Karoon Energy Aktie

Well, good morning, ladies and gentlemen, and welcome to the 2026 Annual General Meeting for Karoon Energy Limited. My name is Peter Botten, and I am your Chair.

Before we start, I've got a couple of housekeeping matters for those of you in the auditorium and it's great to see so many here. So thank you for that. Please ensure your mobile devices are now set to silent mode. In the unlikely event of an emergency, you should proceed down the stairs at the side of the room to exit the building while at all times following the direction of the Langham staff. I'm sure that won't happen, but please follow Langham staff down the stairs, and it's only 25 floors.

For those attending in person today, shareholders and proxy holders entitled to vote should have received a blue admission and voting card on registration. Please retain that card until the close of the meeting. Nonvoting attendees will have received a yellow card and visitors a white card. If any shareholder or proxy holder entitled to vote has not received a blue card, please raise your hand and a Computershare representative will assist you. Everybody got the blues and the whites. Good. Thank you.

Today's meeting is being held online via the Computershare meeting platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. Online attendees can submit questions at any time. To do so, select the Q&A icon, type your question into the text box and press the send icon to submit. Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting. Please also note that your questions may be moderated or if we have received multiple questions on one topic, amalgamated together. To ask a question, please follow the instructions written below the broadcast.

Voting today will be conducted by way of a poll on all items of business. I will shortly open the voting for all resolutions. If you are eligible to vote, once voting opens, select the vote icon and all resolutions will be activated with voting options. To cast your votes, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You will receive a vote confirmation notification on your screen. You can change your vote up until the time I declare voting closed.

I now declare voting open for all items of business. I am advised that there is a quorum of members and there are sufficient numbers present for a quorum. I, therefore, declare the meeting legally constituted and open. To provide you with enough time to vote, I now open the poll for resolutions 1 to 7.

Before proceeding with formalities, I'd like to introduce the participants joining the meeting today. Firstly, the independent non-executive directors of your company. Peter Turnbull who is Chair of the People and Culture Committee and a member of the Audit Risk and Governance Committee; Ms. Joanne Palmer is Chair of the Audit, Risk and Governance Committee; Ms. Luciana Rachid is the Chair of Sustainability and Operational Risk Committee; and Mr. Fernando Borges, is a member of the Sustainability and Operational Risk Committee; Ms. Melissa Holzberger is a member of the People and Culture Committee. The remaining member of the Board is Carri Lockhart, who is Karoon's Chief Executive Officer and Managing Director.

Also participating in the meeting today are Mr. Eric Williams, the Chief Financial Officer; Mr. Daniel Murnane, General Counsel and Company Secretary. I am chairing the meeting from the Langham Hotel. There are a number of other members of our management team here, too, who I encourage you to meet when -- at the end of the meeting, and you can engage and have a dialogue with our Carri's new management team. And I look forward to engaging with you at the end of the meeting as well. Our Senior Vice President of Communications and Investor Relations. Ms. Ann Diamant will moderate questions submitted during the meeting. Peter Render from our registry Computershare will also be supporting the meeting as returning officer and Peter is sitting in the second row from the back. Mr. Graeme McKenna of the company's auditors, PwC, is also present today.

Ladies and gentlemen, as the notice of meeting has been made available to all shareholders. I will take them as read. As we progress through the meeting, first, we will have my chair's address followed by a presentation by the Chief Executive Officer and Managing Director, Ms. Carri Lockhart. We will then proceed to consider the formal resolutions as outlined in the notice of meeting.

Now to my address. At last year's AGM, I outlined the key priorities that would guide Karoon's strategic transformation through 2025. Foremost among these was restoring a safe, reliable and predictable production base, a task that is now nearing completion. Alongside this, we set out to mature our organic growth portfolio, maintain disciplined capital management and ensure the long-term sustainability of our operations. I'm pleased to say that we're making strong and measurable progress across each of these priorities.

Most importantly, Karoon delivered a total shareholder return of some 16% in 2025, combining share price appreciation and dividends paid during the year. While the ASX 200 Energy Index declined by 2%, Karoon's share price increased by 11% despite crude -- Brent crude falling 19% in the second half of the year. In addition, we paid dividends of AUD 0.074 per share. Our on-market buyback program also continued to create value. During the year, we acquired 43.5 million shares at an average price of $1.69 a share, materially below the current share price.

Since the program began in 2024, we've repurchased approximately 12% of the shares on issue, significantly enhancing earnings per share. At present, the Board intends to continue the buyback program, subject, of course, to continuing market conditions, oil prices, the capital requirements of our strategic growth projects. We believe the program remains an effective use of capital, while our organic growth opportunities to continue to mature. At the end of March 2026, Karoon had net debt of USD 180 million and $283 million available under our Reserve-based Lending facility. We recognize that as a new bond market entrant in 2024, the cost of our bond debt carries a higher cost than our RBL facility and we continue to assess and review opportunities to optimize our capital structure.

Another major milestone in 2025 with the successful relocation of our global headquarters from Melbourne to Houston. This decision was driven by operational challenges and employee impacts associated with managing a global business across significantly different time zones. Since the transition, we have already seen major improvements in efficiency, reduced duplication of roles and stronger collaboration between our Brazilian and U.S. operations. As part of this transition, Ms. Carri Lockhart was appointed our new Chief Executive and Managing Director in November 2025, succeeding Dr. Julian Fowles. Carri's extensive offshore operational expertise has already proven highly valuable as we execute the Baúna maintenance, revitalization and remediation projects and position the business for its next phase of growth.

We also welcome Mr. Eric Williams as Chief Financial Officer, Mr. Mark Mick as Chief Commercial and Technical Officer, and Ms. Beth Radtke as Chief People Officer, and those good people are sitting on the front row. And as I say, I encourage you to meet them after the meeting. Together with Marcus Brummelhuis, EVP Brazil; and Daniel Murnane, our EVP, General Counsel and Company Secretary. Our new executive team is now complete and exceptionally well positioned for the future.

Operationally, 2025 has been a pivotal year for Karoon. A major achievement was the acquisition of the Baúna FPSO in April 2025. Bringing this crucial piece of infrastructure under direct ownership has enabled us to accelerate maintenance and revitalization activities which are already delivering more consistent operating performance and improved efficiencies. Importantly, lower operating costs have extended the estimated Baúna field life by approximately 7 years allowing access to additional reserves and enhancing the long-term value of this asset. The final steps towards strengthening long-term operational performance is the transfer of the FPSO operatorship from the previous operator, Altera & Ocyan to Karoon.

Following an extensive capability building program we recently received regulatory approval from the Brazilian authorities to proceed as previously we have disclosed to the ASX. Subject to final implementation steps, the transition is expected to occur on 1 June in a few days' time and represents a defining milestone in Karoon's evolution from explorer to producer and now to a fully integrated offshore operator. While Carri will discuss operations in greater detail shortly, I'd like to highlight our continued progress in safety performance.

Despite the intensive maintenance and revitalization work program in 2025, Karoon recorded a significant improvement in personal safety outcomes across our operated assets. The Baúna project recorded only one restricted work case and no lost time injuries, while there were no Tier 1 or Tier 2 process safety incidents during the year. These results are pleasing for both management and the Board and reflect our strong commitment to continually improving safety performance. Oil markets remained volatile throughout 2025, influenced by increased supply from OPEC+, subdued global economic growth, geopolitical tensions and strategic stockpiling in China. Despite low average or lower average realized oil prices compared to 2024, Karoon's low-cost, high-margin production base continued to generate strong cash flow.

As we move through 2026, volatility has again significantly intensified. The conflict in the Middle East and disruptions to regional energy infrastructure, shipping through the Strait of Hormuz are reminders of the fragility of global energy supply and systems and ongoing importance of reliable energy production. Karoon is fortunate to operate in world-class basins with generally stable and supportive jurisdictions. However, the recent introduction of an export tax in Brazil implemented without industry consultation is disappointing. We encourage the Brazilian government to remove this additional burden in a timely manner, particularly should oil prices normalize over the coming months.

While recent increases in oil price reinforce the strategic value of Karoon's portfolio, we remain mindful that prices may also weaken materially in future periods. With approximately 93% of our production weighted towards oil and liquids will remain highly leveraged to oil prices. Accordingly, ongoing cost discipline and operational efficiency remain central to ensuring resilience across all market conditions.

As outlined in our 2025 annual report documents, 2026 will be a year of 2 distinct halves shaped in part by the volatility of oil price. The first half of the year is capital intensive as we complete the Baúna FPSO operatorship transition, execute the planned maintenance shutdown and undertake a broader revitalization campaign. At Who Dat, the operator, LLOG, now a subsidiary of U.K. listed Harbour Energy, is progressing work to restore a significant proportion of production curtailed following a riser issue. Collectively, these activities if successful are expected to supply higher production levels and lower cost base from around mid 2026 onwards.

At the same time, we continue to mature our organic growth portfolio to maximize the value of existing discoveries. The proposed Who Dat East development in the Gulf of America is advancing towards the mid 2026 investment decision. In Brazil, we are refining the development concept for the Neon opportunity to improve capital efficiency and better manage risk amid high volatility of oil price. We are also advancing regional geological understanding and prospectivity analysis across our new Brazilian acreage ahead of a potential farm down involving both our exploration portfolio and Neon. As we optimize our operations, sustainability remains integral to how we manage risk and create long-term value.

In early 2025, we formally updated our climate commitments, targeting Net Zero for Scope 1 and 2 emissions by 2050 or sooner from our operated assets. The time frame aligns with broader industry realities and reflects a practical and achievable pathway. Operational improvements at Baúna delivered a 41% reduction in flaring during 2025. While we continued to offset 100% of Scope 1 emissions through the surrender of verified carbon credits.

On the social front, we continue to strengthen our relationship with local communities through expanded community investment programs in Brazil. We remain on track to meet our target of contributing 0.1% of sales revenue to social projects in 2027.

As highlighted at last year's AGM, Karoon's Board renewal process remains ongoing. We were very pleased to appoint Mr. Fernando Borges as an Independent Non-executive Director effective from 30th of March 2026. Fernando brings more than 4 decades of senior international oil and gas industry experience. And subject to his reelection today, we are confident where he will make a valuable contribution to Board deliberations. I would also like to thank again Mr. Tadeu Fraga who recently stepped down due to family and personal reasons. Tadeu made a very significant contribution to Karoon during his tenure. And on behalf of the Board, I thank him sincerely and wish him the very best for the future.

As part of the natural process of board renewal and optimization, it's likely that additional Board transitions will occur over the next 12 to 18 months. This will ensure the Board continues to maintain the right mix of skills, experience and perspectives as Karoon evolves.

In closing, Karoon is entering a new phase defined by greater operational control, stronger alignment and clear strategic focus. We have the asset base, financial capacity and leadership team required to deliver long-term shareholder value. On behalf of the Board, I'd like to thank our employees and contractors across Brazil, the United States and Australia for their commitment and hard work during a period of significant change and volatility. I'd also like to thank you, our shareholders, for your continuing support.

I will now throw open the floor to questions. But first, before that, I'll hand over to our CEO, Carri Lockhart, to address the meeting. So over to you, Carri.

Thank you, Chair. It is a pleasure to be here today as Karoon's CEO and Managing Director. Joining Karoon has been an incredible opportunity, and I'm delighted to be working in the company with world-class assets and a clear vision for the future. The company does have an extremely talented and dedicated team, and I am focused on ensuring that we build on these solid foundations. I'll briefly touch on the 2025 performance before providing an update on each of our assets.

The 2025 highlights demonstrate the underlying quality asset base, coupled with a disciplined and focused team. Consolidated production of 10.3 million barrels of oil equivalent was only marginally down from a record production achieved in 2024. This was driven by higher reliability of Baúna, partially offset by the natural decline at both Baúna and Who Dat. Sales revenue of USD 628.6 million was 19% lower than 2024 and this was due to the lower average realized prices, which was $67 per barrel at Baúna and $63 per barrel at Who Dat. We also had one fewer cargo from Baúna.

With costs largely fixed, that revenue reduction flowed directly to underlying EBITDAX and operating cash flow, partially offset by royalty reductions and FPSO lease savings. The lease savings were a result of our purchase of the Baúna FPSO for USD 115 million in April, which, as Peter had mentioned, has provided us with strategic control of a critical asset. Karoon is a low cost operator, highly leveraged to oil prices with a production base of 93% liquids.

In 2025, the unit production cost averaged USD 13.20 per barrel of oil equivalent, and our assets generated gross margins of 66%. The average breakeven in 2025 was around $31 per barrel equivalent, which is globally very competitive and much lower than a marginal barrel found in many asset basins across the world. This low breakeven cost structure provides us with the resilience and enables continued cash flow generation even in lower pricing scenarios when coupled with disciplined approach to capital. This will result in a strong balance sheet.

The strong balance sheet shown in the chart at the end of March 2026, our net debt position was USD 181 million reflecting the capital investment program at Baúna, which is now reaching completion. Liquidity at the end of March was just over USD 450 million from our cash on hand and our undrawn reserve-based lending credit facility. So our robust balance sheet will support our near-term project deliveries and will provide shareholder returns as outlined in our capital allocation framework.

In 2025, we achieved substantial improvement in both personal and process safety, which are core to how we run our business. And in essence, this is our license to operate. We ended 2025 with 0 lost time injuries, 0 severity process safety events and a total injury rate of 0.16, down materially from 0.77 the previous year. In addition to the strong safety performance in 2025, we reduced our flaring by 41% and reduced Scope 1 and Scope 2 emissions by 9.5%, which is compared to the 2024, which was driven by Baúna FPSO reliability enhancement. 100% of the 2024 Scope 1 and 2 emissions were offset in 2025 by surrendering independently verified carbon units. And we are aiming to offset 100% of the 2025 emissions by midyear 2026.

I am passionate about taking personal responsibility for safety of our people and assets. And excellence just doesn't happen, it takes relentless effort and focus. Unfortunately, in 2026 to date, we've experienced 4 high potential safety incidences to which relate to dropped objects and 3 Tier 2 process safety events due to the FPSO integrity failures. This is just not acceptable. Our focus is firmly on reinforcing the under our leadership, my leadership, safety and process safety management are our highest priority. We will remain uncompromising on our objective of delivering 0 injuries every day, minimizing our environmental impact, were practical and cost-effective and being a positive supporter to the communities in which we work and operate.

Karoon's 2P reserves increased 7% year-on-year, primarily due to the conversion of the Baúna 2C to 2P as acquiring the FPSO and reducing operating cost has given us the confidence in being able to produce until the late 2030s. As a result, reserve life was extended to 7.1 years as previously announced to the ASX. Importantly, our 3-year rolling reserve replacements is 160% primarily reflecting the Who Dat acquisition and the 7-year extension of the Baúna field life. 2C contingent resources increased 34%, driven by an upgrade in the Neon resource based on improved reservoir characterization and the acquisition of licenses containing the Piracucá field. This provides substantial potential upside if these resources can be commercialized.

