Santos Advances Barossa and Pikka Projects as Q1 Production Edges Up 3%
Santos delivered a steady first quarter with production up 3% year-on-year, driven by Barossa's initial cargoes and Pikka phase 1 nearing first oil. Free cash flow held firm at $383 million, while a key Moomba optimisation project received final investment approval.
- Production rises 3% year-on-year to 22.5 mmboe
- Pikka phase 1 commissioning progressing; first sales oil imminent
- Barossa LNG ramps up after compressor seal replacement
- Quokka-1 appraisal well confirms high-quality Alaskan oil resource
- Moomba Central Optimisation project approved targeting $600m savings
Production Growth Supported by Barossa and Pikka
Santos Limited (ASX:STO) reported a disciplined operational performance for the first quarter ending March 31, 2026, with production increasing 1% on the prior quarter to 22.5 million barrels of oil equivalent (mmboe), and 3% higher than the same period in 2025. This uptick was largely driven by Barossa achieving its first cargoes, marking a significant milestone for the LNG project.
Meanwhile, Pikka phase 1 in Alaska reached mechanical completion early in the quarter and is now in dynamic commissioning. Fuel gas introduction has been successful, and oil initiation for tank and facility fill is underway, with first sales oil expected imminently. The project targets plateau production of 80,000 barrels per day early in Q3 2026, supported by 27 development wells drilled to date and 20 wells stimulated and flowed back as planned.
Barossa LNG Overcomes Commissioning Hurdles
The Barossa floating storage and offloading facility (FPSO) encountered some commissioning challenges, including the replacement of dry gas compressor seals during a recent shutdown. With this work completed, the FPSO is expected to ramp up production in the coming week as heat exchanger trains are flushed and cleaned. LNG production is slated to commence shortly after, supporting Santos’ LNG portfolio positioned to meet growing Asian demand.
Alaska’s Quokka-1 Well Validates Resource Potential
The successful Quokka-1 appraisal well in Alaska confirmed a high-quality Nanushuk reservoir with approximately 143 feet of net oil pay and 19% average porosity. Following stimulation, the well flowed at 2,190 barrels of oil per day, with fluid analysis indicating light-gravity oil that could command a premium to Pikka oil. Located about 10 kilometres from the 2020 Mitquq-1 discovery, Quokka is shaping up as a material addition to Santos’ development runway in Alaska, with potential for a two-drill site development. This adds to the company’s strategic growth options in a region where it has already drilled 27 development wells for Pikka phase 1.
Moomba Central Optimisation Project Approved
Santos made a final investment decision on the Moomba Central Optimisation project, which aims to consolidate compression facilities into a single, remotely operated hub. The $350 million investment over three years targets more than $600 million in capital and operating cost savings net to Santos, with an expected internal rate of return above 15%. The project also promises to reduce annual Scope 1 emissions by approximately 40 kilotonnes of CO2 equivalent, aligning with Santos’ emissions reduction commitments.
The company also secured a 10-year, 200 petajoule conditional gas sales agreement with the South Australian Government, which includes a pre-pay component supporting the Moomba project investment. This deal reinforces Santos’ role in bolstering Australia’s domestic energy security and regional economic development.
Stable Financials Amid Market Disruptions
Sales revenue rose 3% quarter-on-quarter to approximately $1.27 billion, driven primarily by higher crude oil sales volumes and increased third-party LNG sales. Free cash flow from operations remained steady at around $383 million. Capital expenditure decreased 29% from the prior quarter to $441 million, reflecting the substantial completion of Barossa LNG and lower restoration spend in Western Australia.
Notably, Santos worked with Viva Energy and Ampol to support Australian domestic fuel security during a period of global market disruption, bringing forward Cooper Basin crude sales to maintain refinery feedstock stability. This complements the company’s broader commitment to reliable base business operations and disciplined capital allocation.
The company’s 2026 production guidance remains unchanged, targeting 101 to 111 mmboe with capital expenditure forecast between $1.95 billion and $2.15 billion. Unit production costs are expected in the range of $6.95 to $7.45 per barrel of oil equivalent.
These results follow Santos’ recent resilient 2025 results with emissions milestone, which highlighted the company’s progress on emissions reduction and LNG project development, underscoring continuity in operational execution and strategic focus.
Bottom Line?
Santos is navigating commissioning challenges and market volatility while advancing key projects that underpin its medium-term production growth and cost efficiency targets.
Questions in the middle?
- How will the ramp-up of Pikka phase 1 and Barossa LNG influence Santos’ production profile through 2026?
- What impact will the Moomba Central Optimisation project have on Santos’ cost structure and emissions trajectory?
- How might regulatory developments around the Narrabri Gas Project and Papua LNG affect Santos’ Australian growth pipeline?
