Santos Limited (ASX: STO) Outlook: Pikka Boost and Stronger FY26 Production

Santos Limited enters the second half of FY26 with improving production and progress across key growth projects, despite weaker earnings in the first half.

Santos Limited (ASX: STO)

On 2 September 2026, announced the successful commencement of seawater injection at the Nanushuk Drillsite-B (NDB) of the Pikka oil project on Alaska's North Slope. Seawater injection provides pressure support to the reservoir, a key enabler of the production ramp-up targeting plateau production of approximately 80,000 barrels of oil per day (gross) at the end of the third quarter of 2026.

Earlier on 19 August 2026, the company announced its June ending half year results for FY26, reporting a revenue of US$2.6 billion with a declining EBITDAX of US$1.6 billion from US$1.75 billion in the previous year, reflecting an increase in operating costs. This carried down to a decrease in NPAT of 19% to US$355 million from US$439 million in the previous year, indicating an overall weaker performance.

The company has a market capitalisation of around $27.11 billion with a stable dividend yield of 3.67%, supported by an interim dividend of US11.6 cps which is scheduled to be paid on 23 September.

Santos’ portfolio is quite diversified across various regions like Australia, Papua New Guinea and Alaska, where LNG remaining a key part of its production base. LNG operations delivered strong reliability in Australia and PNG, with 7.7 Mt of LNG produced in the first half of 2026. Barossa is progressing towards steady-state production, while PNG LNG continues to operate at high reliability and benefits from additional backfill opportunities. In Australia, the company also operates domestic gas assets across the Cooper Basin, Western Australia and New South Wales, supported by its low-cost operating model.

The company is also expanding its production base through its major growth projects. Pikka in Alaska achieved first oil in May 2026 and reached production of around 23,000 barrels per day, with a gross plateau target of approximately 80,000 barrels per day. Barossa is currently producing around 550 mmscf/d, with production expected to increase further as commissioning progresses. In addition, Santos is progressing Papua LNG, with a final investment decision targeted for the fourth quarter of 2026, while the Moomba Central Optimisation project is expected to improve the efficiency of its Cooper Basin operations.

Looking ahead, Santos expects a stronger second half of 2026, with production forecast to increase by around 20-30% compared with the first half as Barossa and Pikka move towards plateau production. The company is targeting full-year production of 99-105 mmboe and sales volumes of 102-108 mmboe. It also expects stronger free cash flow as major project capex moves past its peak declining it heavily in the first half, while focusing on Papua LNG, PNG LNG backfill projects and further development opportunities across its portfolio.

(Source: Company Announcements)