And as Peter mentioned, producing -- purchasing the Baúna FPSO was essential to ensuring a more reliable and predictable production from the field. As part of this journey, we have been focused on executing a range of critical maintenance and upgrades to our activities aimed at achieving the FPSO efficiency between 90% and 95%. Based on the work completed to date, the FPSO efficiency has improved from 84.5% in 2024 to 95.1% in 2025 and 96% last quarter. We are currently nearing completion of intensive FPSO maintenance and revitalization campaign, which commenced in February.

At its peak, we had more than 700 people working offshore on the FPSO and well operations where we normally have about 95. On completion of the campaign, which we expect around midyear, we will have replaced 100 tons of pipe and other structures, painted over 20,000 square meters of real estate, we've replaced the header system and performed underwater hull inspections. This work is essential for operational safety, reliability and as an investments aimed to sustain the asset through the late 2030s. Some of this work scope required a full shutdown of the facility. The 28-day shutdown known as a turnaround was completed safely, on time and is expected to be within budgets. Production resumed on May 14, and we are currently producing approximately 11,500 barrels of oil per day.

Now this excludes the production from the SPS-92 well which is currently shut in as we execute an intervention to replace the electric submersible pump that partially failed last year. We expect the SPS-92 to be back online about midyear.

The next operation ongoing is the planned recovery and reconnection of the PRA-2 well umbilical, which is expected to take place in early Q3. We anticipate that subject to the success of both the SPS-92 and the PRA-2 well will restore an additional 9,000 to 10,000 barrels of oil a day to Baúna daily production.

Moving on to Who Dat. Who Dat continues to provide crude at Karoon with a diversified source of production, which is low-cost, high-margin and low-carbon emissions. Unfortunately, we did experience an unplanned event in February, 1 of 6 production risers developed a minor leak, curtailing approximately 15,000 barrels of oil equivalent today of gross production. Work to restore 55% to 75% of that curtailed production by diverting the hydrocarbons through the other E-manifold flowline and riser and through optimization is currently targeted to be completed around midyear pending technical reviews and regulatory approval. The remainder of the planned production to be restored in the second half of 2027 once we've manufactured a riser and contracted the necessary equipment and services.

Two infill wells, both sidetracks from existing production well bores are planned for 2026. If successful, these 2 sidetracks should help offset a large proportion of production deferred through the riser issue. First, the A1 sidetrack is in the process of being completed and will be brought online in the next few weeks. The JV has accelerated a second sidetrack of the G1 well from 2027 into the second half of this year. And subject to final reviews and approvals, this well could be contributing to production from fourth quarter onwards.

As previously mentioned by Peter, 2026 is the tale of 2 halves. The vast majority of our 2026 capital exposure, including -- expenditures, including the flotel campaign, is concentrating in the first half of the year. Around midyear, we expect the Baúna FPSO operatorship transition to be complete. The SPS-92 and PRA-2 wells to be back on line and the Who Dat riser curtailment to be partially remedied.

The A1 sidetrack at Who Dat is expected online in the second quarter. And if approved by the JV, the second sidetrack G1 in the fourth quarter. So as a result of all of this work, we've materially -- we expect actual materially higher cash flow in the second half compared to the first half, subject to oil prices and our production and actual capital expenditure. With less capital going out and more production coming in, we expect this to represent a major inflection point for Karoon.

Now moving forward to the potential growth in offshore assets. Some of them are most valuable accretive projects are those that are near infrastructure that can be drilled and produced using existing infrastructure. We're going to continue to target this near infrastructure infill opportunities at Who Dat and we'll be seeking similar opportunities at Baúna by undertaking a comprehensive subsurface data review supported by AI. We have a robust pipeline of organic growth, both discovered resource and prospective exploration acreage. This includes Neon in the Santos Basin with 2C contingent resources of 90 million barrels and nearly 47 million barrels in structures nearby.

At year-end, we exited a competitive process for acquiring a large FPSO due to a material change in the purchase price. This was an informed and disciplined decision due to inflating capital exposures. Since then, we've been reassessing the development concept to optimize the capital efficiency and reduce risks and we are engaging with other FPSO providers for a fit-for-purpose solution. We've pulled back since then on the farm-down process that was started last year, and so we have further matured and revised the optimized development concept. This work will continue over the coming months.

In the U.S. the Who Dat JV expects to consider a final investment decision on the Who Dat East around mid-2026, which if sanctioned, will deliver production early starting 2028. In addition, we have approved seismic reprocessing and the purchase campaign to enhance the visibility of bypassed pay and attic oil opportunities for potential future tieback and reservoir delineation at Who Dat South. Karoon has built a substantial acreage position of over 7,300 square kilometers in the deep South Santos Basin located approximately 60 kilometers southeast of Baúna. We believe this area has an active working petroleum system supported potential post-salt tertiary oil play. Although it is untested and unproven, our work to date has defined a number of prospect leads which, if successful, are potentially significant.

Technical work is ongoing to mature these prospects, including the Eta Front prospect located in S-M-1482. We're currently packaging information for a data room ahead of a potential farm down of this exciting exploration acreage.

Over the past 6 months, I've seen improved collaboration, process improvements, renewed energy around the team, all foundational for continuous improvement culture, and we're going to continue to build on this throughout the year. In addition, we'll be undertaking a strategic refresh over a multiyear forecast planning period to shape how we maximize long-term shareholder returns. We're targeting June 1 for the operatorship handover in the Baúna FPSO. And once completed, we will focus on further optimization of operational and cost. This includes conducting a study to identify potential areas of cost reductions and synergies post the FPSO acquisition. We believe there's an opportunity for asset performance and predictability improvements by integrating the FPSO topside and the reservoir data, which is another potential enhancement enabled by the FPSO acquisition.

In addition, we have already began planning and structuring how we might integrate AI into our workflows, including production and injection optimization, equipment performance and maintenance, subsurface data integration for use in evaluating opportunities nearby our existing infrastructure.

Finally, we're focusing on company culture, talent development and our staff and overall succession planning. Karoon's framework for capital allocation and its disciplined approach for spending remains unchanged. Our highest priority is assuring safe, reliable operations, optimizing production and liquidity and a strong balance sheet. Remaining cash is then allocated towards value-accretive growth opportunities and capital returns to shareholders, whichever generates the highest returns. We don't envision any change in this prioritization going forward as we strongly believe this balanced approach to capital allocation will create most value accretion for shareholders.

So in summary, Karoon is a compelling and resilient company. In 2025, we secured a strategic asset, the Baúna FPSO and improved our operational and safety performance and we closed out the year with strong balance sheet and shareholder returns. In 2026, we're building on this. I believe Karoon's fundamentals are excellent and the operational environment is currently in our favor. By the second half of this year, subject to the success of the work programs outlined, we aim to have reestablished a predictable reliable production platform, a highly competitive cost base. From that foundation, we will remain disciplined and continue to mature and execute our strategic growth prospects creating shareholder value and value in the communities where we operate.

I would like to acknowledge the entire Karoon team, our contractors, directors, you, our shareholders, for the hard work and support over the year. Thank you for your attention, and I will now hand this back to Peter.

Thanks, Carri. Ladies and gentlemen, we now move to the formal business of the meeting. As I mentioned earlier, voting is open on Resolutions 1 to 7, inclusive. I remind you that you have the ability to change your vote up until the time I declare voting closed. Proxies have been received from 366 shareholders, representing over 485 million ordinary votes being some 68.33% of Karoon's issued share capital.

As we proceed through each resolution, the proxy votes for that resolution will be shown on your screen. I propose to vote all undirected open proxies given to the Chair of the meeting in favor of Resolutions 1 to 7. Results of the polls will be available after the close of the meeting and will be announced on the ASX and posted on the company's website. I appoint Peter Renda of Computershare, Investor Services as poll scrutineer. I will now formally put the resolutions to the meeting.

The first agenda item relates to the election of Mr. Fernando Borges as a Director. To consider, and if thought fit, to pass the following resolution as an ordinary resolution that Fernando Borges, who was appointed by the Board of Directors of the company on the 30th of March 2026, pursuant to Paragraph 11.11 of the constitution and who retires in accordance with paragraph 11.12 of the constitution is eligible, offers himself for election, be elected as a Director of the company with immediate effect.

Mr. Borges was appointed by the Board as a non-independent -- as an Independent Non-executive Director of the company on the 30th of March 2026, pursuant to the constitution, which allows the board to appoint a director to fill a casual vacancy or appoint a director as an additional director to the Board. Mr. Borges retires in accordance with the constitution and being eligible offers himself for election as an independent non-executive director. The board, excluding Mr. Borges unanimously supports the election of Mr. Fernando Borges as a Director. In accordance with the company's constitution, Mr. Fernando Borges is seeking election as a Director at this meeting.

And I'll now ask Fernando to address the meeting.

Good morning, ladies and gentlemen. My name is Fernando Borges, and I am honored to extend for election as a Non-executive Director of Karoon Energy. I would like to briefly explain why I believe my experience is relevant to Karoon and how I hope to contribute to the Board on behalf of the shareholders.

Over the course of my career, I have built extensive experience across the upstream oil and gas sector, primarily through leadership roles at Petrobras, the Brazilian state oil company, and through industry engagement with the Brazilian Petroleum Institute, IBP. My background combines 3 areas that I believe are highly relevant to Karoon.

First, exploration portfolio assessment and project selection. In our industry, value creation starts with disciplined technical judgment and capital allocation. Over many years, I have been involved in evaluating exploratory opportunities, develop options and reservoir potential, always with a strong focus on risk, value and strategic fit.

Second, offshore field development and reservoir management. A major part of my career was dedicated to production development, subsurface evaluation, reserves and reservoir understanding and the integration of technical disciplines needed to support offshore assets. For a company like Karoon where field performance, development sequencing and capital discipline matters greatly. I believe this experience can be directly useful in Board discussions.

Third, institutional and strategic perspective. Through my time in IBP, which was 6 years on that, and institutional relation at Petrobras for the whole company, I developed a broad view of the industry environment in Brazil, include regulatory dynamics, stakeholder engagement and the interaction between companies and government authorities. I believe that broader perspective can also be valuable to Karoon.

Why does this matter? Because Karoon's future value will depend not only on current production but also in the quality of its decision around project prioritization, exploration maturity, development time, reservoir management and disciplined capital allocation. I believe I can contribute particularly to develop the Karoon project portfolio, especially of the exploration opportunities in Santos Basin and production development around Baúna. In effect, I would serve as an independent non-director, my role would be to support management, but also to challenge constructively to bring technical and strategic perspective to board deliberations, to test assumptions and to help the Board make decisions that are robust technical commercially and in the best interest of shareholders.

I'm not joining the Board to manage the company. I am seeking to help the Board make better decisions, particularly where upstream technical complexity, project risk and loan cycle capital allocation requires discipline and experience. I also understand the importance of governance, accountability and shareholder governance. Good board create well by improving the quality of oversight churn and decision making. I believe my career has given me the technical depth, the strategic perspective and the industry context to make a meaningful contribution to Karoon at the stage of its development today.

Thank you for your time. Thank you for your consideration. And I respectfully ask you for your support.

Thank you, Fernando. Details of proxies received for this resolution are up on the screen. Of the proxies received, 97.71% are for the resolution and 2.2% against with 0.09% classified as other. Do we have any questions from the floor on this resolution?

Good morning, Mr. Chairman. My name is [indiscernible] this is not particularly -- sorry. So my question is not particularly addressed to Mr. Borges. But a general question with respect to your skills matrix in your governance report. One of the few things that shareholders can actually vote on is the incoming and reelection of directors. And so we look for more detail in the skills matrix to tell us what particular skills they have? Is this edited? Or is this basically something that's independently audited by the human relations specialists and so on.

And I'd have to say looking at Karoon's skills matrix, it's very elementary. Pretty well, all the directors have all the skills, according to your own metrics. And it's not clear that this wasn't something that was given to people to take over for the weekend and sign and bring back the next day. So what we'd encourage you to do is draw out the skill level of each of the directors, not just aggregated and basically have it independently audited. And look, one of the examples you might look at as one of your peers, which is Woodside, which has of the 10-or-so skills that they rate on their skills matrix. They only have 1 skill that all directors are deemed to have whereas yours 7 out of the 10 skills are deemed to be held by all directors at the highest level. So not at all to impune what skills you have got, but it kind of leaves us in the dark about how to vote on these things with respect.

No, thank you. Thank you for your comments. Look, I think there is always an opportunity to improve and to provide greater transparency. There is a comprehensive program and far more detail that we have internally to analyze the skills of our directors and the skills that we need as the company evolves. I think we'll genuinely look at how we portray this for next year.

As I say, it's a comprehensive piece of work that we do, do. And I have absolutely no issue at all in being as transparent as we can reasonably be around demonstrating and showing the skills that we have around our Board table.

Are there any other questions? Moderator, do we have any questions online relating to this resolution?

No, there are no questions online.

And do we have any questions on the phones?

There are no questions via the phone lines.

Well, thank you. As there are no more questions, the resolution on the screen is now put to the meeting. So please, if you want to vote accordingly, please vote.

The second item relates to the reelection of Ms. Melissa Holzberger as a Director. And to consider and if thought fit to pass the following resolution as an ordinary resolution that Melissa Holzberger, who retires for the purposes of Listing Rule 14.4 and paragraph 11.6 of the Constitution and who being eligible, offers herself for reelection, be reelected as a Director of the company with immediate effect. Ms. Holzberger was appointed to the Board as an Independent Non-Executive Director on the 19th of April 2024. The Board, excluding Ms. Holzberger unanimously supports the reelection of Ms. Holzberger as a Director of the company. In accordance with the ASX listing rules and the company's constitution, Ms. Holzberger is seeking reelection as a Director at this meeting.

I now invite Ms. Holzberger to address the meeting.

Thank you, Chairman. Good morning, shareholders and colleagues. I'm grateful for the opportunity to address you today and honored once again to be considered for reelection to the Board of Karoon Energy. We're operating in an environment where energy security has risen to the top of the geopolitical agenda, where allied supply chains are being actively reconfigured and where the long-term case for well-governed independent oil producers has never been stronger. I'm genuinely optimistic about the outlook for this sector and about Karoon's position within it. The company holds high-quality producing assets in 2 of the Western Hemisphere's most significant oil provinces and is well placed to benefit from the structural forces now shaping global energy markets.

I bring to this Board more than 2 decades of experience at the intersection of law, governance and international energy -- the international energy industry. Across private practice and in-house legal roles with multinational and Australian companies. My expertise is grounded in Energy and Resources law, spanning across areas such as project development, operations, joint ventures, regulatory affairs, stakeholder relations and environmental social governance areas.

Is this experience forged through commodity cycles, regulatory shifts, geopolitical disruption and major project risk, and this experience is directly relevant to the challenges and opportunity that Karoon faces today. Over 13 years of Board service across listed private government and not-for-profit entities, I've chaired various committees spanning audit, risk, remuneration, governance, and sustainability. And it's that breadth across those areas that I'm able to engage substantially across the full governance agenda.

