Santos (ASX:STO) management used its results presentation and Q&A to emphasize what it described as a resilient “base business,” improving cost performance and major projects moving through commissioning and toward start-up, even as lower commodity prices weighed on profit compared to the prior year.
Safety and operating performance
Chief executive Kevin Gallagher said safety performance in 2025 was “outstanding,” describing top-quartile personal safety results versus the sector and the company’s best lost time injury rate and total recordable injury rate on record. He also cited improved process safety, measured by the loss of containment incident rate.
Financial results, costs, and shareholder returns
Gallagher said Santos delivered a strong result “despite lower commodity prices,” reporting free cash flow from operations of $1.8 billion to $2.4 billion and underlying profit after tax of almost $900 million. He said total production for the year was 87.7 million barrels of oil equivalent, up from 2024, and that unit production cost was the lowest in a decade at $6.78 per barrel.
Chief financial officer Lachy Harris said Santos’ 2025 free cash flow breakeven was $43 per barrel and all-in free cash flow breakeven was $58. He said the company is targeting an all-in free cash flow breakeven of $45 to $50 per barrel going forward, while continuing to invest in “high-quality production volumes, reserves and resources.”
On capital returns, management highlighted dividends, including a final dividend of $0.103 per share. Gallagher said the total amount returned to shareholders for the year was $0.237 per share, which he described as 43% (and noted the final dividend equated to 48% of free cash flow from operations in the second half). Harris said total 2025 dividends were $770 million.
Balance sheet, gearing, and funding
Harris said gearing finished the year at 26.9% including leases, which he described as positive as Santos reaches the end of a peak capital investment period with Barossa in production and Pikka Phase 1 nearing start-up. He reiterated a commitment to an investment-grade balance sheet, noting continued credit ratings from Fitch, Moody’s and S&P.
He also said Santos accelerated repayment of PNG LNG project debt in 2025, calling out benefits including lower interest costs and removal of restricted cash requirements. Harris said the company had approximately $4.3 billion of liquidity across cash and undrawn facilities, and described a long-dated debt maturity profile. He added that Santos uses hedging for commodity and FX exposure, with hedging undertaken at Australian dollar rates “well below the long-term” average, which he said provides balance sheet protection.
Major projects: Barossa, Moomba CCS, and Pikka
Gallagher said Santos delivered Barossa “within around 6 months” of the original planned start date and without drawing on additional budget contingency, calling it evidence of project discipline. He said Barossa was producing at “just under half rates” while the company worked through a sequence of compressor dry gas seal change-outs, with full production rates expected “in the next few weeks.” In Q&A, Gallagher said Santos had already shipped a couple of cargoes, with another expected in coming weeks, though at a slower rate until the compressor work is completed.
He also described specific commissioning issues encountered at Barossa, including a software-related heat sensor issue that required resetting settings on 300 sensors and utility water system connection failures that required a broader program of work. He said the company decided to run at half rates while replacing compressor seals to reduce risk.
On carbon and emissions, Gallagher said Santos received more than 900,000 ACCUs for Moomba CCS Phase One. Addressing a question about Barossa emissions during commissioning, he said some flaring occurs during commissioning but that once in full production emissions would be in line with the environmental baseline. He added that under Safeguard Mechanism rules, Barossa’s emissions apply from day one and that would be the plan “until we are able to develop a CCS solution for those emissions.”
For Pikka Phase 1 in Alaska, management highlighted drilling progress and well results. Gallagher said 20 development wells had been flowed back with start-up flow rates around 7,000 barrels per day per well, in line with pre-drill expectations, and said productivity to date supported expectations of about 8,000 barrels per day per well. He said combination wells delivered cost and rig-time savings, including a record 10,000-foot horizontal section. In Q&A, Gallagher said the company was targeting a 5- to 6-year plateau, with 2 to 3 years of sustaining drilling before decline, but he did not provide a specific annual decline rate.
Outlook and strategic priorities
Gallagher said Santos aims to maintain production between 100 and 120 million barrels of oil equivalent in the near term, with “clear pathways” to sustain growth beyond that. He also said that once Barossa and Pikka Phase 1 are integrated into the base business and the organization is “rightsized,” Santos expects a reduction in headcount of around 10%. In Q&A, he said those reductions were largely a natural shift as major projects move from construction to operations, and that the savings were already included in the company’s cost and breakeven frameworks.
Looking to 2026, Gallagher outlined eight strategic priorities, including:
- Delivering Barossa to reliable, full-rate operations and addressing early-life issues typical of new projects
- Completing Pikka Phase 1 and achieving a safe ramp-up to plateau rates
- Continuing to optimize PNG LNG through practical, high-return opportunities such as infill drilling
- Progressing Papua LNG toward final investment decision; Gallagher cited a net 2C resource of 1.6 TCF and said he was aiming for an FID decision around mid-year
- Advancing appraisal activity in the Beetaloo Basin and the Bedout Basin to expand future supply options
- Building on Moomba CCS and progressing a Northern Australia CCS hub concept, including Bayu-Undan and additional Bonaparte Basin options
- Conducting a strategic review of Australian integrated assets (including the Cooper Basin, Western Australia and Narrabri), with more detail to be shared at an investor day
During Q&A, Gallagher said Bayu-Undan CCS had completed FEED, with additional work required to finalize costs and estimates. He said second-half 2027 was a realistic timing for FID, contingent on cross-border approval processes and engagement with governments in Timor-Leste and Australia.
Management also discussed LNG contracting and market positioning. Gallagher said 83% of Santos’ LNG portfolio is contracted over the next five years and that the company aims to keep the portfolio around 80% to 85% contracted, leaving room for optimization and spot exposure. He emphasized proximity to Asian demand centers and portfolio flexibility, and said higher heating value LNG—citing Barossa as a premium source—supports realized pricing.
About Santos (ASX:STO)
Santos Limited explores for, develops, produces, transports, and markets hydrocarbons in Australia and Papua New Guinea. The company's assets are located in the Cooper Basin, Queensland and NSW, Papua New Guinea, Western Australia, Northern Australia and Timor-Leste. It also holds an asset in Alaska, the United States; and engages in the development of decarbonization technologies, such as carbon capture and storage technologies. In addition, the company produces crude oil, liquefied petroleum gas, ethane, coal seam gas, liquefied natural gas, and condensate, as well as natural gas.
