Karoon Energy's (ASX:KAR) second-quarter results were financially stronger than expected after it captured two Brazil Baúna oil shipments, setting the company up for stronger production in the second half of the year, RBC Capital Markets said in a Thursday note.

As two Baúna oil production wells are now fully restored and a capital-intensive maintenance cycle is complete, the equity research firm expects a sharp production uplift in the second half to drive a step-change in generating free cash flow.

A $10 per barrel rise in the price of Brent oil leads to a 30% increase in RBC's 2027 earnings per share forecast for Karoon, which "offers the most compelling oil price leverage" in the research firm's coverage, it said.

However, RBC does not expect to see a production recovery at Who Dat oil and gas operations in the Gulf of Mexico until the fourth quarter of 2027 as riser issues remain an overhang. One riser requires a replacement, but RBC expects the operator to replace both risers next year as a precautionary measure.

The investment firm upgraded its rating on Karoon Energy to outperform from sector perform with a price target of AU$2.

The company's shares were 10% higher in recent Friday trade.