I currently serve as a Non-executive Director of listed investment company Argo Investments, and I'm a member of the Australian Federal Government Radiation and Nuclear Safety Agency Advisory Board. And their roles that keep me thinking -- keep my thinking on capital discipline and regulatory complexity current and tested. Throughout my career, I've seen what strong governance delivers and what its absence costs. I bring that perspective to every discussion on this Board with objectivity, rigor and integrity and an unwavering commitment to the interest of this company and its shareholders. It's on that basis, I seek your continued support today. Thank you.

Thank you, Melissa. Details of proxies received for the resolution to elect Ms. Holzberger are up on the screen. Of the proxies received, 97.62% are for the resolution, 2.28% against with 0.01% categorized as other.

Do we have any questions from the floor on this resolution? It doesn't appear to be. Moderator, do we have any questions online relating to this resolution?

There are no questions online.

And do we have any questions on the phone?

There are no questions via the phone lines.

Thanks. Well, as there are no questions, the resolution on the screen is now put to the meeting. So please vote accordingly.

The third agenda item relates to the reelection of Ms. Joanne Palmer as a Director. To consider and if thought fit to pass the following resolution as an ordinary resolution that Joanne Palmer, who retires for the purpose of Listing Rule 14.4 and Paragraph 11.6 of the constitution and who being eligible, offers herself for reelection, be reelected as a Director of the company with immediate effect. Ms. Palmer was appointed to the Board as an Independent Non-Executive Director on the 19th of April 2024. The Board, excluding Ms. Palmer unanimously supports the reelection of Ms. Palmer as a Director of the company. In accordance with the ASX listing rule in the company's constitution, Ms. Palmer is seeking reelection as a director at this meeting.

And I now invite Joanne to address the meeting. Gets further and further to walk, isn't it?

Good morning, everyone, and thank you, Peter, and thank you to the Board and shareholders for the trust placed in me over the last 2 years. I'm honored to stand for reelection to the Karoon Energy Board. When I joined the company in April 2024, the company was navigating a period of transition following the acquisition of Who Dat and the recent issue of the bond on or around my appointment date. And the development of a strong capital allocation culture. Since then, I have been proud to work alongside my fellow directors and management to guide the strategic decision-making during what in more recent times, has been a volatile market.

By way of background, I'm a chartered accountant with over 29 years experience across audit, capital markets, M&A and corporate advisory in the global resources sector. My career has span roles with Ernst & Young in London and Perth alongside board positions in listed resource companies. I currently serve as a Non-exec Director of St. Barbara, Boss Energy and New Murchison Gold. And if reelected, I'll continue to apply focus and oversight on value realization, disciplined execution to short-, medium- and longer-term goals in a sector defined by both opportunity and volatility. I remain committed to the role to serving you, our shareholders and working constructively with the Board and the new executive team through Karoon's next phase of delivery and growth.

Thank you again for your confidence, and I respectfully ask for your support in my reelection.

Thanks, Joanne. Details of the proxies received for the resolution to elect Ms. Palmer are up on the screen. Of the proxies received, 95.82% are for the resolution and 4.09% against with 0.09% classified as others.

Do we have any questions from the floor on this resolution? No. Moderator, do we have any questions online relating to this resolution?

No, there are no questions online.

And do we have any questions on the phone?

There are no questions via the phone lines.

Thank you. Well, as there are no questions, the resolution on the screen is now put to the meeting. Thank you.

The fourth item on the agenda relates to consideration of Karoon's Annual Financial Report. While no resolution is required to be put forward to shareholders through this agenda item, shareholders should consider these documents and raise any queries they may have. Shareholders are now provided the opportunity to ask questions regarding the financial statements and reports, the operations and the management of the company. All questions to the auditor in respect of the audit report. Mr. Graeme McKenna representing the company's external auditor, PwC Australia is available today to respond to any questions in relation to the conduct of the audit and the preparation and content of the auditor's report.

So ladies and gentlemen, it's your opportunity now to ask us as a Board and relevant managers, executive within the organization. Questions about the company and its operations. Do we have any questions? Yes.

Sorry, [indiscernible]

Mike just -- there's a mic for you, Mike.

Thank you. I forgot to congratulate you on retaining the hybrid format for these meetings. They're very important for shareholders to be able to access your meeting.

Look, a couple of questions, if that's all right. One is on the longer-term impact of the war in Iran. We're all very grateful for the bump in share price that this seems to have delivered in the last little while, but of course, that brings with it its concerns. And there are some commentators predicting a change of momentum in investment towards renewables and perhaps a slight increase in the decline in the industry for the extraction of materials. So I'd be interested in your view on that.

And if I could ask a second one, if that's -- or would you like me to queue them up?

Perhaps, I'm worried about not addressing the first question, address your -- before I address the second one. So let me address that first one and contextualize a little bit.

When we started the year prior to the 28th of February, the outlook for the oil and gas -- or the outlook for oil price and by relationship at gas pricing, was quite soft for 2026 into 2027. So our framing of what we were doing and how we were doing it was very much driven by an outlook of oversupply on the oil side and a soft oil price probably at $60 to $65 and probably going down. Obviously, the events of the 28th of February fundamentally changed that outlook. And we've seen highly volatile oil prices depending on what statement Donald Trump may or may not make on any given day or at 2:00 in the morning on his social media account.

What I think it has highlighted is that the dependence of the world on hydrocarbons, oil and gas and all the related products that come from it have been, I think, emphasized to the world that it's not just about petrol and diesel and maybe avgas. It's all about plastics, it's about all the byproducts that come from hydrocarbons. And the dependency of the world, especially the developing world in -- on hydrocarbons and access to it has obviously been, I think, as I say, emphasized.

The outlook for hydrocarbon production over the next 25-or-so years. There are a number of scenarios and range of production and outlooks, all of which undoubtedly will be wrong. But I have a belief that hydrocarbons will play a significant role right out past 2050. And the -- whether it be a slightly different balance of gas versus oil, fundamentally, hydrocarbons will still be a significant part of the energy mix, I think, well past into -- past 2050.

How much? Some people would say, I think the IEAs most likely outcome is still that oil will be produced between 90 million and 100 million barrels a day, and we're presently producing circa that number now. I don't think it will fundamentally change and gas will be likely go up. So although renewables will have an impact, especially in the developed world, I don't believe that it's anything like a forgone conclusion that hydrocarbons will be dramatically different 25 years' time. I'm not quite sure whether I'll care apart from my kids, but whatever that prediction is, I'm sure I'll be wrong.

Second question. If I answered the first one.

You did answer the first. Thank you very much. I think that will give most shareholders some comfort going forward. The second one really is about the relocation of Houston. This was a fairly major move. And you had forecasted there would be some synergies. How are you seeing anything so far? Progress to date?

Well, I'll go to that straight off, and I'll probably then pass it to Carri, so I'll give you a couple of minutes to prepare your thoughts, albeit I know you don't need that time.

Look, I suppose first off, our business is in Brazil and to some degree in the U.S. It's not now in Australia. It used to be in the past with Karoon. Fundamentally, when you look at the efficiency of running a business in South America and the U.S. from Melbourne, Melbourne is a lovely spot, but it's not the place to run business across that sort of time zone. And the pressures and stresses and strains that it put on our management team to try and do that for a number of years, was wearing -- and frankly, for -- it was unsustainable.

Our people were working 18 hours a day across the time zones, getting up early, staying up late and managing their time across a very long distance. That became very taxing on our people on both sides of that equation from the U.S., Brazil and in Australia, and it was unsustainable. For the good of our own people, it was unsustainable. And frankly, it also led to inefficient and quite challenging decision-making. So we needed to change. And we took the opportunity to also refresh our management team to bring in key people who had very, very strong operational experience and could apply themselves into our new operating environment as operator of the FPSO. And in conjunction with some augmentation of people in Brazil, we were able to access some top quality management who are perfectly experienced and have abilities that are directly applicable to our business evolution. So that was the reason.

It comes with some different cost base, but it also comes with Qantas getting a lot less travel and an efficiency of decision-making and team building that is far, far more efficient and allows our management team to now develop into a high-performing team, which was deeply challenging under the old regime. Carri?

Yes. Thank you. That was a great question. And I think Peter answered it well. What I've seen is absolute improvement in collaboration and integrated decision-making. And I think it's always helpful when you have the visibility of the leader sitting right next door to the office of the individuals that are doing the work.

The other thing that I've seen is how we utilize the epicenter of global deepwater development expertise that we have in Houston, Texas and bringing the ability to bring consultants and contractors and people that understand project development better than anyone together in how we commercialize and facilitate concepts for projects such as Neon. So hands down. I have seen the benefits of doing this. And I think we're just touching the iceberg as we come together as a new executive team here, integrate fully with our operations, both U.S., Brazil and our team that will be -- continue to stay here in Australia. I do think we will see ongoing benefits and as we go through our strategy refresh this summer, we will be putting additional action plans together to take advantage of the colocation in terms of people development and how we utilize the resources to enhance efficiencies of the company.

I should also add. Thank you, Carri. I should add to that, that we recognize that a very substantial portion of our shareholding base remains in Australia. And we have no intent to change that or change our listing but because we have so many loyal Australian shareholders, we will also continue to spend as much time as we can in servicing that group and ensure that our contact and both Board and management level will remain very active in servicing a large percentage of our shareholder base.

Are there any more questions?

Good morning, Jeffrey, shareholder. Thank you so much for your detailed operational information and also for a dividend for a long suffering shareholder. Just a question about who you sell products to oil and gas, who you're marketing to? Because I was thinking about the geopolitical change and like Albanesi, our Prime Minister running around looking for oil and gas supplies. I didn't really hear much information about that. I'm just curious about where you sell your products to?

Yes. We're our oil price is based on Brent oil price. So you sometimes see that on the TV. So I always take yourself on that. Carri, you can talk where we sell to and we sell through Shell primarily, but over to you.

Yes. Thank you. So our offshore U.S., which is about 25% of our crude oil production is sold directly through pipeline to the U.S. Gulf Coast refinery base. The Baúna production is sold via cargoes to global markets. And the nice thing about both assets, this quality crude is very high and highly demanded by refineries across the world. So a good portion right now of the Baúna cargoes have been headed towards Europe, but we can sell to any market globally.

Fred?

Fred Ward, a shareholder. I have a question to Carri. I heard in your speech, something I may have missed before, you said that the company was well down the road of buying an FPSO for Neon, I've not heard that before. Interested and you said we showed commendable discipline in walking away from that. Interested to hear more about that because I don't think it's been spoken about before that we were down that road.

Under the prior concept that we were working on, we were in a competitive bid round to look and to purchase an FPSO for that as part of the project management, FID process. And that was mentioned this winter or this past winter when I first came on that we did pull out of that process because of the increasing costs. And it was very deliberate and an intentional decision, hard decision to be made because it does push the FID out, and it does put that project at risk.

But it was absolutely the right thing to do to add discipline to the project and to review it with the goals of capital efficiency, maximizing our capital efficiency and minimizing our residual risk on the downside. And so we are undertaking a comprehensive fulsome review of the various options that we have ongoing for Neon and hands down as we continue to mature these, I do believe this will be a much more robust and better project that fits Karoon in a better and more disciplined way as we continue to mature these various options moving forward. So yes, you are correct. We were in a competitive process.

Now whether we would have won that or not, it's a competitive market, but we made the decision not to move forward with that. And now it's about the fit-for-purpose vessel for this concept for this project.

I should also say that one of the reasons we didn't move forward with that apart from price, would be actually we don't think that it was necessarily the right concept. So we had to at least be in a process to understand what the pricing structure was and what the capacity of the FPSO was if we wanted to move forward. All the potential families need to know what exactly the project would look like before committing. And frankly, we pulled that relatively early in the piece because we did not think the concept was exactly right. And certainly, the price and shape of that FPSO wasn't going to work. So it was part of the project evaluation process, which I think is extremely normal.

My name is Anthony, I'm a shareholder. In the annual report, it mentions that the reserves proven and probable. You go to a third-party reviewer to get their input. And every 3 years, they do a more detailed review. The reserve upgrades that you've announced recently, are they in line with the third-party reviewers' reserve updates? Or are you more conservative? Or are they more conservative?

They're in line. We would -- every year, when we have our reserves, we do a thorough review and they need to be within tolerance of our third-party auditors and third-party companies that do this for us.

And just a follow-up question for our new CEO. I know you're only recently joined Karoon, but I'm curious what's your idea of success, say, over the next 5 years for Karoon? Where would you like to take Karoon and what would be your successful outcome?

That's a fantastic question. So let me step back and share why I joined Karoon. First and foremost, it's a company that has world-class assets. Your asset base is the foundation of any good company. Second of all, it had a strong balance sheet. And third of all, it has a growth profile and opportunities for the future. I didn't join the company just to sit and write a decline curve. I joined the company to create value, to create value for the shareholders, to create value for the industry and to grow.

So what does success look like? First and foremost, having a very focused, disciplined and safe operation. Having a world-class, high-performing team that is able to manage these assets in a good way and having success on these growth opportunities, continuing to mature them in a good way and get these over the finish line and to deliver on the objectives of continued shareholder growth and shareholder -- share price accretion. So that's what I -- will see a success over the coming years.

Thanks. Does that cover? Thanks. Any further questions from the floor? Do we have any questions online?

Yes. We have a question from [ Mrs. Anita Hangirani ]. How does the Board prioritize between funding high-risk growth projects like Neon, pursuing further acquisitions and increasing shareholder returns? And what explicit decision framework governs that trade-off?

Well, I think we've published and had in place for the last 2 years a really detailed capital management priority, which we apply rigorously to all our investments. We look at -- we have operations that need to be run safely and sustainably. We have existing opportunities within that framework, which allows us to optimize and do what we did with Baúna to drive value. We provide a balance with dividends on a prescribed formula of profitability. And I'm pleased to say higher oil price and higher production means that an opportunity to get a bigger dividend, subject to, obviously, what the oil price might do, which comes back to the earlier question. I think the oil price outlook right now is actually pretty strong and will remain reasonably strong through 2027.

Even if the Strait of Hormuz opens tomorrow, it will be a while before production comes back to a supply-demand type impact on pricing. The reality is that we also do share buybacks because we think the shares remain undervalued and it's a good return for our business. So each investment we make has an expectation of a high return, and we benchmark where we spend our dollars against that return expectation. Sometimes we will risk some of that money in exploration, for instance. Sometimes, we manage that risk by looking to farm down and for things like Neon and for our exploration portfolio in the South Santos Basin.

The risks, we believe are appropriately mitigated by having somebody else fund some or all of that investment and us maintaining an ability and our balance sheet strength for other things. So apply -- we apply a rigorous capital management policy, which we have for the last few years, which has seen dividends paid and share buybacks done as well as judicious investment to drive value in our core business.

