Australian energy giant Santos will focus on LNG and oil production across three regions as part of its revamped strategy to slash debt, cut local capital expenditure, and boost shareholder returns.
In an investor briefing, Santos highlighted a structural shift driven by the start-up of two major growth projects: the Barossa gas project in Northern Australia and the Pikka Phase 1 oil field in Alaska.
“Going forward, Santos will be laser focused on investment in major oil and LNG production across three regions as we develop tier-1 basins in Alaska and Papua New Guinea and fully appraise Australia’s Beetaloo and Bedout basins to provide scale, higher margins and leverage off existing advantaged infrastructure,” Santos CEO Kevin Gallagher said.
The strategy will see the Australian oil and gas arm repurposed into a lower capital-intensity, higher-margin operation focused on meeting domestic gas and decommissioning commitments.
Growth investment will instead focus on tier-1 basins in Alaska and Papua New Guinea, alongside appraisal of Australia’s Beetaloo and Bedout basins.
The Barossa project is already operating at 75 per cent of its planned 2026 production rate, tracking towards plateau production by mid-2026 at a unit cost of under US$7 per barrel of oil equivalent (boe).
Meanwhile, continuous production is imminent at Pikka Phase 1, which is expected to reach a gross plateau of 80,000 barrels of oil per day by the third quarter of 2026.
Once both projects achieve full plateau rates, Santos forecasts generating an additional US$550 million to US$600 million in annual free cash flow for every US$10 that the realised oil price sits above its breakeven price of US$45 to US$50 per barrel.
Under its disciplined capital allocation framework, Santos has pledged to return at least 60 per cent of all-in free cash flow to shareholders.
It is also targeting a US$2.5 billion reduction in net debt by 2030, a move expected to shave US$150 million off annual interest expenses and position gearing at the lower end of its 15 to 25 per cent target range.
As part of this shift, Santos will prioritise Cooper Basin investment within the Moomba Central fields while deprioritising broader areas, locking in an estimated US$300 million in cumulative capital expenditure savings between 2027 and 2030.
“Santos now has the scale and cost base to deliver strong returns throughout the commodity price cycle while maintaining and building the financial strength to fund value-accretive production growth for the future,” said Gallagher.
