Santos Limited

Santos reported first-half 2026 sales revenue of $2.6 billion, EBITDAX of $1.6 billion, and free cash flow from operations of $378 million. First-half production was 45.6 million barrels of oil equivalent, up 3% year over year. Unit production cost was $7.53 per barrel, EBITDAX margin was 59%, and gearing was 28.1% including leases or 23.2% excluding leases. The company declared an interim dividend of USD 0.116 per share. On realized pricing, LNG was $10.95 per mmBtu and crude oil was $92 a barrel. Management said second-half production should be around 20% to 30% higher than the first half, with cash flow more heavily weighted to the second half, and reiterated an all-in free cash flow breakeven target of $45 to $50 per barrel through 2030, plus a free cash flow breakeven from operations of below $35 per barrel. They also reaffirmed a target of $2.5 billion reduction in net debt by 2030 and at least 60% of free cash flow returned to shareholders.

Kevin Gallagher framed 2026 as a year of transition, emphasizing that Santos has moved from major project execution into production growth and cash generation. He highlighted safe start-up of Pikka, continued Barossa ramp-up, and a portfolio focused on advantaged infrastructure in Alaska, PNG, and Australia. His tone was constructive and confident, repeatedly pointing to a stronger second half, higher realized LNG pricing, and the company’s disciplined capital allocation framework.

Lachlan Harris focused on the first-half financial bridge and balance-sheet strength. He cited $2.6 billion of sales revenue, $1.6 billion of EBITDAX, $378 million of free cash flow from operations, $3.8 billion of liquidity, and net debt of approximately $6 billion with gearing of 28.1% including leases. He said first-half free cash flow was weighed down by commissioning costs, cargo timing, and a PNG LNG underlift of around 1.3 million barrels of oil equivalent, and he reiterated annual recurrent savings of $150 million by end-2026, with no debt maturities before September 2027.

Analysts focused on Pikka ramp timing, Papua LNG progress, Bedout and Beetaloo optionality, and how Santos thinks about capital returns versus debt reduction if commodity prices strengthen. Management said Pikka’s seawater treatment plant is operational and water is going into the pipeline, with ramp to the 80,000 barrels a day gross plateau still targeted by the end of the quarter. On Papua, Kevin Gallagher said the development forum had resumed and was expected to run through about the end of September, while also stressing any equity or operator changes would be announced by the joint venture at the appropriate time. He also said there are no major FIDs expected in the next couple of years outside Papua, with Pikka Phase 1 needing time to prove out before any expansion decisions.