Thanks, Chair. There are no further questions online.

Okay. Anything on the phone?

There are no questions via the phone lines.

Okay. Well, thank you. I'm sure we will all be around post the meeting. So please snaffle us over a coffee or something if you have any further questions, pleasure to answer them.

Okay. We will now move on to item 5, adoption of the remuneration report. A vote on this resolution is advisory only and does not bind the company or its directors. However, the Board will take into consideration the outcome of the vote when reviewing Karoon's remuneration practices and related policies. So to consider and if thought fit to pass the following resolution as a nonbinding advisory resolution that for the purposes of Section 250R(2) of the Corporations Act and for all other purposes, the remuneration report for the calendar year ended 31 December 2025 as contained within the directors' report be adopted.

I will speak very briefly regarding the company's overriding aim in terms of remuneration being to ensure that executive performance and outcomes are as aligned as possibly been with the company's shareholders and particularly those of our shareholders.

As outlined in Carri's and my earlier addresses, Karoon made significant advances towards these objectives during CY '24, responding to shareholders' concerns at the last Annual General Meeting. The reward structure for key management personnel, KMP includes a fixed salary, a short-term incentive over 1 year and a long-term incentive over 3 years. KMPs must maintain a shareholding in Karoon equal to 50% of their first year's after-tax remuneration within 3 years of their appointment. The details of the CY '24 remuneration outcomes are set out in the remuneration section of the annual report. The non-executive directors support the adoption of the remuneration report. This resolution is subject to voting exclusions as set out in Section 5 in the explanatory memorandum.

Details of proxies received for this resolution are up on the screen. Of the proxies received, 95.94% are for the resolution and 3.96% against with 0.1% classified as others. Do we have any questions from the floor on this resolution?

Thank you, Mr. Chair. Look, first of all, we'd like to congratulate the new CEO on her appointment. And we'd quite like to actually employ her as a consultant in negotiating pay increases because she's done a fantastic job in doing that particular job.

Look, I wouldn't be doing my role as a monitor for the Australian Shareholders' Association, if I didn't raise the point. But the remuneration has changed dramatically. It's shocked us that what happens in the American payment business, but the payer is now more than double what the outgoing CEO had from about -- if my calculations are right from about $2.4 million maximum to about $5.8 million through a range of things, including an additional stretch target bonus.

So really, my question is that can the Chair give us confidence that this will actually result in improved business. Now you have partly with that with your previous question, so please don't go over what you just said. But I mean my job as a shareholder representative is to actually raise.

Totally understand. I suppose one of the implications of moving to the U.S. and wishing to, I suppose, put in place management team and take the opportunity to put in place a management team with the relevant skills, we believe are set for to drive value in the organization. Meant that we did move a lot of our people or we looked to employ people in the U.S. against a different market. And frankly, the Board took a view, it's like trying to thread a needle because it's extremely tough to as an ASX company to get the balance right, frankly, between what we have to pay by accepting the fact that we are employing U.S. people with a different U.S. market, and actually still attracting serious quality, which is what drives the value in the medium term.

The Board through our PPC, our People and Culture Committee and Chair held by Peter Turnbull, was carried out a substantive review of remuneration practices across the U.S., what was needed. And we also did a substantive review of Australian companies that have made similar moves in the past, frankly, most of which got it wrong and didn't do a particularly good job in terms of setting up their remuneration. The remuneration that we came up with, firstly, is really -- I hate to put your hands over your ears, Carri, but based on market perception and the market analysis is that Carri's remuneration is at the 25th percentile against others in her category. It's always interesting to try and compare when we did a detailed comparison across many companies, bigger and smaller than us in the U.S., but the reality is that there are certain things in the U.S. remuneration packages that are different to the ASX.

The -- I should highlight that the -- we spent also a very substantial amount of time in setting Carri's fixed remuneration was relatively simple, but the variable incentives, short and long term, we did take a substantial amount of time to set the objectives and a very significant portion of Carri's long-term incentive is at risk and is tied to particularly meticulous deliverables in operations and cost and metrics that drive our business and value. So much of that is absolutely no guarantee and is very much aligned to if shareholders do well, Carri delivers on those things, the share price will appreciate and therefore, Carri will do okay as well.

So this is a difficult piece and a challenging thing to manage as a Board. I think we've done as much as we can, recognizing the unsustainability of our past structure and the real need, I think, to bring in some fresh, new and seriously talented individuals into our organization to help drive the business' value. Now that value in an oil and gas perspective, we will be able to test over the next few years. And but I can tell you unambiguously from where I sit as Chair, the company is in far better shape, far better hands, is more sustainable and are making better decisions with the process that we've gone through.

I don't know, Peter, you want to add anything as Chair of the PPC.

That's a great summary, Peter. We took a very data-driven approach to this to start with. We had 3 sets of data. We work with Willis Towers Watson in the U.S. We work with our search firm Russell Reynolds and the other set of parameters were the negotiations with Carri herself. So this is at the lower end of what would be acceptable in America. It's been quite difficult to straddle the 2 markets, but we've come up with something we think does the best we can to straddle the 2 markets. And I just point out, I think it's 82%, 83% is at risk. The outperformance elements of this package are going to cover areas again -- are going to be quite hard to achieve, quite hard to achieve.

So well, I think Peter said, it's been a difficult exercise, but I think we've taken a logical and data-driven approach to it. Started at the lower end, and we'll see how we go with that. But we wanted our candidate through the process, and then we had to take the data, we had the negotiations with Carri and see where that could get us.

Okay. Do we have any questions from the floor anymore? Any questions online?

No, there are no questions online.

Or on the phone?

There are no questions via the phone lines.

Great. Thank you. As there are no more questions, the resolution on the screen is now put to the meeting. So please pass your vote accordingly.

We will now move to the only item of special business of the meeting. Next general item relates to amendments to the constitution. The proposed amendments reflect updates to the Corporations Act, ASX listing rules and current governance practices and are largely administrative in nature. A summary of the proposed material amendments is set out in the explanatory memorandum. The amendments referenced the proposed inclusion of proportional takeover bid provisions. Essentially, these provisions allow the company to include clauses in its constitution, which enable the company to refuse to register a transfer of shares under a proportional or partial takeover offer unless shareholders first approve the offer by resolution.

The benefit of the provision is that shareholders are able to decide collectively whether a proportional offer is acceptable in principle and it may ensure that any partial offer is appropriately priced. Otherwise, the bidder could take control of the company without other shareholders -- with our other shareholders have a chance to sell all their shares to the bidder and without paying an adequate amount for gaining control. It is possible that such provisions may discourage proportional takeover bids. However, your Board considers the advantages of including such provisions outweigh the potential disadvantages. You have the opportunity to participate.

As of today, I can also confirm that no director is aware of any person seeking to acquire or increase substantial interest in the company. A copy of the amended constitution has been made available to shareholders and is now tabled at this meeting for the purposes of this resolution.

So to consider and if thought fit to pass the following resolution as a special resolution, the constitution of the company be amended as set out in the document tabled at the AGM and described in the explanatory memorandum with immediate effect. The Board unanimously recommends that shareholders vote in favor of this resolution. This is a resolution -- a special resolution and requires at least 75% of votes cast to be in favor to pass.

Details of proxies received for this resolution are up on the screen. Of the proxies received, 99.83% are for the resolution, and 0.08% against with 0.9% classified as others.

Do we have any questions from the floor on this resolution? I think it's rare to see a 99.8%. So I think we've got solid support.

Moderator, do we have any questions?

There are no questions online.

And on the phone?

There are no questions via the phone lines.

Well, as there are no questions, the resolution on the screen is now put to the meeting. So please vote accordingly.

The next item on the agenda relates to the issue of performance rights to Ms. Carri Lockhart. This resolution is subject to voting exclusions as set out in Section 7 in the explanatory memorandum. To consider and if thought fit to pass the following resolution as an ordinary resolution. The shareholders approve for all purposes, including Listing Rule 10.14, the issue to Ms. Carri Lockhart of 48,287 short-term incentive deferred CY '25 performance rights, which will only vest subject to completion of a 1-year employment retention ending on 31 December 2026. And 2.094398 long-term incentive CY '26 LTI performance rights, which are at risk remuneration and will only vest under and in accordance with the performance rights plan and otherwise on the terms and conditions set out in the explanatory memorandum.

This resolution seeks shareholder approval for the grant of performance rights to the CEO and Managing Director under the company's incentive arrangements. Further details of Ms. Lockhart's remuneration and the terms of the performance rights are set out in Section 7 in the explanatory memorandum. The non-executive directors support the issue of performance rights to Ms. Carri Lockhart, the CEO and Managing Director, makes no recommendation in relation to this resolution. Details of proxies received for this resolution are up on the screen.

Of the proxies received, 75.63% are for the resolution, 24.27% against with 0.1% classified as others. Do we have any questions regarding this resolution from the floor? No.

Moderator, do we have any questions?

There are no questions online.

And from the phone?

There are no questions via the phone lines.

Thank you.

Sorry, one if I may.

Yes, please.

I'd just be interested in the logic that the people who voted against gave you when they provided there against it.

Look, I always find it really difficult to describe the logic of a shareholder who votes positive or negative. And it's not really my place to put their arguments for or against a vote. I think I can -- having spent the last few weeks actually very comprehensively engaging with a lot of our bigger shareholders. There is clearly a sensitivity, especially for shareholders who follow specific guidelines that this as an ASX-listed company, what we're doing with U.S. remuneration is sometimes falls outside the strict guidelines of certain shareholders in the way they look at things. We've tried to explain the unsustainability of what we were doing. We've tried to explain, as Peter did very well what the process was to get to where we've got to. And the value that we see and the judgment that you will make of us in the medium term around what we've done is driving value in Karoon.

But I do believe that there are still people and entities especially the passive funds and others that have guidelines in what they will vote for in an ASX-listed company. And sometimes, what we do is somewhat outside that guideline, and I don't have the capacity or the willingness to be flexible or understand a broader picture. But I've been in the business for over 50 years, and I can tell you, I'm reading shareholders' minds. I don't do that very often, honestly, it's so obvious, and I'm shareholder generally as well. So I think about the same things as they do really. So that's where we sit with that one. I hope I answered it a little bit without giving away confidentiality because certain people are really worried about that.

Okay. Well, as there are no more questions, I'll -- the resolution on the screen is now put to the meeting. So please vote accordingly.

There is now an opportunity for general business and any other questions. So open it up. Do we have any more questions from the floor?

I've only been a shareholder of Karoon Energy for 3 months. And well, I understand Carri has only been managing your active for 6 months, but I'm just interested, we've had heard a little bit of the other directors give their spell. I'm just wondering what Carri did with her life before she became Chief CEO of Karoon Energy.

That's the trick.

Yes. Great question. Thank you for your interest. So I've been an Energy Executive, I've been in the Energy for 30 years. And I retired actually, I had this goal of retiring by the age of 50 and decided to do that and retired from Equinor as Chief Technology Officer.

I've worked every aspect of the industry starting in the U.S. as an engineer and spent a lot of time in the field. And that's really important when it comes to running a company because you know how work gets done and you know how to keep people safe. And you know what matters when you're turning the valve. So I spent a lot of time in the field and then moved up to the various ranks in the leadership and upstream, international, domestic U.S., offshore, onshore, resource plays, conventional. So I saw the broad spectrum of the energy industry, and then I retired. And with this grand vision of sitting as a director and doing only director work on board. And that only lasted so long because I felt this need to continue to have my hands dirty and to get in the details of the work. And so I want to have the opportunity to join Karoon, I thought, well, why not?

I love the industry. I really do. I think it's fascinating. And one thing is for sure, energy is needed in the world. And hydrocarbon, oil and gas is not going to go away. There hasn't been a single source of energy that's ever been displaced in the world. And so the energy mix we have to play a very big role in that for the sustainability and affordability and reliability of our systems globally. So I wanted to continue to be a part of that and be with the people to make that happen.

There was also a second element, maybe a little bit more selfish. But 50% of the world are young ladies. There's not a lot of energy executives that my daughter, granddaughters, daughters, nieces can look up to as a role model. And so I wanted to be part of that journey also to give that role model. If you can have a family, you can have a balance and you can make a difference in the industry. And so when I have this great opportunity, I looked at the company, looked at the quality of the assets, looked at the talent of the Board and the team members and thought it's a great making, it's a great foundation in which to grow and still make a difference in the industry.

So that's my background, and that's why I chose to say yes.

And it was a great decision as far as I'm concerned. Let me say. So there, anymore questions? Any questions from Ms. Moderator?

There are no questions online, Mr. Chair.

And from the phone?

There are no questions via the phone lines.

Great. Thanks so much. I should like to end my bit before -- because I've got to put the votes and to a few other bits and pieces, but just by thanking shareholders to their patience and their support over the years. We really do appreciate it. I know it's been an interesting and quite volatile ride in Karoon.

I also wanted to thank our Australian staff who've through a lot of volatility and a lot of change have performed, in my view, outstandingly professionally and outstandingly well over the last 12 months and enabled a significant handover to over-responsibilities to Brazil and to the U.S. So I know there are a few here, and I just want to say I put on record the thanks first lien, but also the Board to the incredible professionalism that those people add and displayed over the last 12 months.

So ladies and gentlemen, in 1 minute, I will close the voting system. It might be more than that or slightly less. But around 1 minute, please ensure that you've cast your vote on all resolutions. And I'll now pause to allow you time to finalize your votes and Computershare to pick up the votes as necessary.

[Voting]

Are we all done? Well, thank you, ladies and gentlemen. Voting is now closed. The results of the poll voting will be announced to the ASX as soon as possible after this meeting and will also be posted on the company's website.

As there's no further business to be conducted now, I declare the meeting closed. Thank you sincerely for your participation today. For those of you who have joined us in person, the Board now invites you to join us for [indiscernible] light refreshment, [indiscernible] and a cup of coffee. So thank you very much.

Thank you for standing by, and welcome to the Karoon Energy Limited 2025 Full Year Results Briefing. [Operator Instructions] I would now like to hand the conference over to Ms. Carri Lockhart, CEO and Managing Director. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining our 2025 full year results webcast. My name is Carri Lockhart, CEO and Managing Director of Karoon. I have with me this morning, Ray Church, our CFO; and Ann Diamant, our SVP of Investor Relations.

Earlier this morning, we released our 2025 full year results to the market. This presentation should be read in conjunction with the ASX announcement, and I draw your attention to the disclaimers on Slide 2 and notes and definitions on Slide 3.

I will move directly to Slide 5, which provides an overview of 2025. We are pleased with Karoon's performance during 2025. We produced 10.3 million BOEs, which was nearly on par with last year despite well issues and natural decline. While our sale revenue and NPAT were lower in 2025, largely due to the softer oil prices, our low-cost, high-margin assets generated $231 million of operating cash flows, demonstrating the robustness of our business. These cash flows underpin the disciplined investment in our organic growth opportunities and healthy returns to shareholders.

