Oil and gas major Santos has tightened its fiscal 2026 guidance after technical problems delayed the ramp up of production at its Barossa and Pikka projects.
Santos now expects production volumes to come in at 99 to 105 million barrels of oil and gas (mmboe), down from the previous guidance of 101 to 111 mmboe. Sales volumes for the full year is expected to come in at 102 to 108 mmboe, a decline from the previous guidance of 101 to 111 mmboe.
Santos CEO Kevin Gallagher noted that 2026 represents an operational turning point as major projects move from capital-intensive development into operation.
“The challenges encountered during commissioning activities have essentially delayed our transition to a higher production, higher cash flow generating portfolio, until the second half of the year,” Gallagher said.
“2026 was always going to be a transition year for Santos with two major development projects coming online and significant commissioning activities to be completed before establishing steady-state performance at both asset.”
Both the Barossa gas project in the Timor Sea and the Pikka oil project in Alaska encountered technical issues during commissioning, slowing their production ramp up.
However, the Barossa gas project is now operating at 97 per cent of planned rates, with cargoes loading every eight days.
Meanwhile, the Pikka Phase 1 project in Alaska is progressing toward plateau production, currently delivering 23,000 barrels per day gross, with first sales revenue expected in August.
Despite the challenges, Santos still reported a solid operational June quarter, positioning the company for a substantial surge in production and free cash flow in the second half of 2026.
Second-quarter production rose three per cent on the previous period to 23.1 million mmboe, bringing first-half output to 45.6 mmboe.
ales revenue reached US$1.35 billion for the quarter, up 6 per cent, supported by a 4.9 per cent increase in realised LNG pricing to US$11.21 per mmBtu.
First-half operational free cash flow of US$378 million was temporarily muted by commissioning costs, timing of cargo receipts, and an under-lift position in Papua New Guinea (PNG).
However, Santos expects second-half production to lift by 20 to 30 per cent, driven by steady-state output from Barossa and Pikka reaching its 80,000 barrel-per-day plateau targeted for the third quarter.
The producer also highlighted strategic expansion in PNG, taking final investment decisions on the Agogo Production Facility tie-in and an oil infill drilling campaign.
Stronger second-half LNG prices, driven by a recent rebound in oil benchmark pricing, are expected to further bolster cash generation.
