Disciplined delivery as projects ramp-up
- Barossa is now producing at 97 per cent of planned rates, with two project cargoes loaded towards the end of the quarter, with a current cadence of cargoes approximately every eight days.
- Pikka phase 1 is progressing toward plateau, with the initial set of production wells currently online delivering gross production of approximately 23,000 bbl/day. Seawater injection for reservoir pressure support and additional production wells are expected to come online in the coming weeks. Plateau production of approximately 80,000 bbl/day (gross) is targeted for the third quarter of 2026, with first sales revenue expected in August.
- Production of 23.1 mmboe for the second quarter, a three per cent increase on the prior quarter, with first-half production of 45.6 mmboe. Second-half 2026 production expected to increase around 20 to 30 per cent on the first half.
- Higher realised LNG pricing combined with expected production uplift are likely to drive free cash flow in the second-half of 2026.
Financial performance
- Sales revenue of $1,349 million for the second quarter, an increase of 6 per cent on the prior quarter.
- Free cash flow from operations of ~$378 million for the first half. This has been impacted by one-off Barossa and Pikka commissioning costs, timing of cargo movements across the half-year reporting date, and an under-lift position in PNG of approximately 1.3 mmboe which is expected to reverse in the second half.
- Barossa and Pikka together recorded a combined free cash flow from operations loss of ~$151 million for the first half, including the cost of cargoes purchased from third parties during commissioning.
- Cash flow was impacted by cargo movements timed around the 30 June cut-off: two Barossa and three PNG equity marketed cargoes were lifted before 30 June with ~$300 million proceeds due to be received shortly after quarter end.
- Santos also received a prepayment of ~$200 million on 1 July following execution of its 200 PJ domestic gas sales agreement with the South Australian Government, proceeds of which will be used to fund the Moomba Central Optimisation (MCO) project. Santos also expects to receive the revenue for the PNG underlifted volumes (1.3 mmboe) in the second half.
- Capital expenditure was 20 per cent below first-half 2025 reflecting the transition from Barossa and Pikka major project development to commissioning and operations.
- Realised LNG pricing was $11.21 per mmBtu during the quarter, up 4.9 per cent on the prior quarter. This was achieved despite the first quarter JCC price averaging $67 per barrel – the lowest JCC price since 2022. The majority of Santos’ LNG contracts reflect sales on an industry-standard three-month pricing lag. JCC average pricing has subsequently lifted to more than $100 per barrel in the second quarter of 2026, which is expected to drive higher realised LNG pricing and cash flow in the third quarter.
Operating performance
- PNG LNG plant reliability remained above 98 per cent during the second quarter, delivering an annualised run rate of 8.7 Mtpa.
- GLNG upstream production was stable, averaging 703 TJ per day (gross), with the Roma field achieving record daily production of 230 TJ per day (gross).
- Moomba carbon capture and storage reached two million tonnes of CO2e safely and permanently stored since start up in September 2024, and the Moomba Plant achieved reliability of more than
99 per cent for the second quarter. - Santos took a final investment decision (FID) on the Agogo Production Facility (APF) tie-in project in Papua New Guinea in May 2026. The APF project is targeting first gas in the second quarter of 2028, and is expected to deliver an internal rate of return (IRR) greater than 50 per cent with a payback period of less than four years from FID.
- Santos also reached FID on the PNG LNG oil infill drilling campaign, with drilling scheduled to commence in the fourth quarter of 2026. This project is targeting an IRR of greater than 30 per cent, and the oil wells are convertible to gas as APF tie-in comes online.
- Papua LNG remains on track for FID decision in the fourth quarter 2026 with key regulatory approvals secured and the government-led Development Forum having commenced in July, a key milestone ahead of FID.
- Santos secured regulatory approval for its 2026-27 Beetaloo Basin appraisal campaign, with two appraisal wells expected to commence drilling in the third quarter of 2026.
- Santos executed a 10-year, 200 PJ Gas Sales Agreement (2030-2040) with the South Australian Government on 29 June 2026 for the South Australian Strategic Gas Reserve. The prepayment, received on 1 July 2026, will support Santos’ capital investment in the MCO project.
Santos Managing Director and Chief Executive Officer Kevin Gallagher said the June quarter demonstrated strong operational performance, resulting in production growth and disciplined capital allocation. However, the first half was shaped by challenges during the final stages of commissioning and ramp up at the Barossa and Pikka projects, and the timing of cargo receipts, with five equity marketed cargoes lifted before the end of the reporting period and receipts following shortly after the end of the half.
“Production increased towards the end of the second quarter as Barossa ramped up and Pikka came online, with Barossa now producing at 97 per cent of planned rates. 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. Subsequently, we expect continued strong production growth through the third quarter as Barossa maintains steady state production and Pikka grows to plateau rates.
“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 assets. Our initial production guidance had a large band of uncertainty as a result. However, with Barossa’s ramp-up nearing completion and Pikka’s first wells online, we have narrowed our production guidance to 99 to 105 mmboe for the full year.
“This quarter, we also took FID on two high-return brownfield projects in PNG: the Agogo Production Facility tie-in, targeting an internal rate of return above 50 per cent; and the PNG LNG oil infill drilling campaign, targeting an internal rate of return above 30 per cent. In the Cooper Basin we also took FID on the Moomba Central Optimisation project during the first quarter, another high return project which should result in a significant reduction in unit production cost in the Cooper Basin once online. These projects demonstrate our disciplined approach to capital efficiency by growing our portfolio through quick pay-back, high-return investment opportunities.
“Our realised LNG price of $11.21 per mmBtu remained strong, particularly against a backdrop of multi-year low JCC-linked pricing in the first quarter of 2026 which directly drives second-quarter realised pricing. We expect stronger realised LNG pricing in the second half of the year, driven by average JCC of more than $100 per barrel in the second quarter with the majority of our LNG contracts having an industry-standard three-month lag in pricing.
“The board will consider the timing of expected cash flow over the full year in determining the amount of the interim dividend, with first-half free cash flow impacted by a number of timing items that are not reflective of the Company’s underlying cash flow capacity,” Mr Gallagher said.
This ASX announcement was approved and authorised for release by Kevin Gallagher, Managing Director and Chief Executive Officer.
