How Is Santos Navigating Floods and Major Projects to Boost Production?
Santos Limited reported robust operational and financial results for Q2 2025, driven by solid production and cash flow, while its flagship Barossa LNG and Pikka projects advance on schedule. The company also navigates flood impacts and a notable acquisition proposal.
- Free cash flow from operations at $620 million in Q2, $1.1 billion for H1
- Production up 1% to 22.2 million barrels of oil equivalent
- Unit production cost guidance narrowed to $7.00–$7.40 per boe
- Barossa LNG ~97% complete, first gas expected Q3 2025
- Pikka phase 1 ~89% complete, on track for mid-2026 first oil
Strong Operational Performance Amidst Challenges
Santos Limited has delivered a solid second quarter performance, underscored by free cash flow from operations of approximately $620 million, contributing to a robust $1.1 billion for the first half of 2025. Production edged up by 1% to 22.2 million barrels of oil equivalent (mmboe), while sales volumes increased 3% to 23.9 mmboe, reflecting a resilient and diversified portfolio.
Despite flooding in the Cooper Basin, an event not seen since 1974, which temporarily shut in over 200 wells and several compressors, Santos has managed a steady recovery. The company prudently narrowed its 2025 production guidance range to 90–95 mmboe to account for this disruption, while maintaining sales volume guidance and capital expenditure outlook.
Major Projects on Track to Boost Production
Key development projects remain on schedule and within budget. The Barossa LNG project is approximately 97% complete, with the BW Opal FPSO successfully installed and commissioning progressing as planned. First gas is anticipated in the third quarter of 2025, promising to underpin production growth.
Meanwhile, the Pikka phase 1 project in Alaska is about 89% complete, with nineteen wells drilled and the seawater treatment plant en route to site. Santos maintains guidance for first oil in mid-2026, with the possibility of an earlier start-up contingent on logistical success this northern summer.
Cost Discipline and Credit Strength
Unit production cost guidance has been tightened to $7.00–$7.40 per barrel of oil equivalent, reflecting strong first-half operational efficiency. This cost discipline supports Santos’ investment-grade credit ratings, affirmed by Moody’s, S&P, and Fitch, all maintaining stable outlooks. Gearing remains conservative at 20.5% excluding operating leases.
CEO Kevin Gallagher highlighted the company’s focus on disciplined capital management and a low-cost operating model, which have underpinned a strong balance sheet and free cash flow breakeven oil price under $35 per barrel for 2025. These strengths position Santos well as it approaches the start-up of its major growth projects.
Carbon Capture Milestones and Strategic Partnerships
The Moomba Carbon Capture and Storage (CCS) project reached a significant milestone by storing over one million tonnes of CO2 equivalent, earning Santos the Energy Technology Company of the Year Award at the 2025 APAC Energy Awards. The company is advancing phase 2 of the CCS project and exploring infrastructure opportunities with the South Australian Government to support low-carbon ambitions.
Additionally, discussions continue with the Timor-Leste and Australian governments on the Bayu-Undan CCS project, aiming to repurpose existing infrastructure for carbon storage and third-party gas processing.
Corporate Developments and Market Position
Santos recently entered into an exclusivity agreement with the XRG Consortium, led by Abu Dhabi National Oil Company and Carlyle, regarding a non-binding proposal to acquire 100% of Santos shares at A$8.89 per share. This development adds a strategic dimension to the company’s outlook amid ongoing strong demand for high heating-value LNG and flexible contract portfolios.
Looking ahead, Santos is preparing to release its half-year financial results on 20 August 2025, which will provide further clarity on its operational and financial trajectory.
Bottom Line?
With major projects nearing production and a strong cash flow foundation, Santos stands at a pivotal moment, but flood recovery and acquisition talks will shape its next chapter.
Questions in the middle?
- How will the Cooper Basin flood recovery timeline affect Santos’ full-year production and costs?
- What are the implications of the XRG Consortium’s acquisition proposal for Santos’ strategic direction?
- Can Santos leverage its LNG portfolio flexibility to capture emerging market opportunities amid evolving global energy demand?