We paid shareholders $80 million, which includes $35 million in dividends and $45 million in buybacks. Since the second half of 2024, we have purchased and canceled 11% of shares on issue, delivering solid returns to our shareholders. I will share more about our operations, Reserves and Resource base and projects while Ray Church will discuss the 2025 results later in the presentation.

Slide 6 summarizes our good safety record and sustainability initiatives. We achieved a year-on-year improvement in both personnel and process safety, which are core to how we run our business. We also reduced our flaring by 41% compared to 2024 as we improved operations and FPSO reliability. We do remain committed to being 100% carbon neutral for Scope 1 and 2 emissions, primarily by surrendering independently verified carbon offsets. This has been achieved since 2021. We will remain relentless in our aim of delivering 0 injuries every day, minimizing our environmental impact where practical and cost-effective and being a positive supporter to the communities in which we work and operate.

Moving to Slide 7. We achieved a total shareholder return of 16% in 2025. Our share price appreciated 11%, closing the year at AUD 1.54 per share, and we paid AUD 0.074 per share of dividends unfranked during the year. Our positive share price performance was despite Brent crude price declining 19% and the ASX 200 Energy Index being down 2% over '25. The Board has declared a fully franked final dividend for 2025 of AUD 0.031 per share to be paid on March 31, 2026, bringing the total dividend declared for 2025 to AUD 0.055 per share.

On the next slide, we show our capital allocation framework and our priorities to create value for shareholders, which remain unchanged. The on-market buyback program has been reviewed as we enter a period of higher capital-intensive work during the first part of this year as well as oil price volatility. We believe with the strong fundamentals from the base business and our current share price, which, in our view, remains undervalued by the market, it is prudent to continue with the on-market purchases as part of our disciplined approach to capital allocation.

As we move to Slide 9, Reserves and Resource growth have been an ongoing thematic for Karoon over the years, and this year is no exception. Reserves increased 7% year-on-year, primarily due to conversion of Bauna 2C to 2P as acquiring the FPSO and reducing operating costs has given us the confidence in being able to produce to late 2030s. As a result, Reserves life has also increased to 7.1 years. Our 2C Contingent Resource saw an increase of 34%, driven by an upgrade in the Neon Resource with improved subsurface characterization and the acquisition of licenses containing the Piracuca field.

On Slide 10, our business has a healthy and balanced pipeline of portfolio growth opportunities in different phases of maturity. The short term includes short-cycle project deliveries, primarily at Who Dat in the Gulf of America. The medium term includes Neon and potentially Piracuca, Goia and the Neon West in Brazil, which we are continuing to mature. In the long term, we have a sizable prospective exploration acreage position in the South Santos Basin. I will talk about each of these opportunities in more detail shortly.

Now I'd like to hand over to Ray, our CFO, who will run through the financial highlights.

Thanks, Carri. Good morning, everyone. I'll move right into Slide 12 and open by saying that in 2025, the FPSO acquisition, oil price impacts on the Petrobras contingent consideration provision and expense treatment of the flotel campaign make it important to look through to the underlying results. Slide 29 in the appendix shows these items in a reconciliation of statutory to underlying results, and I'll now focus on those underlying numbers.

With production of 10.3 million BOE marginally down from 2024, 15 offloads took place at Bauna in 2025 versus 16 last year. Revenue was also affected by oil price, resulting in sales of $628.6 million versus $776.5 million in 2024. With costs largely fixed, that revenue reduction flowed directly to underlying EBITDAX and operating cash flow, partly offset by royalty reductions and FPSO lease savings. As you can see, we drew cash to close the year with $143.9 million of net debt, primarily as we funded the FPSO acquisition. I'll say more about cash movements on later slides.

Turning to underlying earnings on Slide 13 and to provide more detail, the revenue reduction comprised 2 parts. The first being $100.4 million from realized price as the average liquids price was 14% lower at Bauna and 17% lower at Who Dat and the second being $47.5 million from a sales volume reduction, mostly at Bauna.

Production costs improved by a net $7 million through savings of $40 million in FPSO lease D&A and interest costs, offset by roughly $28 million of temporary FPSO transition support costs and $5 million of logistics and nonrecurring mooring line repair costs. Royalties reduced by $7 million in line with price and produced volumes and crude inventory movements were $26 million as a lifting occurred in January 2026.

The majority of the increase in net finance and interest costs relates to the accounting treatment of $17.8 million of withholding tax on intra-group funds movements. This is fully offset in income tax expense. Of the remaining $52.4 million, the increase year-on-year is a result of $3.9 million of full year bond interest impacts plus $4.2 million of reduced interest received as we drew down cash.

And as I mentioned, income tax expense includes $17.8 million credit for withholding tax, neutralizing the impact on NPAT in the year. Excluding this item from tax expense and profit before tax, the underlying tax expense rate is 33%. This all leads to an underlying NPAT of $107.5 million.

Slide 14 provides a per BOE view of the 2024 and 2025 cost structure on a pre-AASB16 basis. Despite the oil price decline, the pretax cash margin remained above 65% per BOE. Unit production costs further reduced to $13.20 and breakeven realized price improved from $33 to $31 per BOE. This reflects the ongoing work to improve topside efficiency, replace natural decline and the emerging FPSO acquisition impacts, and it demonstrates Karoon's leverage to oil price.

Moving to Slide 15. As I've already flagged, EBITDAX included the flotel costs and converted after taxes and net finance costs to $231.3 million of operating cash flow, including FPSO lease payments. This provided adequate funding for CapEx investments in the Who Dat sidetrack and SPS-88 as well as the last of the largest Petrobras contingent payments, leaving $57.8 million of free cash from operations. This, combined with our opening cash was then applied to the strategic FPSO acquisition and capital returns to shareholders, resulting in a net drawdown of cash of $135.1 million. This led to the change in net debt mentioned earlier.

Moving to liquidity and the balance sheet. Slide 16 shows this cash reduction to close the year with $206.1 million of cash. As no further draw on debt was necessary in the year, the combination of the RBL debt facility and cash leaves us with $546.1 million of total liquidity at year-end. This positions Karoon's balance sheet for the second extended shutdown and flotel campaign and well works at Bauna and Who Dat with approximately 85% of this planned 2026 CapEx expected to be spent in the first half. It will also fund the much reduced contingent consideration and the announced capital returns. I'd like to finally note that the RBL facility amortizes with Reserves and is reassessed in April and October of each year.

Thank you. And now I'll hand back over to Carri.

Thank you, Ray. Looking forward to 2026, we see the year as having 2 distinct halves. This first half is a period of intense investment and the second half when we aim to realize the benefits of this work. Over the next few months, we will realize on performing essential inspections, maintenance, the annual turnaround, systems revitalization and upgrades on the Bauna FPSO, together with the production riser reinstatement work at Who Dat.

Regarding wells, we have 1 well and 1 subsea intervention plan in Brazil aimed at restoring well production and a sidetrack plant at Who Dat. Assuming the operational programs in the first half go as planned and oil prices remain steady, we expect to realize increased facility uptime and production as well as operating cost reductions, in turn, delivering strong cash flow generation.

Next slide. The Bauna FPSO acquisition was a very significant milestone for Karoon as it provided us with strategic control over arguably our most important asset. Acquiring the vessel has already led to improved safety, reliability and cost efficiencies. Production from Bauna in 2025 was higher than 2024 despite natural decline and was driven by improved FPSO efficiencies of 95% versus 84.5% in 2024. The acquisition also allowed us to extend field life by 7 years to 2039 and increase our 2P Reserves.

As shown on Slide 20, our Brazil operations team are heavily focused on several major concurrent activities during the first half '26, as previously mentioned. Our FPSO revitalization campaign is currently planned over a 4-month window with an option of a 2-month extension if necessary. For most of this time, we will be producing as normal. The annual maintenance turnaround is planned to commence during March and will run for 28 days.

Alongside this, we expect to conduct SPS-92 and PRA-2 well activities in late March to early May window. These concurrent offshore activities present both a challenge and an opportunity with safety remaining our highest priority throughout. Simultaneous operations and logistics are being managed via detailed planning and the use of a flotel, which is already on location. The drilling rig is expected to mobilize in the field in second quarter to undertake the SPS-92 ESP well workover. And at peak offshore workforce at Bauna is expected to exceed 700 personnel compared to a typical complement of around 90.

On Slide 21, during 2025, our Neon team completed some excellent subsurface work further maturing the Neon development opportunity, resulting in Neon 2C Contingent Resources increasing by 50% to 90.3 million barrels. Additionally, we picked up the nearby Piracuca Resource, which allowed us to book a further $19.6 million of 2C Contingent Resource, while 2U Prospective Resource at the nearby Neon West exploration prospect increased 69% to 25 million barrels unrisked based on technical studies completed in the year.

The Neon work was centered on a stand-alone redeployed FPSO development concept. Late last year, our preferred concept option went off the market. Since then, other available FPSO options have been identified, including the strategic ownership of the Bauna FPSO, which may present a more value creative development solution.

Our focus over the next few months will be on further assessing and optimizing the Neon development concept in a disciplined project management process, including cost reductions and exploring potential synergies with Bauna and the future development of Piracuca and Goia discoveries as part of the greater Neon area development plan.

We are also well into a competitive farm-down process, which is targeting a 30% to 50% interest sell-down in Neon and the surrounding areas. This cost reduction initiative, development concept review and equity farm-down will steer our defined and feed activities and schedule.

On Slide 22, Karoon has built a substantial acreage position of over 7,300 square kilometers in recent Brazilian licensing round, all with no associated drilling commitments. We believe this area located in the South Santos Basin has a working petroleum system to support the potential post-salt tertiary play. Although it isn't tested and unproven, our work to date suggests this area and potential targets could potentially be significant if successful.

Our leading drill candidate is currently the Eta Front prospect located in S-M-1482, which is supported by seismic direct hydrocarbon indicators. Extensive work remains in the surrounding acreage to assess additional prospectivity. We have begun a farm-down process and have secured a rig option to potentially drill in 2027. This is subject to farm-down results and technical and regulatory requirements.

As we move to Slide 23, our non-operated Who Dat asset produced in line with our expectations in 2025. We saw an increase in liquids contribution as the year progressed, finishing with 74% liquids and 26% gas. Our production share on a net revenue interest NRI basis was 2.6 million BOE in 2025, with the natural reservoir decline rate mitigated to 10% relative to 2024. The E6 sidetrack well was successfully drilled and completed under budget with excellent rig performance. The well, which came online in fourth quarter '25 flowed within expectations at a rate of 1,050 BOEs per day on an NRI basis.

In early February, a minor leak was detected on 1 of the 6 production risers at Who Dat data floating production system. The riser was immediately shut in and has since undergone inspection and seawater flushing to remove the hydrocarbons. The operator LLOG is currently working to reroute production if feasible and proceed with repairs and reinstatement of the riser. As a result, Who Dat first half production is estimated to be lower than planned. However, the 2026 Who Dat production is currently expected to be within our guidance range of 2.1 million to 2.5 million BOEs on an NRI basis, albeit at the lower end based on current plans for reinstating production from the riser and other activities such as the planned A1 sidetrack, which is estimated to start operations in early Q2.

On the next slide, we have 2 potential Who Dat development opportunities in the U.S. Gulf of America. Both are short cycle and are proximal to the existing infrastructure. The joint venture is maturing the Who Dat East opportunity towards a potential final investment decision, which is subject to royalty relief and project commerciality. The preferred development concept is a single well tieback to infrastructure. We expect this could add 3,500 to 5,000 BOE per day of initial flow rate net to Karoon on an NRI basis.

The Who Dat South has been undergoing further geologic and geo studies. We believe the Who Dat area has additional potential for value-creating opportunities that leverage the existing infrastructure. Karoon participated in the recent Gulf of America bid round, and we are a parent successful bidder of block Mississippi Canyon 587 near Who Dat South. We plan to purchase additional seismic to further mature the potential prospects on that block once it is rewarded.

Our final slide showcases our focus on leveraging our competitive advantages to optimize total shareholder returns. We're doing this by maintaining safe and reliable operations of these high-quality assets and ensuring low-cost and high-margin barrels. Our strong balance sheet provides us with the flexibility to sustain business and balance capital returns with our organic value-accretive portfolio and growth opportunities. I would like to thank all of our staff and contractors for their hard work and dedication to Karoon and to thank our shareholders for their continued support of the company.

Ray, Ann and I are now happy to take any questions, first from the telephone lines and then from the online facility.

Now I will hand it back to the moderator.

[Operator Instructions] Your first question comes from Dale Koenders with Barrenjoey.

Carri, I was hoping you could provide a bit more color on the Neon optimization works. What are the cost-out opportunities that are currently being explored and considered?

Thanks, Dale. So let me step back on what has changed. We were designing to a stand-alone FPSO concept. And of course, as I mentioned, the vessel went off the market late last year about the time that I arrived. And then at that time, we're also seeing the softer oil prices. And then prior to that, we acquired the Piracuca license, and we completed, of course, this very strategic acquisition of the Bauna.

So when you put all these factors together, naturally me coming in, I'm going to ask the question of how do we continue to drive out cost in this project and get it across the finish line, which I firmly believe we can. So it was a good opportunity for us to revisit the concept with a focus on reducing cost and optimizing these plans.

So where are we at now? We have 2 parallel processes running. The first is evaluating alternate developments and a disciplined project review that considers the strategic ownership of the Bauna vessel. And I think this can enhance economics. We also have the farm-down process, which has started last year. So the review is kicking off, and it's a very disciplined review. And I think both of these will run their path and the FID timing will logically follow. And we are going to be placed in the economic -- or the economics of the projects and the process of this review process over defined schedule.

And I will say coming into this, my experience is that a schedule-driven process is not conducive to maximizing returns. And I do think that there are several different interesting concepts that we're exploring that will improve the project as you see other companies doing in lower oil prices and their projects always come out of the tail end much better.

I feel like you've preempted my second question by stating schedule-driven processes don't define the best outcome in a success case, what could be an FID date is end of '26 a more realistic outcome? Or how should we think about when the balance sheet might need to support such a project?

Again, we'll come forward with more information over the next few months, but I need to get through this review process first. And then hopefully, midyear, we'll have more to share on this.

I'll just add Dale, on your balance sheet point, we have obviously run models on existing -- on the previous projections around the project with the plus/minus, I guess, contingent costs and timing. And we're already -- as you know, we're already slowing down the project, I guess, FID date. So it probably fits the balance sheet better, and it probably also supports -- could support if we go ahead, it could support the refi of some of the financing facilities. So it may actually be a little bit better for the balance sheet.

Yes. And then just final question. You booked Piracuca for the first time, just under 20 million barrels of oil. It was previously referenced could have been 500 million barrels of oil equivalent. Just sort of any comments on what assumptions have been made on that booking and how you think about that resource?

