Half Year 2026 Santos Limited Earnings Call Transcript
Key Points
- Santos Ltd (SSLZY) safely commenced production at Barossa and Pikka, with Barossa wells exceeding expectations and Pikka on track to reach plateau by end of Q3 2026.
- Strong safety performance with no lost time injuries and no Tier 1 process safety incidents, maintaining a rate better than the IOGP global average.
- Declared an interim dividend of USD 0.116 per share, consistent with the capital allocation framework and reflecting confidence in the full-year outlook.
- Base business delivered reliable performance with 100% plant reliability at Darwin LNG and GLNG, and strong margins (59% EBITDAX margin).
- Executed a gas sales agreement with the South Australian Strategic Gas Reserve, supporting the Moomba Central Optimisation Project and targeting over $600 million in cost savings.
- Pikka achieved first oil and first crude cargo, with drilling program consistently beating technical limits, reducing time and cost.
- Papua LNG progressing towards FID in Q4 2026, with project financing expected to fund a significant portion of development capital, enhancing capital efficiency.
- Free cash flow break-even target of $45-$50 per barrel, with sensitivity to oil expected to increase by 50% once Barossa and Pikka reach plateau.
- Strong LNG pricing outlook with JCC trading above $100/barrel, and 80% of contracted LNG linked to oil indexation, benefiting second-half realized prices.
- Halyard-2 well in Western Australia exceeding expectations at 85 TJ/day, potentially leading to a significant upward reserves revision.
- First-half free cash flow from operations was impacted by commissioning costs, cargo timing (around $300 million received in July), and a PNG underlift position, reducing cash generation.
- Gearing at 28.1% (including leases) is above the 15-25% target range, reflecting the Barossa FPSO liability and peak CapEx spend.
- Production at Pikka is currently constrained at ~23,000 barrels/day, pending startup of the seawater treatment plant and water injection, with ramp-up risk to reach 80,000 barrels/day by end of Q3.
- Cooper Basin production declined to 15.4 million boe (down from 16.8% a year ago) due to record rainfall and strategic review, with some production losses expected to continue.
- Unit production costs remain at $7/barrel, and the company faces planned statutory maintenance and routine testing at Barossa in the second half, which could impact production.
- The company has no major FIDs expected in the next 2-3 years (except Papua LNG), limiting near-term growth opportunities and potentially slowing production growth.
- Oil hedging realized a loss of $37 million in the first half, and the company has hedged 11.5 million barrels for H2 with a floor of $67.10 and cap of $98.59, potentially limiting upside.
- Papua LNG FID is still subject to government processes (development forum) and project financing, with risks of delays or changes in equity structure.
- The strategic review of the Australian domestic gas business is leading to a shift towards lower capital intensity, which may reduce production volumes in the near term.
- First-half sales revenue and EBITDAX were lower than expected due to commissioning and timing effects, with cash flow more weighted to the second half.
Thank you for standing by, and welcome to the Santos Limited 2026 half-year results briefing. (Operator Instructions)
I would now like to hand the conference over to Kevin Gallagher, Managing Director and Chief Executive Officer. Please go ahead.
Thank you. And good morning, and welcome to the presentation of Santos's 2026 half-year results. I'm speaking today from the traditional lands of the Kaurna people of the Adelaide Plains and pay my respects to Elders past and present. I also acknowledge and recognize the support of traditional owners, indigenous people, and nationals everywhere Santos operates around the world.
2026 is a year of transition for Santos. In the first half, we safely commenced peak of production and continued commissioning and ramp up at Barossa, and that is the story of this result, new production coming online while the base business keeps delivering.
I'll begin with an overview of our performance before handing
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