A Major Exploration Boost for Santos Limited: Is the Long-Term Outlook Getting Stronger?

Santos' recent announcements highlight strong earning potential with continuous exploration and export activities for long term value creation. 

Santos Limited (ASX: STO)

One of the top energy ASX stocks with a market capitalisation of $26.91B and a current annual unfranked dividend yield of 3.70%.

Santos achieves a significant milestone.

STO has announced on 2 September 2026 that they have successfully started seawater injection at the Nanushuk Drillsite-B (NDB) of the Pikka oil project on Alaska's North Slope. The seawater treatment plant began on the specification water export form on 18 August 2026 and built an inventory of approximately 75 kilometres of seawater pipeline connecting the Beaufort Sea with the Pikka project site.

Santos had started injection into the reservoir on 26 August, and water injection testing has successfully completed water injection of around 40,000 bbls/d. This provides pressure support to the reservoir, which is a key enabler for production ramp-up, aiming for plateau production of ~80,000 barrels of oil/day (gross) by the end of the third quarter of 2026.

Pikka Well is now producing 40,000 barrels of oil per day (gross), with additional wells to be brought online safely and progressively over the coming weeks now that the water injection has come online.

Half yearly results

STO had announced on 19 August 2026 its half yearly results for the period ended on June 2026. The first half production rose by 3% YoY to 45.6 mmboe, with an average unit production cost of US$7.53 per boe. STO reported a total revenue of US$2.7B with a production cost of US$343M.

The Pikka project achieved its first oil in May 2026, with production starting in June 2026. STO has lifted its first cargo in August with a current production of around 23,000 barrels per day. The Barrosa LNG plant has delivered seven LNG cargos during 1H and five additional cargos after June. It has a current production of 550 mmscf per day, aiming to increase it to 600 mmscf per day shortly. The Darwin LNG has achieved 100% reliability, and Barossa is moving from a commissioning production to do commercial production.

STO reported an EBITDAX of US$1.56B, an NPAT of US$355M and an underlying profit for 1H26 of US$397M. STO has delivered a free cash flow from operating activities of US$378M. They have a cash and cash equivalent of US$1.12B and committed undrawn bank facilities of US$2.6B. Santos has reported a total debt of US$7.25B and a net debt of US$6.12B, resulting in a gearing of 23.2% excluding the leases. Additionally, they have no debt maturities until September 2027, providing near term financial stability to the company. Moody’s has upgraded its outlook to positive, and the S&P rating remains at BBB.

Outlook

STO management is optimistic for FY26, as they have given management guidance for key line items. STO expects production to be in the range of 99-105 mmboe, with sale volume to be 102-108 mmboe for FY26, driven by strong demand. They also mentioned that the unit production cost is to be US$6.95-$7.45 per boe, lower than the half yearly results. STO will continue the same expansion momentum with an expected capital expenditure of ~US$1.95B-US$2.15B and depreciation, depletion & amortisation of approximately US$2.2B.

(Source: Company Announcements)