Santos Limited has demonstrated solid operational progress in its second quarter results, with major growth projects Barossa and Pikka now generating revenue as they ramp toward their target production levels. The company’s disciplined execution of its development strategy is positioning it to deliver meaningful production and cash flow growth in the second half of 2026, supported by an improving commodity price environment.
Barossa reached 97 percent of planned production rates during the quarter and achieved a cargo cadence of approximately one every eight days toward the quarter end. Pikka Phase 1 is progressing toward its plateau production target of 80,000 barrels per day, with the initial production wells currently delivering approximately 23,000 barrels per day. Seawater injection systems and additional wells are expected to come online in the coming weeks, with plateau production targeted for the third quarter and first sales revenue expected in August. These milestones represent critical inflection points for Santos’ medium-term cash generation capability.
Second quarter production reached 23.1 million barrels of oil equivalent, up three percent from the prior quarter, while first-half production totaled 45.6 mmboe. Santos expects production to increase by 20 to 30 percent in the second half of 2026 compared to the first half. Sales revenue grew to $1,349 million in the quarter, up six percent sequentially. Free cash flow from operations for the first half reached approximately $378 million, though this was impacted by one-off commissioning costs and cargo timing effects. The combined Barossa and Pikka projects recorded a free cash flow loss of approximately $151 million in the first half as they absorbed commissioning expenses, but this dynamic is expected to reverse as operations normalize.
The pricing environment has strengthened meaningfully. Realised LNG pricing reached $11.21 per million British thermal units during the quarter, up 4.9 percent sequentially, despite the first quarter Japan Credit Buyer average price averaging $67 per barrel, the lowest since 2022. Since the end of the quarter, JCC pricing has lifted above $100 per barrel, which should drive higher realised LNG pricing in the third quarter given Santos’ three-month pricing lag on most contracts. This combination of production ramp-up and pricing improvement is expected to substantially boost free cash flow in the second half.
Elsewhere in the portfolio, PNG LNG plant reliability remained above 98 percent with an annualised run rate of 8.7 million tonnes per annum. GLNG upstream production remained stable, and the Moomba carbon capture and storage project reached two million tonnes of CO2 equivalent stored since startup in September 2024. Santos received a $200 million prepayment following execution of a 200 petajoule domestic gas sales agreement with the South Australian Government, which will fund the Moomba Central Optimisation project. Capital expenditure declined 20 percent compared to the first half of 2025 as major project development transitions to operations.
Investors should focus on whether Santos’ Pikka and Barossa projects meet their Q3 2026 plateau targets and how commodity prices track in coming months, as these will determine the extent of the expected second-half cash flow uplift. This announcement has been flagged as price sensitive and material by the ASX.
View the full ASX announcement (PDF)
About Santos Limited (ASX: STO)
Santos Limited is a major Australian oil and gas producer operating across Australia, Papua New Guinea, and other Asia-Pacific locations. It is a significant supplier of natural gas to the domestic and export markets.
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