Well, again, we're studying that. It's a new license, and we continue to study how this fits in with the broader hub potential concept. And that's one of the concepts that were under review. So we'll have more information in the coming months as this review concludes.

Your next question comes from Henry Meyer with Goldman Sachs.

Just the Who Dat on the riser leak, could you just share a bit more detail, please, on what scopes needed to repair that and if you see any opportunity to complete it earlier than the second half?

Yes. Thanks, Henry. This is in early stages, and it's a very recent development. The operators preliminary plan at this stage is reinstating production. It involves actually 2 steps. The first would be to reroute wells within the next 1 or 2 months that restores the majority of the production with final riser repairs towards the end of the year. But keep in mind, we're still in the -- the operator LLOG is still in the assessment phase, and we'll know more here in I hope the coming weeks.

But based on the preliminary information that we have, we still currently believe that we will be within guidance, albeit at the lower end, as I previously mentioned. And some of these losses are offset, of course, by the A1 sidetrack well that will be drilled as well as other activities and certainly contingencies that we already have factored into guidance.

Okay. And at Bauna, the flotel campaign has been underway for a few weeks, I think. Just any thoughts on how those initial repairs and inspections are comparing to the original expectations?

So yes, you are correct. The flotel is currently on target. We do have detailed planning in place to manage the simultaneous operations, as you heard me state that we have potentially over 700 people at peak period going into that field working on this. Nothing out of the ordinary. Of course, it's early. And as we get into inspections, we'll have to continue to assess if there's any other remediation work that comes into play. We do have the contingency that we have an additional 2-month option for the flotel if needed.

So I think we have the planning well in place. I think everything is looking as though it should based on our knowledge to date. But we still have an awful lot of work to do, including the turnaround, which is in conjunction with the transition that we're undertaking at this point. On the tail end, some of this work that we're doing is to ensure that the critical systems that we need in place to ensure production reliability and safety will be replaced and upgraded. So I'm very comfortable with the progress that's being made.

Your next question comes from Nik Burns with Jarden Australia.

I had a couple of additional questions around the riser leak at Who Dat. First, can you confirm how much production is coming through the riser that's been impacted here?

And secondly, probably a more general question. I guess, riser leak is relatively unusual. If you put your petroleum engineering hat on, Carri, you've been able to gain any confidence in the integrity works undertaken on the Who Dat infrastructure in recent times. I'm conscious there was an issue with the flash gas compressor a couple of years ago or 18 months ago, which also impacted production. And you're about -- as you mentioned, you're about to go through a large campaign to address production and integrity issues in Brazil. I'm just [indiscernible] just after your views on whether there may be a need for increased maintenance on Who Dat going forward as well?

Yes. So thank you for those questions. A couple of things. Right now, the riser production, it's somewhere in the range of 30-ish percent. And of course, reinstatement is going to be within 2 different phases where the majority of it should be reinstated hopefully in the next few months and then the rest of the year-end. So again, I want to reinforce that we're not changing our guidance and that we still believe that we're within the lower end.

In terms of putting my production engineering hat on and managing mid- and late-life assets, operators, including LLOG [indiscernible], we do have annual periodic shutdowns that we take turnarounds where we're constantly upgrading equipment, and we're constantly making sure that our critical defeat systems are in order. And this isn't going to change. Whether or not you are doing the right amount, I do believe that the operator is a very prudent operator, and we're a prudent JV, and we are doing the right amount.

But some of these things are very hard to predict. You can't necessarily see when you're going to have failures a lot of times. And in the case of the riser, it's too early to even understand, at least based on inspection, we don't have the root cause analysis in hand to even understand what actually happened. So was this mechanical or was this more deterioration related. So let's table that. But am I confident that we have integrity on that kit? Yes. Is there always work to do? Yes. And this is just the nature of offshore.

I appreciate the answer there, Carri. And my other question, just on Who Dat more broadly. Harbour Energy announced the completion of the acquisition of Who Dat operator, LLOG a couple of weeks ago. Have you had an opportunity to sit down with Harbour management to discuss their plans and intentions for Who Dat and how the change in ownership could impact or influence future development and investment strategy here? Is there any risk that they want to slow down investment in Who Dat to prioritize other assets within the LLOG portfolio? Or I guess, on the flip side, could -- is there a chance they might want to go harder on investment here?

Thank you for that question. No, we engage with the management team all the time on LLOG, and that's not changing with the acquisition with Harbour Energy. I think whether or not they slow down or speed up, those are going to be questions that Harbour will have to answer at the corporate level. That's not just something that I can dictate.

So I think it's early. Best I can tell from what I know on this year's plans, we are -- actually see from what we have in our plan a slight acceleration on the A1 sidetrack. So that gives me comfort that our plans are intact, and we're well engaged with the operator. And until there's a different opinion from Harbour, we're going to continue to march forward with what we have in our plans.

[Operator Instructions] Your next question comes from Gordon Ramsay with RBC Capital Markets.

Just had a question on Who Dat East, Carri. You said FID is subject to royalty -- a royalty relief decision. Is that kind of normal practice? Or is this something that is different in terms of moving forward with the project and there's some risk on that?

Well, let me start by -- and I'm going to turn this over to Ray for a minute. But let me start with, yes, this is normal practice when you apply for royalty relief, and we are still waiting for the decision. And then once the decision comes in based on what those parameters are for the royalty relief, the JV will reconvene and then run our process through the final commerciality and have a decision at that point.

But let me turn this over to Ray.

Gordon, just I'd only add that even the Who Dat field itself has royalty relief on it. So the standard rate is commonly reduced on fields. So we're -- it's not an unusual request to make this up to request it. And then if successful, it will be something similar to the royalties we see on Who Dat as well.

Okay. And my second question, I'm very intrigued about the post-salt tertiary oil play in the South Santos Basin. And you've mentioned that a farm-out process is underway. I fully recognize that you're not committed to a well with that acreage, but I would assume that whoever you do bring in, if you do, will end up drilling a well on the block. Is that a fair assumption? And can you give us a feel for the intended timing on that possibly?

Yes. So we view this as being actually an exciting play. It is exploration and exploration is complex and sometimes it's a bit of an art form, but we're excited about the area, and we do believe that it has an active working petroleum system. So for the next phase, we do have a farm-down process, as I mentioned, that has just initiated. It's going to take quite some time for companies to come in and assess what we have because this is a very, very sizable acreage position that we have.

And in terms of drilling a well, once you have a prospect and you've derisked it, you almost have to drill a well to prove it up because it is exploration, and it is a bit of science and a bit of art. But we don't intend to drill this 100%. And we look to have a more firmer date once we finish the data room and once we finish the geologic assessment that is ongoing to prove up any kind of volumetrics or to assess the volume metrics.

Does that answer your question?

Got it. Sounds pretty exciting. And the ideal partner, again, one with strong technical skills and operating capability? Or are you looking for a financial partner? Can you just comment on that?

No. Ultimately, it's always beneficial in these cases to have a partner that can offer technical skills because every company has their view and every company has quality engineers and geoscience staff and bringing those together just comes up with a more robust project.

So ultimately, we would be looking for a partner that can contribute to the technology piece as well, especially not so much for drilling the well. It's more for if this is a discovery on what this potentially means given the scale of this area if it's play opening.

So early days, but looks pretty exciting to me.

That is all of our audio questions at the moment. I'll now hand over to Ann Diamant for any webcast questions.

Thank you. There's just one webcast question that's from Derek Becker, who's a shareholder. He asks, if the company's share price is so cheap that we do share buybacks, then why aren't current management showing confidence by also buying shares on market?

I'll go ahead and answer this. Management directors do have shareholder requirements in the company. I can refer you to the rem report, but the prior CEO was a significant shareholder. I know Ray sitting here has shares. I just joined the company, and so been in largely a period of blackout. But rest assured, the management does have significant equity stake even via the performance rights. So some of this is personal decisions of individuals. But again, management and directors do have shareholding requirements.

Thank you. No further questions from the webcast.

Thank you. That does conclude our question-and-answer session today. I'll now hand back the conference to Ms. Lockhart.

I want to thank you all for joining today's annual report with Karoon Energy and look forward to further engagements. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to the Karoon Energy Limited 2025 Half Year Results. [Operator Instructions] I would now like to hand the conference over to Mr. Julian Fowles, CEO and Managing Director. Please go ahead.

Thank you very much, Darcy, and good morning, everyone. Thank you for joining our 2025 half year results webcast. My name is Julian Fowles, CEO of Karoon. And I have with me this morning, Ray Church our CFO; and Ann Diamant, our Head of IR. Earlier this morning, we released our 2025 half year results to the market, and we're now going to talk through those. Noting the disclaimers on Slide 2, I'll move to Slide 4, which provides an overview of the first half of 2025. Karoon's main areas of focus during this period have been to ensure safe and reliable operations at our assets. To complete the bona FPSO transaction and to progress our organic growth projects at Neon and Who Dat, while maintaining strong capital discipline to allow us to continue to provide returns to shareholders. .

As a result of our efforts over the past year, our safety performance is gradually improving, and the Baúna FPSO is now operating at significantly higher levels of uptime than it did in 2024 providing an uplift to our production relative to the first half of '24. Although I would note, the partial failure in August of the electrical submersible pump at SPS 92, which I shall return to later. At Who Dat, the assets are performing in line with expectations. Underlying NPAT for the half was USD 45 million, 61% lower than the prior corresponding period, largely due to weaker global oil prices and lower sales volumes as a cargo of Baúna oil was loading at the end of June. We ended the half with net debt of USD 238 million, and our liquidity remained strong at $452 million. During the half, we acquired the Baúna FPSO. This was a strategic transaction. It is expected to lower Baúna's cost base over time and extend its economic life out to 2039, leading to a significant increase in our remaining Baúna project reserves base to 52.7 million barrels, and this was published in parallel with our half year report this morning.

We are working towards taking full operatorship of the FPSO by the end of the first half of 2026. During the half, we completed key operational activities, including the SPS-88 well intervention, a 2-month flotel supported maintenance campaign and a 3-week planned shutdown. In addition, we made the final major contingent payment of $88 million to Petrobras, although 2 further payments do remain. The first half saw us return $53 million to shareholders through dividends and the on-market buyback. Importantly, we achieved this while ending the half with leverage at just 0.6x. Looking ahead, with net debt expected to decrease through the second half of 2025, we are continuing the previously announced buyback and the Board has determined an unfranked dividend of AUD 0.024 per share. This represents a 25% payout of 1H '25 underlying impact and complements to USD 75 million on-market buyback announced earlier this year.

During the half, we advanced several organic growth opportunities in the U.S. Gulf, the Who Dat E6 sidetrack is scheduled to be drilled later this quarter and expected online in Q4. Meanwhile, Who Dat East has entered the defined phase and remains on track for a final investment decision in late '25 or early '26. In Brazil, we entered a 3-stage Phase III, including FEED for Neon and have commenced the farm down process, a potential final investment decision is targeted for the second half of 2026. The next milestone for Neon is in 1Q '26 when we will decide whether it will progress to the second of the 3 substages defined for this phase. And I'll go through these growth opportunities in a bit more detail shortly. Slide 5 summarizes our safety and environmental performance during the first half of 25%. As the graphs show, our performance has improved despite higher levels of activity at Baúna. There were 710,000 work hours recorded in the first half of '25, 47% higher than at the same time last year. as we completed an extended maintenance campaign with up to 200 additional workers accommodated on the flotel beside the FPSO. There were no LTIs in our single restricted work case.

Having said that, we reported 4 high-potential incidents and we are focused on ensuring the safety of our staff and contractors as we transition to full operatorship of the FPSO. We recently completed the 100-day safety improvement plan on the FPSO to reinforce our safety culture. On the environmental side, no spills were reported in the first half and our Scopes 1 and 2 emissions intensity continues to fall, reflecting higher production spread over a largely fixed operational base. I'll come back to operational performance and the status of the growth opportunities shortly, but now I'll hand over to Ray to address our financial results.

Thanks, Julian. Good morning, everyone. I'll go to Slide 7 and cover a few highlights of the 2025 first half results. And after that, I'll step through earnings, cash flow and balance sheet before finishing with our revised 2025 guidance. Production in the first half of 2025 was about 200,000 barrels of oil equivalent higher than first half of 2024, which is due to a stronger performance at the Baúna project. However, as our Baúna lifting was in progress at 30 June, sales volumes did not include that cargo and accompanied by lower oil prices. We saw reduced revenue of $308 million down from $409 million in the first half of 2024. This flowed through to lower earnings with EBITDAX down proportionately or $66.2 million on first half 2024.

This EBITDAX result reflects a combination of Karoon's operating leverage to oil price and improved FPSO efficiency in this period. We saw EBITDAX margin at Who Dat hold steady while Baúna project margin improved despite a decline in sales volumes. Moving to the balance sheet at bottom of the slide, this half called on our combined strong EBITDAX margin and balance sheet for the strategic acquisition of the Baúna FPSO. After also funding the Baúna project flotel costs, SPS-88 well intervention and other CapEx, contingent consideration as well as taxes and debt service, the business then funded capital returns and continued buyback to close the half with net debt of $237.9 million. Moving to Slide 8 and underlying earnings. We offloaded 7 Baúna project cargoes in first half 2025 compared with 8 cargoes in first half 2024. So that $53 million of revenue reduction related to volume and $48 million related to lower average realized price. The Baúna cargo loading at 30 June deferred $34 million of revenue into the second half of '25 and is reflected in inventory movements.

Transportation costs fell slightly to $10.2 million, in line with sales volumes and production costs increased by $3 million to $71.8 million. While FPSO lease charges ceased on 30 April 2025 when we acquired the FPSO, savings were temporarily offset by transitional ops and maintenance service costs with Altera & Ocyan for their continuing support until Karoon assumes full operatorship in mid-2026. The remaining increase in production costs was driven by $1 million of higher O&M service costs through April as FPSO efficiency incentives applied and $2 million increase in logistics spend as contracts set in 2020 roll off and current rates take effect. Royalties and other government taker down against first half 2024 due to lower commodity prices. I'd note that royalties also apply to produced volumes at Baúna project rather than sold volumes.

Corporate and other costs were stable at around $20 million. Meanwhile, exploration costs rose to $4.7 million as Karoon advanced studies our new deepwater blocks in Brazil. Depreciation increased in line with higher production and higher net debt translated to higher finance costs. Underlying income tax expense in first half 2025 was lower than in first half 2024, reflecting lower underlying pretax profit.

However, I'd like to point out that while the report underlying tax expenditure rate increased from 29% to 42%, this is due to the weakening USD against the BRL across the period and accounting rules require recognition of this foreign exchange impact within income tax expense. Karoon minimizes this tax -- this cash tax impact by converting USD funds to BRL each month for our estimated year-end tax obligation, which is then paid at close of the year in BRL. This minimizes the realized effects exposure despite the variability in this reported expense and the normalized cash tax rate is approximately 32%.

