Santos Half-Year Revenue Rises 2% as Production Hits 45.6 mmboe

Profit Falls Despite Production Gains and LNG Ramp-Up

Santos Limited (ASX:STO) reported a 19% decline in net profit to US$355 million for the half-year ended 30 June 2026, even as production increased by 3.4% to 45.6 million barrels of oil equivalent (mmboe). The boost in volumes was largely driven by the ramp-up of liquefied natural gas (LNG) projects Barossa and Pikka phase 1. However, commissioning costs and a change in depletion accounting methodology from proved plus probable (2P) to proved (1P) reserves weighed on earnings.

Underlying profit fell 22% to US$397 million, while EBITDAX (earnings before interest, tax, depreciation, depletion, exploration, and restoration adjustments) dropped 12% to US$1.555 billion. Free cash flow from operations tumbled 65% to US$378 million, reflecting commissioning expenses at Barossa and Pikka, as well as timing effects related to cargo shipments and an under-lift position in Papua New Guinea (PNG) LNG volumes.

Operational Highlights and Project Progress

Operationally, Santos marked key milestones with Barossa LNG reaching 97% of planned production rates and Pikka phase 1 achieving continuous production with first oil in May and first crude cargo lifted in August. Barossa is producing around 550 million standard cubic feet per day (mmscf/d) with plans to increase to approximately 600 mmscf/d by the end of the third quarter.

The company expects second-half production to be 20-30% higher than the first half, underpinning stronger free cash flow and shareholder returns. Santos also took final investment decisions (FID) on several growth projects, including the Agogo Production Facility tie-in in PNG and the Moomba Central Optimisation project in Australia, targeting significant capital and operating cost savings.

Segment Performance and Cost Pressures

Segment results showed mixed performances. PNG LNG production remained steady at 4.3 million tonnes of LNG, but EBITDAX declined 11% due to lower sales volumes. Queensland and New South Wales saw a 16% EBITDAX drop linked to reduced third-party sales and pricing pressures. Western Australia’s EBITDAX fell 26% driven by cyclone-related production impacts and lower crude oil output.

Midstream and Energy Solutions posted a 32% EBITDAX increase to US$137 million, boosted by carbon capture and storage (CCS) revenues and tolling from Darwin LNG linked to Barossa. Santos has safely and permanently stored over 2 million tonnes of CO2 equivalent at its Moomba CCS project.

Financial Position and Dividend

The company’s balance sheet remains robust with equity of US$15.7 billion and net cash provided by operating activities of US$827 million, despite being 47% lower than the prior year. Net cash used in investing activities decreased by 28%, reflecting lower development capital expenditure.

Santos declared an interim dividend of 11.6 US cents per share, unfranked, payable on 23 September 2026, consistent with its capital allocation framework. The dividend record date is 25 August 2026.

Outlook and Regulatory Risks

For 2026, Santos maintains guidance of 99 to 105 mmboe production and sales volumes of 102 to 108 mmboe. Unit production costs are forecast between US$6.95 and US$7.45 per barrel of oil equivalent, with capital expenditure expected around US$1.95 to US$2.15 billion.

Regulatory uncertainty persists around the Narrabri Gas Project in New South Wales, where native title appeals by the Gomeroi People continue following a Federal Court hearing in March 2026. A decision is anticipated in the coming months, with implications for Santos’ east coast gas supply ambitions.

Meanwhile, Santos is advancing its decarbonisation agenda with ongoing CCS projects in Australia and Timor-Leste, and development of low carbon fuels, positioning the company amid evolving energy transition dynamics.

Despite the profit decline, Santos’ strategic investments in LNG ramp-up, cost optimisation, and carbon management signal a company navigating transition with an eye on long-term shareholder value.