Santos Limited Announces Expiry of 168,936 STOAY Share Acquisition Rights Under Employee Incentive Plan

Santos Announces Lapse of STOAY Share Acquisition Rights Effective 16 May 2026

On 13 July 2026, Santos Limited submitted an Appendix 3H notice to the Australian Securities Exchange confirming the cessation of 168,936 Share Acquisition Rights under the ASX code STOAY. The rights expired on 16 May 2026 after the company confirmed that the conditions required for vesting were either not met or became impossible to satisfy. The filing did not specify which particular performance or vesting criteria were unmet.

The lapse occurred over the period from 16 May 2026 to 30 June 2026, as detailed in the filing’s additional information. Santos also confirmed that no compensation was paid to holders upon termination of these rights. This Appendix 3H disclosure complies with ASX Listing Rules, promoting transparency regarding changes in a company’s capital structure when equity securities cease to exist.

Understanding Share Acquisition Rights and Their Role in Santos’s Employee Incentive Framework

Share Acquisition Rights, such as those identified by the STOAY code, are conditional equity instruments commonly used by ASX-listed companies as part of long-term incentive plans for employees and executives. These rights grant holders the option to acquire ordinary shares upon meeting specified performance targets or service conditions during a defined vesting period. They are unquoted securities without voting rights or dividend entitlements until they vest and convert into ordinary shares.

Within Santos’s remuneration model, these rights incentivize performance alignment. If conditions are unmet—due to factors like failure to achieve targets or termination of employment—the rights lapse without issuing shares or transferring value. This approach helps maintain alignment between the company’s performance and shareholder interests, preventing unwarranted dilution of existing shareholders.

Updated Capital Structure Following STOAY Rights Expiry

Following the lapse of 168,936 STOAY Share Acquisition Rights, Santos’s capital structure now comprises 3,247,772,961 ordinary fully paid shares (ticker: STO), which represent the company’s primary quoted equity and underpin its market capitalization as determined by the ASX.

In addition to ordinary shares, Santos holds several classes of unquoted equity securities. As of the latest filing, 15,748,344 STOAY Share Acquisition Rights remain outstanding, alongside 2,969,372 STOAZ Share Acquisition Rights issued under the ShareMatch plan. The company also has two classes of partly paid ordinary shares: 5,000 securities under the STOAM plan and 5,000 under the STOAO plan, each partly paid to one cent with 24 cents unpaid. These figures may be subject to change pending concurrent ASX processing of other forms.

No Compensation for Holders as STOAY Rights Are Cancelled

Santos confirmed that no payment was made to holders of the lapsed STOAY rights, consistent with standard long-term incentive plan rules where unvested rights expire without compensation. The lapse was involuntary, resulting from unmet conditions rather than voluntary surrender or buy-back.

For shareholders, this event incurs no direct financial cost or dilution since no shares were issued. Instead, it reduces the potential future dilution from these rights had they vested and converted. Investors assessing Santos’s fully diluted share count should note this marginal decrease in maximum possible shares arising from the STOAY pool.

Santos’s Role as a Leading Asia-Pacific Oil and Gas Producer

Santos Limited is among the largest ASX-listed oil and gas producers, with upstream assets across Australia, Papua New Guinea, Timor-Leste, and the broader Asia-Pacific region. Key assets include the PNG LNG project, Darwin LNG facility, Bayu-Undan field, Cooper Basin operations, and the Dorado and Barossa developments. The company’s revenue is primarily generated from liquefied natural gas, crude oil, condensate, and natural gas sales to domestic and international markets.

Santos holds significant importance in supplying energy to Asian markets through long-term LNG contracts with major buyers in Japan, South Korea, China, and others. Its revenue is influenced by global oil and gas prices, LNG market dynamics, and production volumes. Share Acquisition Rights are integral to Santos’s executive and employee remuneration, aligning management incentives with long-term shareholder value creation.

Regulatory Requirements Behind Santos’s Appendix 3H Filings

The Appendix 3H form is mandated by ASX Listing Rules to disclose when securities cease to exist, whether by lapse, cancellation, or conversion. Santos Limited (ABN 80 007 550 923, issuer code STO) complies by promptly notifying the ASX of cancellations or lapses of unquoted equity securities like Share Acquisition Rights. This ensures investors have accurate, current information on the company’s capital structure.

Disclosure of employee incentive security cessation is a key continuous disclosure obligation under ASX rules and the Corporations Act 2001. Through Appendix 3H filings, Santos provides transparency on lapses and updated totals of securities outstanding, information valuable to analysts, institutional investors, and proxy advisers monitoring dilution risk and remuneration governance.

Remaining STOAY Rights and ShareMatch Plan Post-Lapse

After the lapse of 168,936 STOAY rights, 15,748,344 STOAY Share Acquisition Rights remain outstanding. These rights continue to be subject to performance and vesting conditions not detailed in this update. Depending on future performance, these rights may vest and convert to shares or lapse.

Separately, Santos’s ShareMatch plan includes 2,969,372 STOAZ Share Acquisition Rights outstanding. The STOAZ pool operates under different terms from STOAY rights. Together, these pools represent the main sources of potential future equity dilution from Santos’s employee incentive programs. Investors should watch future Appendix 3H filings and remuneration disclosures for changes.

Operational and Market Factors Influencing Santos’s Incentive Outcomes

The lapse of performance-based rights like STOAY often reflects broader company operational or financial performance during the measurement period. Large oil and gas firms typically tie long-term incentives to metrics such as total shareholder return, production volumes, safety records, balance sheet health, or strategic milestones. Market volatility, project delays, or cost overruns can cause performance conditions to go unmet, resulting in rights lapsing.

Santos faces risks including fluctuating LNG and crude oil prices, execution risks on projects like Barossa, regulatory and environmental approvals, and geopolitical factors in Papua New Guinea and Timor-Leste. These risks affect operational performance and the ability to meet incentive targets. Investors and analysts should consider these factors when evaluating future equity incentive vesting or lapses.

Share Price Impact and Investor Considerations Moving Forward

The immediate share price impact of this lapse was not evident from public data. Such cessation events are typically administrative and do not usually cause significant share price changes. However, institutional investors and remuneration experts may note the disclosure as part of ongoing governance and incentive alignment assessments.

Investors should monitor upcoming operational updates, LNG production reports, and progress on major projects like Barossa and Dorado. Future Appendix 3H filings will reveal whether additional Share Acquisition Rights lapse or vest. Santos’s forthcoming remuneration report, expected in the annual report, will provide further detail on performance conditions and incentive outcomes for the relevant periods.