The overall result was an underlying NPAT of $45 million and a reconciliation between underlying and statutory and EBITDA is on Slide 24. I'd like to mention that the noncash accounting adjustments related to closure of the capitalized FPSO lease and a reduction in fair value of contingent consideration based on current oil price have also been reported and removed from underlying results on Slide 24. Slide 9 provides a reconciliation from statutory unit operating costs to pre-AASB 16 unit OpEx which are mentioned in the rest of this material. Unit cost of $13.10 per boe is a blend of $14.95 at Baúna project and $8.84 at Who Dat and increased in total by $1 per boe from first half 2024. This is due to the $3 million increase in production costs on reduced sales volumes.

Slide 10 covers funds generated and applied and movements in our net debt and leverage position. Operating cash flow was $62 million, which is after $21 million for the flotel cost. We also funded various CapEx and contingent payments that I mentioned on Slide 7. As a reminder, these contingent payments to Petrobras will fall sharply in '26 and '27 with the last of the larger payments already made in January 2025. In addition, we returned $53 million to shareholders via dividends and buyback. While net debt has increased in the period, leverage remains well below our maximum leverage range of 1 to 1.5x underlying EBITDAX. And looking ahead with lower capital demand, we expect net debt to fall in the second half of 2025. That does well to fund upcoming FID decisions over the next 12 to 18 months. while also continuing to return capital to shareholders under our policy, all strictly according to our capital allocation framework on Slide 11.

Our capital allocation framework remains unchanged since last presentation. So moving on to guidance on Slide 12. We have upgraded our production outlook for Baúna reflecting strong first half performance and also recognizing the electrical fault at the SPS-92 well. Meanwhile, Who Dat production range has been narrowed as the asset continues to perform in line with expectations.

With much of our cost base fixed, the revised higher production translates to lower unit production cost, and we have reduced that cost by 10% at the midpoint of guidance, which is now $12 to $15 per boe. All other guidance items remain unchanged as we anticipate rig intervention for SPS-92 to be completed in 2026. I'd like to finally note that there are several costs that will be incurred in 2025, but excluded from underlying earnings and therefore, not reflected in guidance. This includes FPSO transition costs of up to $5 million to $7 million, which Julian will speak in more detail a little later and $3 million to $5 million in corporate relocation costs.

Thank you, everyone. I'll now hand back to Julian to talk about operations.

Yes. Thank you, Ray. Turning to Slide 14, talking about operating performance of Baúna. The benefits from the work completed on the Baúna project in the last 12 months to address the FPSO maintenance backlog and the SPS-88 well intervention have started to come through. The owner production in the first half of '25 was 3.9 million barrels of oil ahead of expectations as SPS-88 resumed production earlier than expected, and FPSO efficiency for the first half was 94.5% against a forecast of 88% to 92%. This uptime is particularly encouraging as it lies towards the upper end of our medium-term target of 90% to 95%.

Baúna project production has remained strong during July and much of August, and we have increased our 2025 production guidance for Baúna to 7.3 million to 7.8 million barrels of oil. However, as announced on Monday, we have seen a partial failure of the ESP at SPS-92, one of the project's key producers. And as a result, current rates of production from this well are reduced to around 2,500 to 3,000 barrels of oil per day. We believe we should be able to potentially double this rate as the flow rates are expected to stabilize over the next few weeks, and we optimize the pump itself.

In order to return the well to full production, however, we shall require a heavy workover using the drilling rig. We have a replacement ESP in stock and are in the process of investigating rig options in the market. The regulatory approval period is expected to take a minimum of 6 months, and we do not expect to return SPS-92 to full production until the second quarter of 2026 at the earliest. And just to clarify, that full production rate is expected to be around 8,500 barrels per day. Since purchasing the FPSO on the 30th of April, we've been going through the process of planning and integrating the operations into Karoon's business. After a successful outcome from the 25 flotel campaign, we are now planning a second flotel supported maintenance campaign of up to 4 months in the first half of 2026 alongside the planned 2026 2 to 3-week annual maintenance shutdown.

Now moving to Slide 15. I'll provide an update on the progress of Karoon taking ownership of the FPSO. Since completing the acquisition in April, we have reviewed several FPSO operating models. After careful consideration, we concluded the optimal approach is for Karoon to directly control and operate the vessel with support from service providers for routine operations, maintenance and for major works as required. This model will take a little longer to implement than our prior assumptions, and we are working towards taking full operatorship by the end of the first half of 26. To ensure continuity of operations, we have signed a transition services agreement with Altera & Ocyan, which will support a safe and efficient handover during this period. While the time line has been extended, the economics of the acquisition remain compelling.

Now turning to Slide 16, I'll step through those changes to the economics for the acquisition. Most of the assumptions remain unchanged. We remain confident on achieving annual savings of $30 million to $40 million once we assume operatorship and embed a number of cost efficiency initiatives. However, with the transition taking longer, we do expect USD 5 million to USD 7 million in additional transition expenses through the balance of 2025. Looking further out, we now expect to invest $55 million to $60 million of CapEx in 2026 and then a further $80 million to $90 million in the early 2030s to extend the life of the FPSO out until the end of the license in the late 2030s. We can confirm our expected returns from the acquisition remain well above our mid-teens post-tax hurdle rate.

Now moving to Slide 17. One of the drivers in the value of the FPSO acquisition was converting owner contingent resources into reserves. And this slide provides a breakdown of Karoon's success in replacing reserves since acquiring the asset in November 2020. Baúna reservoirs have continued to outperform expectations. And following a comprehensive review, we have confirmed that based on the new cost structure and implementation of life extension plans, there is an additional 17.6 million barrels of 2P reserves at the Baúna project. This is a 45% increase on our 31 December 2024 figure and results in 2P reserves at 30th of June 2025 of 52.7 million barrels after accounting for production. The results are well ahead of our business case at the time of the FPSO acquisition.

To summarize, the acquisition of the FPSO is enabling a structural change in our operating cost structure, leading to a longer economic production life for the project, deferral of decommissioning costs and booking of significantly more reserves.

Now turning now turning our attention to Neon on Slide 18 and starting with the Neon resource upgrade. The team reevaluated the Neon resource, leading to a 54% increase in 2C contingent resources to 86.5 million barrels of oil which has increased our confidence that Neon is an attractive, robust and value-accretive growth project. In April, we moved the project into the defined phase. Slide 19 outlines the current expected time line for the defined phase of Neon. This phase has been split into 3 substages to limit capital exposure and allow the team the opportunity to reconfirm the economic merits of the project in the light of current oil price volatility at each substage gate. The first stage of the farm-down process involving the engagement with potentially interested third parties and targeting the sale of a 30% to 50% interest in Neon and surrounding licenses has commenced.

The next milestone for Neon is expected to take place in Q1 '26 when we will decide whether the development progress to the second sub stage of the defined phase. This stage gate is some 3 months later than previously planned as we continue to refine the field development plan and the detailed basis of design. And as we progress the contracting and procurement strategy, and also, of course, as we seek -- The second stage will also involve environmental and seabed surveys as well as issuing tenders to refine the cost estimates for the development. A farm-down and continued positive results from the staged decision-making process are prerequisites to achieving a potential Neon final investment decision in the second half of 2026.

Now turning to the U.S. on Slide 20. Who Dat performed in line with our expectations delivering 5.6 million barrels gross of oil equivalent in the first half. This is 1.4 million barrels of oil equivalent net revenue interest to Karoon. Production benefited from improved facility uptime towards the end of the period following routine maintenance and oil treater replacement. Who Dat is tracking to plan with full 2025 production guidance narrowed to 2.4 million to 2.7 million barrels of oil equivalent. We expect second half volumes to be somewhat lower than the first half due to natural decline and anticipated potential hurricane-related downtime during August to October. Who Dat is a midlife asset and to help mitigate natural decline, the joint venture has identified several attractive in-field targets.

Drilling of the first of these, the E6 sidetrack is expected to commence in late third quarter '25 and is expected to add an initial 3,000 to 5,000 barrels per day gross of liquids from mid fourth quarter '25 prior to natural decline. There is a second sidetrack opportunity that is being progressed with the activity now expected to take place in Q1 2026. The operational log has also completed debottlenecking studies during the first half. The study has identified opportunities to improve reliability and confirm the minimal work on the FPSO would be required to develop our next project there, which is Who Dat East.

Moving to Slide 21. The joint venture continues to progress the development planning for Who Dat East and for the Who Dat South discovery. Who Dat East is currently the more advanced of these 2. Following detailed technical and economic assessment, the preferred development concept for Who Dat East is a tieback via the A Manifold to the Who Dat FPSO. Alternative options were rolled out due to higher cost, flow assurance challenges and less favorable likely commercial outcomes. Work is now focused on finalizing engineering on flow assurance, subsea routing and topsides design with FID targeted for late 2025 or early 2026. For Who Dat South, efforts are underway to reduce subsurface uncertainty and refine our resource estimates. The team is assessing whether a potential development of Who Dat South could include completing the existing well as a producer or drilling a sidetrack supported by ongoing seismic reprocessing and dynamic reservoir modeling.

Now lastly, moving to the summary on Slide 22. We have a very clear set of deliverables for 2025 and beyond, and the team has made good progress in moving each of these forward. Our top priority is to maintain safe, reliable and low-cost operations marked by capital discipline while maturing our value-accretive organic growth opportunities at Neon and at Who Dat. Our robust cash flow, even with some tempering of production expectations due to the electrical fault at SPS-92 in combination with our liquidity and low leverage allows us the opportunity to continue returning capital to shareholders while also progressing our attractive organic growth pipeline.

Lastly, as we have indicated at the 2025 AGM, Karoon is in the process of relocating several corporate head office roles from Melbourne to Houston and to Rio de Janeiro. The transition is aimed at simplifying our structure, increasing efficiency and facilitating collaboration and will take place in a very controlled and orderly fashion over the next 12 months. I would like to thank all of our staff and contractors for their hard work and dedication to Karoon and to also thank our shareholders for their continued support of the company. Ray, Ann and I would now be very happy to take any questions. First, from the telephone lines. And then if there are any calls into the online facility.

I'll now hand back to our moderator, Darcy.

[Operator Instructions] Your first question today from the phone comes from Dale Koenders from Barrenjoey.

Julian. Julian, I was just hoping you could share a little bit of color on how you're thinking about Bauna production outlook now. The reserve upgrades are a fantastic result. But given like limited life, this doesn't produce for forever. So it almost looks like you're assuming like a recovery back to the mid-20s post workover in '26 and then a much shallower decline than the circa 15% discussed previously?

Yes. Thanks, Dale, and thanks for joining the call. But what we're seeing at Baúna in terms of decline rates is now something a lot more similar to what we experienced shortly after we took over Baúna operations from Petrobras in 2020 and 2021. At that point, before we undertook the interventions and the Patola project, we observed a decline rate which was originally around 13% to 15% per annum, but then that decreased to a sort of 10%-ish type range. And that's more of what we're seeing now with our production having stabilized significantly following the '22 campaign when obviously, we saw flush production, not only from that intervention work but also from the Patola field.

We now think that, that has stabilized in terms of the pressure front moving through the aquifer and that we're seeing longer-term decline rates that are around about that 10% mark. That's what leads us to obviously book about 4 million barrels of the reserves increase that we're seeing. But then also a substantial part of the reserve increase is coming from our reduced operating cost and extended economic life at the FPSO itself. And that takes us now out to the end of the current production license in the late 2030s, giving us that significant increase in reserves.

Okay. And then the second question would be for Ray. How are we thinking now around D&A for going forward given reserve step-up and higher abandonment forecasts as they are extended into life.

Sure. Thanks, Dale. So when you look at abandonment, overall provision for abandonment, the total cost has gone up a little. But because it's moved out in time, the, I guess, the trajectory is shallower. And that will be similar in D&A. So as we unit -- unit D&A rates that will take account of that, I guess, prolonged reserve life. So it will be a shallower run on D&A, but it will still be on a unit of production basis. So I think you can still take the reserves to be produced and then traject the production at those decline rates that Julian spoke about into the future. .

That meaningful step-down in D&A should be seen in the second half of this calendar year.

Yes. It won't -- I don't think it is already -- we've put it into guidance. It's not a large rate decline, partly because we have to factor in the workovers that are required to extend the life of that field. So we have to forecast the ESP replacements to more of those through the end of the life if that makes sense. So it's not purely on what's been spent to date. So it does have a decline, but it's not material in the next half.

Your next question comes from Henry Meyer from Goldman Sachs.

Congratulations, Julian, on your time leading Karoon. If you could just follow up on the reserves upgrade and production outlook, would you expect any step changes beyond that 10% decline as well? Just considering we would have a number of wells with different artificial lift systems that would eventually decline and fail under different mechanisms?

Yes. It's a great question, Henry, around the long-term plans for -- obviously, we'll continue to monitor the field in great detail and continue to monitor where the decline rates go. Typically, on fields of this type, which have what we call a piston type displacement mechanism, we do see high rates of recovery long term. And that's certainly what we are seeing already at Baúna and what we anticipate we'll continue to see. You're right in that some of the planning will involve looking at future ESP replacements and of course, grow very carefully the performance of the gas lift wells. .

We currently project that we will need to replace ESPs about every 3 to 4 years. SPS-92 obviously, is a little bit disappointing in seeing that partial failure a little earlier than we would have liked. But 3 to 4 years is about the average time frame that we see across the industry for these types of pumps. So yes, I do anticipate that we'll see a couple more campaigns through the life of the field. And those will be assessed at the time for the economic merits of obviously, mobilization and intervention activities. So yes, doubtless, there will be future campaigns. And that is already factored into our view of future reserve bookings at Baúna.

Great. Okay. And a bit for the North, Neon is making good progress with the potential tieback of Therapure and I'm probably pronouncing that wrong. Just any details you could share on how that development concept is shaping up and perhaps a ballpark range on CapEx for what you're seeing so far?

So the overall range of CapEx that we see for Neon still sits in that $0.9 billion to $1.2 billion. We are going through a phase now obviously, of starting to engage more heavily with contractors ahead of a decision around the end of this year or in the first quarter of next year to go into the next substage when we'll be doing that engagement in force. But that CapEx range at the moment seems to be about where we think we'll end up, and we haven't seen any indications yet to alter that. .

In terms of -- yes, that obviously is new for Karoon. It has a resource that has been identified there already through an earlier Petrobras drilling campaign. We anticipate that towards the end of this year, we will have worked that resource into a potential future tie-in to the potential Neon development and that we should be in a position to book some contingent resource at that discovery at that point. So that will be end of the year going into our early '26 normal annual contingent resource and reserves bookings. At this stage, it's too early to say what we believe those numbers are likely to be. But obviously, we acquired the licenses because we feel that there is good upside potential there for a Neon development.

Your next question comes from Nik Burns from Jarden Australia.

Look, first question for me. Just on the ESP repair at SPS-92. Can we just talk a bit about the scope? My understanding is, I think you have 2 ESPs on operation at the moment and 1 at PRA-2 as well, you take the opportunity to repair or replace PRA-2 at the same time?

