Why this ASX energy stock is jumping 8% after a brutal sell-off

Karoon Energy Ltd (ASX: KAR) shares are getting some relief on Monday after a painful stretch for the ASX energy stock.

The Karoon share price is up 8.33% to $1.365 after the company updated investors on its Bauna operations in Brazil.

The bounce comes after a rough two weeks. Karoon shares have fallen more than 30% since the company lowered its CY26 production guidance earlier this month, which put pressure on investor confidence.

With Karoon’s market capitalisation sitting just under $1 billion, today’s update appears to have given investors something more positive to focus on.

Karoon restarts key Bauna well

According to the release, production has been restored from the SPS-92 well at Bauna after Karoon replaced its electrical submersible pump.

Karoon said SPS-92 is currently producing around 8,600 barrels of oil per day.

This means that Bauna production has now lifted to roughly 20,500 barrels per day before natural decline.

Karoon could get another lift from PRA-2 as well. Management expects that well to add around 1,000 to 2,000 barrels per day once it is brought back online, with umbilical work already underway.

SPS-92 has been causing problems since August last year, when a partial pump failure cut production by around 4,500 barrels per day.

While getting it back online doesn’t fix everything, it does ease some of the pressure on Karoon’s recent production outlook.

Higher production, higher costs

Karoon said the final cost of the SPS-92 intervention came in higher than first expected.

This was due to extra rig time, wellbore debris, and equipment-related downtime during the work.

As a result, the company has reviewed its 2026 investment expenditure guidance.

Bauna capex is now expected to be between US$89 million and US$97 million. This is up from the previous guidance range of US$61 million to US$74 million.

Total 2026 capex guidance has also increased to between US$178 million and US$202 million. Previously, Karoon was expecting US$150 million to US$183 million.

Management said the spending is expected to support the long-term value of Bauna and stronger operating cash flow in the second-half of 2026.

Can the rebound continue?

Karoon also gave investors another reason to take a second look.

The company announced that it plans to begin a further on-market share buyback from 1 July 2026.

This follows the recent completion of the second phase of its US$75 million buyback program, which was announced last year.

Management said the next phase will be carried out at a measured pace, with the company taking into account market conditions, capital requirements, and future growth projects.

The buyback should provide support after the recent sell-off, with Karoon saying its shares remain significantly undervalued at current levels.

The post Why this ASX energy stock is jumping 8% after a brutal sell-off appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras 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.