy Ltd (ASX: KAR) is having a really bad week.

Headquartered in Melbourne, Karoon's recent woes mirror the big falls witnessed in global energy markets since the announcement of US President Donald Trump's wholesale global tariff campaign.

And Karoon is certainly not alone, with rival ASX 200 energy shares Woodside Energy Group Ltd (ASX: WDS) and Santos Ltd (ASX: STO) also taking a beating this past week.

On 2 April, before Trump's tariff news swept the world, Brent crude oil was trading for US$74.95 per barrel. With Brent slipping another 3.3% overnight amid uncertainty over rapidly shifting US trade policies, the Brent crude oil price currently stands at US$63.33 per barrel.

As you'd expect, this has also seen the Karoon share price plunge. Shares have fallen from $1.62 at market close on 1 April to $1.22 in morning trade today for a loss of 24.7%.

But this big retrace could offer an opportune entry point. Especially if Karoon can increase its earnings per share (EPS) in FY 2026 and FY 2027, as Macquarie Group Ltd (ASX: MQG) forecasts.

What is Macquarie saying about the ASX 200 energy share?

In its 10 April research report, Macquarie reiterated its outperform rating on Karoon shares, though with a slightly reduced price target.

The ASX 200 energy share's flagship asset is its 100% owned and operated Bauna/Patola offshore production project in Brazil. Karoon acquired Bauna in 2020, and Macquarie noted that it has materially boosted production rates since then.

On the longer-term growth front, the broker noted:

Karoon also has a development opportunity for a second standalone asset nearby at Neon/Goia (KAR 100%). It recently acquired a 30% stake in the LLOG-operated producing project Who Dat, located in the US Gulf of Mexico.

Macquarie said that Karoon had completed its maintenance works at Buana 10 days earlier than expected, with less of an impact on production than anticipated. The broker said the Bauna field is now performing well.

Commenting on the project in February, Karoon CEO Julian Fowles said, "In Brazil, the acquisition of the Bauna FPSO is aimed at taking direct control over a vital asset for Karoon, allowing us to improve operational efficiencies and extend Bauna field life."

Macquarie noted that the ASX 200 energy share has 84% unhedged oil exposure. This leaves it vulnerable to potential oil price falls but also sets it up well should oil prices recover.

The broker forecasts Karoon's all-in cash flow breakeven (before dividend payouts) is around US$50 to US$60 per barrel.

Macquarie raised its FY 2025 EPS forecast by 7.8%.

The broker said this reflects "a shorter maintenance program & higher production in Brazil which also leads EPS increases in FY26e/FY27e of 11.2%/10.0%".

If earnings per share increase on this level, it should bode well for passive income investors.

Over the past 12 months, Karoon has paid out 9.5 cents per share in unfranked dividends.

At the current share price, that equates to a trailing dividend yield of 7.8%.

Atop the dividends, Macquarie has a $2.00 12-month price target on the ASX 200 energy share. That represents a potential gain of 64% from current levels.

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

More on Energy Shares

Copal miner standing in front of coal.
Energy Shares

What happened to Coronado Global Resources shares on Friday?

The ASX coal miner announced new funding this week.

Read more »

Gas and oil worker working on pipeline equipment.
Energy Shares

The pros and cons of buying Woodside shares this month

Is this ASX energy share a great opportunity right now?

Read more »

A miner stands in front of an excavator at a mine site.
Energy Shares

What's happening with ASX uranium stocks amid Sprott doubling investment to $200M

ASX investors have witnessed share price gains of up to 30% for the largest uranium stocks this week.

Read more »

Workers inspecting a gas pipeline.
Energy Shares

Woodside signs deal to supply Malaysian company with gas for 15 years  

It’s been a good month for Woodside shareholders with the company’s stock gaining 17%.

Read more »

Excited couple celebrating success while looking at smartphone.
Energy Shares

This ASX 200 uranium stock is charging higher on big news

This uranium producer is delivering the goods. Let's see what it announced.

Read more »

A man looking at his laptop and thinking.
Energy Shares

What did Macquarie make of the Santos takeover offer?

Is this a good deal for shareholders? Let's find out.

Read more »

A man wearing glasses and a white t-shirt pumps his fists in the air looking excited and happy about the rising OBX share price
Energy Shares

Guess which ASX 300 mining stock is surging 11% on big news

There are a couple of reasons behind this strong gain.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Energy Shares

3 ASX uranium stocks up more than 20% in 2 days

Paladin Energy, Boss Energy, and Deep Yellow shares are among the market's fastest risers again today.

Read more »