Nik, that's a great question. It's a $64 million question, to be honest. We will assess that and continue to assess PRA-2 over the coming 6-plus months as we prepare for the SPS-92 replacement. We do have ESPs in stock available. So we don't have any issues around the lead time to replace the second pump should we need to do that. But we'll look very carefully at that pump. And also at our drilling program as we go through the next few months.

Obviously, it would be ideal to be able to have more than just a pump replacement. And so we'll be taking other opportunities for things we can do with the drilling rig in that time frame. At the moment, the team is very focused on ensuring we have the best plan for the SPS-92 replacement. But I believe it's very likely we will also look very, very carefully at perhaps preemptively replacing the PRA-2 pump with a rig mobilizing in the field. And by that stage, that pump being about 4 years in place and operating. It might be a wise choice to make.

Having said that, there is an old saying, I'm sure you'll be aware of, if it ain't broke, don't fix it. So the team will need to weigh that up against the risks at the time decision, but that will be one of the key things we analyze over the coming months.

And do you have an approximate cost to repair SPS-92 and how much additional cost it would you would incur if you did after PRA-2 at the same time?

So we're in the market at the moment, looking at potential drilling units, looking at things like mobilization, day rates, whether we can use a DP type rig, so a dynamically positioned rig or whether we need a mod rig that would also require anchor handling tugs as well. And all of those will feed into our final cost estimates for the intervention work. Doing a second intervention, obviously, we'll incur additional day rates, but it should -- it won't really incur any significant additional mobilization or demobilization costs. So there will be some relative cost savings for doing a second intervention should we choose to do that.

At this stage, we're still at a very early point in analyzing what the numbers are likely to look like, Nik. As soon as we have that type of number available, we'll be able to communicate it to the market. But it's a little early at the moment.

I would say that we have replaced these pumps. Karoon's experience in replacing these pumps in the past. When we bought the field, we knew that was one of the first things we wanted to do. So we replaced pumps in PRA-2 and in SPS-92. So we do know the downholing whereas when we did this 3 or 4 years ago, we were unsure of what those downhole conditions were like. So we should have a much clearer idea of the operational time frame that would be required to replace the pumps. But these are not simple operations. We need a big heavy workover unit that can lift the wellhead. So we take the wellhead off before we reenter the hole.

And the pumps themselves are part of a string, which is about 70 meters long. So they're not the sort of thing you put on your pool pump. These are big, big pieces of kit and require extensive planning and flawless execution. Pleasingly, the previous times that we did these pump replacements, the execution was excellent. So I am confident that we can do that in a similar way this time around.

Your next question comes from Rob Koh from Morgan Stanley.

Congratulations on the announcements and on a personal note, all the best to you, Dr. Fowles, going forward. Just a question for me. I guess, we'll be looking to extend our DCF for Baúna. And I know it's a little tricky to give us forecast out to 2039. But can you give us, firstly, some color on if there's any ability to extend the concession. Any process there?

And then secondly, perhaps a question for Mr. Church on the abandonment estimate change, if you can give us some color on the -- like bridging the change in the cost there, I guess, adding the FPSO in there is the big activity and scope change, but any additional color would be helpful.

Yes, Robert, and thanks for that question. I think when we look at the long term or longer-term production for Baúna. Obviously, we will need to assess as we get to the end of concession life, the economics and the operational -- continued operational viability of the FPSO and of the Baúna field overall. There are certainly examples, offshore Brazil of concessions being extended. And although it's a long way away, I would be optimistic and very hopeful that we would be able to be persuasive with the regulator and with the Brazilian government that continued production through Baúna would make sense, would make strong economic sense for the government in terms of tax revenues, royalty revenues, continued employment, et cetera. And I would think that, that should be quite a strong case to make.

Obviously, it's a long way in the future, and there will be maybe not even my successor, but my successor's successor perhaps who will be the one who addresses that. So -- yes, but there's plenty of examples in Brazil, and I'd be very, very hopeful that we could be persuasive with the government around that.

I'll hand it over to Ray to address the abandonment cost questions.

Yes. So we've -- so we've taken the -- I guess, the NPV on -- the NPV on the Baúna and Patola abandonment has gone up to around $194 million from mid-140s. So we've gone up about $50 million on an NPV basis. That's discounted at the Fed 10-year rate. So that also means that it's -- the abandonment is -- I think it's around $240 million, which includes the FPSO. That's now, of course, moved out to 2039, where it used to be at 2032. So if you take that, effectively, NPV of $50 million and then unwind that over the, I guess, an extended period of another 7 years.

Does that help, Rob?

Your next question from Gordon Ramsay from RBC Capital Markets.

Julian, just on your reserve increase at Bauna at the 2P level. Just trying to get a feel if there's any risk there. You've mentioned a substantial amount of it has come from reduced operating costs. If I'm looking at the 17.6 million barrels, that looks like around 75% of the increase. You mentioned 4 million barrels looking at decline. I'm assuming that's decline curve analysis. Have you made any change to the recovery factor in the field?

Yes, morning, Gordon. The recovery factor, of course, on a reserves basis improves as you recover -- as you move contingent into reserves. And we -- what we see with the field as I mentioned previously, is that we have a piston type of displacement mechanism where the mobility -- the relative mobility of the water in the aquifer and the relative mobility of the oil are very, very similar, which means that we -- our wells tend to get to a relatively steady water cuts that then doesn't appear to increase at a significant rate over time. We see that at SPS-92 and in a number of the other wells. And I believe that, that reflects that displacement mechanism in the reservoir. So yes, we do see improving recovery factors for the field.

Having said that, you can solve the sort of recoveries that we're seeing, you can solve that in more than 1 way, not just by effectively having higher recovery factors or a lower level of residual saturation of oil, but you can also do it by recovering more oil than we perhaps see at the moment. And that could be sub-seismic scale, areas, pockets, pools of oil that we are -- that we're connected to that we don't necessarily identify on the existing subsurface data set. So there is more than 1 way to solve for those uncertainties. But certainly, over time, we anticipate that we'll see higher recovery factors than we have previously anticipated for each of the fields.

So remember those 3 fields, Baúna, Piracaba and Patola. We'll see higher recovery factors in those over time.

Sorry, Julian. So my comment that 75% of the increase is from lower operating costs, is that right?

Yes. A substantial part is because we have purchased the FPSO, we are now able to drive lower costs through the operating mechanism, and that allows us then to look at longer life for the field. However, that is -- I have to say that is also in combination with higher longer-term production rates, which also contribute to the economics. So it's not just the -- it's a lower decline rate, giving us a longer, higher production rates, combined with a lower operating cost and those combined just pushes over the threshold to the economic thresholds to allow us then to extend the life out to the end of the production license.

Okay. Just 1 more for me. You mentioned earlier that there are several areas of FPSO reliability and vulnerability that remain. Can you just run through what those key areas are.

Yes. So there's a few areas I would point to. First of all, we still have a substantial amount of maintenance to do on pipe work on the FPSO. Pipe work, which obviously holds back hydrocarbons, holds them inside the pipes. We've replaced a number of pipe sections and spool sections on the FPSO, many, many kilometers in fact, over the last couple of years.

But we also have a number of areas with temporary repairs. And part of what we're doing during the flotel campaign next year is to make those temporary repairs permanent. So there are vulnerabilities around that. Temporary repairs are obviously not as robust as permanent repairs. Secondly, I would point to the gas compression capability on the FPSO. We have a number of gas compressors, and those are large pieces of rotating equipment. And as with any rotating equipment as you get later in field life, that becomes more vulnerable to break down. We have seen that. Over the last 6 months, we've seen that 1 of the key areas of vulnerability is gas compression on the FPSO.

We have in place a significant amount of work ongoing right now which is upgrading and maintaining 2 of those key compressors. And the compressors are really important for our production because they allow gas lift to be maintained at a number of our wells. And if one of our gas compressors falls over, we can still maintain production. But if a second one falls over, we then are prone to more gas flaring and there are very stringent gas flaring limits in Brazil, which obviously we adhere to.

So although we can continue producing with 2 compressors out, we would reduce our production rates somewhat to stay within gas flaring limits. And we've seen that a number of times through this year with one gas compressor out, we can continue to operate at full rates. So there's vulnerability there, as I said, in a couple of areas that are being addressed and for which we have plans to address over the coming months.

Thank you. There are no further phone questions. I'll now hand back over for any webcast questions to be addressed.

Thank you, Darcy. There are a couple of questions on the web, some of which I think we've already answered. So I'll just ask those, which are outstanding. The first one is from Anthony Korea. He says, Who Dat now seems to be delivering on growth with these 6 wells expected to flow at 3,000 to 5,000 barrels a day. What is the expected flow rates at Who Dat East? And what else can we expect from Who Dat's natural gas deep reserves?

Yes, Anthony, thanks for that question. And yes, it's a great -- a couple of really good points there. Who Dat East is obviously not yet -- hasn't yet reached a final investment decision. We expect that to take place towards the end of this year or early in 2026. And at this stage, we don't have yet firm numbers that work towards what that FID will look like in terms of CapEx or in terms of likely production rates.

However, I would anticipate that it will be many thousands of boes a day. Remember, it's a gas condensate reservoir at Who Dat East. It has about 50-50 gas versus -- or boes of gas versus barrels of liquid. And it is a highly attractive development for us. But we're still going through the process with the operator and our joint venture partners of delineating exactly what that field can deliver, and we'll be in a much better position towards the end of this year to highlight that. Your second question -- or second point was -- remind me.

About the natural deep reserves.

Underneath Who Dat East, we have identified a large gas prospect, which we saw at the time that we farmed into the acreage. That is quite a bit deeper than any penetrations in that area to date, and it does cover quite a large area that -- there is a seismic anomaly in that area. These signs we can only don't always indicate the presence of hydrocarbons, but they can. And there's quite a bit more further work to do in that area in order to derisk that prospect for -- to make it viable for drilling. It's not at the moment, sufficiently mature to be put on a drilling sequence. .

However, looking at where gas prices are going and where they're likely to go over the next few years in the U.S. Gulf. We do feel that should that be derisked sufficiently. It would be a very attractive area for us to -- well, or to drill a new well into. But that work is still ongoing, Anthony, and you've got quite an area of focus for the future.

Anthony also has a question about the Piracaba blocks. Are they included in the farm in process at Neon -- farm down process?

So the Piracaba, there's 2 blocks at Piracaba, shallow water to the north of Neon. We touched on these earlier on. They do have some resources already delineated by 5 or 6 wells that were drilled by Petrobras many years ago, not sufficient volume there for Petrobras to be able to develop that as a stand-alone development. But obviously, with Neon potentially approaching an FID in 2026. These could be attractive tiebacks. The licenses, although we won the licenses in the bid round in June, they have not yet been formally awarded. So we have to go through a formal award process.

At that point, those licenses can then be formally attributed to Karoon and to Karoon's resource base. However, we have advised participants who are currently having a look at the Neon area with a view to farming in, we have advised those participants that we expect to put to the Piracaba area into the farm down process and would expect to farm any to participate in that as well. That's likely to be, as I said, towards the end of this year and will obviously come ahead of any potential resource bookings that Karoon will make in that area.

Thank you, Julian. The next question is from Hazmy Hazin from Foster Stockbroking. SPS-88 was only recently restarted after downtime, and now SPS-92 is also experiencing problems. Should we expect these well issues to become a recurring theme or are there measures in place to prevent further occurrences?

Yes. Look, it's a good question. When you're dealing with midlife operating assets, where you have secondary recovery mechanisms in place down hole, you're very much reliant on that equipment itself. So SPS-88 has gas lift installed and the gas lift valve encountered issues, I guess about quite 2 years ago, but 18 months ago or so, and that's why we had to go in and replace the gas lift valve and mandrel in SPS. That is a failure mechanism that we and the industry have seen elsewhere around the world. And it's certainly a possibility that we could encounter a gas lift valve or a mandrel issue at some point in the future.

Having said that, we replaced the SPS-88 valve with the most recent technical components, which have shown themselves to be much more reliable than the components installed some 10 or 15 years ago into that well. In terms of pumps and pump replacement, we anticipate that we will have to have multiple campaigns of pump replacement. We have always flagged that since the acquisition of Baúna back in 2020. So these things don't last forever. They are down hole. So there are complex pieces of equipment to replace that cost capital. And part of our reserves booking this morning has taken into account future pump replacement economics, but that still allows us, we believe, to extend the life of production at Baúna out to the end of the license period.

Julian, can I just add that I think SPS-92 is within a week or 2 of its since -- of 3 years of its installation, which is not unreasonably out of its life.

Yes. Look, as I said in my presentation, we anticipate 3 to 4 years to be the average lifetime of these types of pumps. There's actually an industry range, which is something less than 2 years, up to about 10 years at the very, very maximum end of the range. So yes, 3 to 4 years is about what we anticipate and looking forward. that's likely if we replace these pumps in 2026, that likely means that sometime 2029, 2030, we would undergo a further period of pump replacement. .

Having said that, each of these wells with pumps in them, so PRA-2 and SPS-92 can be operated with gas lift, just not at such high production rates. And so that is something towards the end of field life that will likely be the type of production mechanism that we use in these wells if we're no longer economically justified in going in with a heavy workover to replace pumps.

Thanks, Julian. The last question is also from Hazmy and he asks what is your outlook for the oil price in the second half of 2025.

Oil prices have been very volatile through 2025. We sort of seem to have stabilized around that $65 mark, maybe somewhere between $60 and $70 a barrel is a sort of worthy guess of where that may end up. But there's currently lots and lots of competing factors in the market around demand, but also around supply. It's interesting to observe the Permian in the U.S., the operators there have been, I think, very conservative in their approach to looking at how they increase or do not increase oil production from those fields. So it's a really interesting time in the oil markets.

We at Karoon look at the futures curve in terms of looking at how we manage future investment plans. As we look at the futures curve over the next 18 months or so and then beyond that, we look at our estimates and where those averages lie. And we tend to sit around the middle of the range on those. So we're not particularly bullish or particularly bearish either way on our future projections of oil price.

Personally, I feel oil prices will continue to be quite volatile over the next 2 to 3 years. But beyond that, that we're likely to see quite a strongly constructive period for oil prices as demand continues to be strong and as supply becomes a little more challenged towards the end of this decade. Remember that over the last 5 years, we have seen quite significantly reduced capital expenditure on field developments, and that has to have a long-term impact on supply.

Thank you. There are no further questions. .

Thank you very much. And with no further questions, I'd like to call it close to the proceedings. Thank you very much once again to everyone who has participated in the call and for all questions. And thank you very much once again to our shareholders and to our staff for their phenomenal contribution over the last 12 months in getting Baúna back on track and setting Karoon up for what promises to be a very interesting and beneficial future. Thank you very much to all.

That does conclude our conference for today. Thank you for participating. You may now disconnect.