Can this blue chip stock retain its shine after deal collapse

Team Veye | 18-Sep-2025

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The planned takeover of Santos at U$5.626 per share by the XRG Consortium was pulled back because both sides could not agree on risk sharing terms. However, Santos continues to develop its Barossa gas project in Australia and the Pikka phase 1 oil project in Alaska, and reported these being on track for start up.

Santos Limited (ASX: STO)

Santos Limited (ASX: STO) has had a very active 2025 with a lot of big steps and deals. The Barossa LNG project is almost finished at 98% with first gas just weeks away. In Alaska the work at Pikka Phase 1 is moving fast and first oil is now expected earlier in Q1 2026. The company also signed an MOU with Orica for supplying up to 15 PJ of gas each year for 10 years from its Narrabri project adding to the other older deals with ENGIE. These deals show strong demand for Narrabri gas and Santos keeping its focus on domestic supply.

On the financial side of things Santos posted a strong half year. Sales revenue was about U$2.6 billion and EBITDAX reached U$1.8 billion and underlying profit was U$508 million. Net profit after tax came at U$439 million even with a non cash impairment in PNG. Free cash flow was U$1.1 billion backed by production of 44.1 mmboe and LNG prices at U$11.57 per mmbtu. The balance sheet is in good shape with liquidity of U$3.9 billion and gearing at 23.7% which is inside the target range. Shareholders got an interim dividend of 13.4 US cents per share which was partly franked and it was 40% of free cash flow as per dividend policy. Production cost also dropped to U$7.28 per boe showing better efficiency and cost control.

Looking forward Santos is counting on more production and cash from Barossa LNG and Pikka Phase 1 which should lift output by nearly 30% by 2027. It also kept its full year production guidance at 90–95 mmboe with costs around U$7.00–U$7.40/boe. Development is going steady with Narrabri aiming for FID in 2026 along with Moomba CCS getting close to next stage and new backfill options in PNG and WA. Almost 90% of its LNG sales are already contracted for the next 5 years and the company would like to maintain it’s strong position to keep steady cash flows supported by its low cost model along with strong project pipeline and ongoing decarbonisation initiatives.

(Source: Company Announcements)

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