Santos Reports Record Barossa Ramp-Up and Pikka First Oil, Forecasting Up to 30% Production Growth in H2 2026

Barossa Project Achieves 97% Capacity as Commissioning Nears Completion

Santos confirmed that its flagship Barossa offshore LNG project in the Northern Territory is now producing at 97% of its planned capacity following successful ramp-up efforts in Q2. The project achieved a cargo loading schedule of approximately every eight days by quarter-end, with two cargoes loaded before the reporting period closed. This milestone marks a key shift from commissioning and testing to steady-state operations, establishing Barossa as a major contributor to Santos’ production portfolio.

With commissioning nearing completion, Barossa is expected to sustain production levels throughout the second half of 2026 and beyond. Management forecasts steady-state output for the remainder of the year, eliminating operational variability experienced in the first half. The 97% capacity achievement reflects the resolution of technical and operational challenges previously limiting cash flow generation.

Pikka Phase 1 Progresses Toward 80,000 Barrels Per Day Plateau

In Alaska, Santos’ Pikka Phase 1 facility reached a significant milestone in Q2, with initial production wells delivering about 23,000 barrels per day (gross). Seawater injection for reservoir pressure support and additional wells are expected to start operating soon, advancing toward the project’s target plateau of roughly 80,000 barrels per day (gross). Management targets achieving plateau production in Q3 2026, with first sales revenue projected for August 2026.

This ramp-up aligns with expectations for accelerated production growth in H2 2026. Completion of major capital expenditures and transition to operational cash flow generation mark Pikka’s development progress. First sales revenue from Pikka will introduce a new income stream, significantly boosting cash flow in Q3 and Q4, especially alongside Barossa’s sustained output.

Production Growth Accelerates; Full-Year Guidance Tightened to 99–105 Million Barrels of Oil Equivalent

Santos produced 23.1 million barrels of oil equivalent in Q2, up 3% from Q1, contributing to a first-half total of 45.6 million barrels of oil equivalent. The company narrowed its 2026 full-year production guidance to 99–105 million barrels of oil equivalent, reflecting improved clarity on commissioning results and steady-state progress at Barossa and Pikka. This refinement reduces uncertainties present in earlier guidance issued during final commissioning phases.

Production in H2 2026 is projected to rise 20–30% over H1, fueled by Barossa’s sustained ramp-up and Pikka’s approach to plateau production. Coupled with higher realised LNG prices, this volume growth positions Santos for substantial free cash flow generation in the latter half of the year, enabling enhanced capital allocation and shareholder returns, contingent on successful completion of commissioning.

Second-Quarter Sales Revenue Climbs to $1,349 Million Amid Pricing Recovery

Sales revenue for Q2 reached $1,349 million, a 6% increase from Q1, driven by higher production and improved realised LNG prices. Realised LNG pricing averaged $11.21 per million British thermal units, up 4.9% quarter-on-quarter, despite Japan Customs-cleared crude prices averaging $67 per barrel during the quarter—the lowest since 2022. This pricing rebound reflects Santos’ contract structures and portfolio mix.

Most LNG contracts have a three-month pricing lag, so Q2 realised prices correspond to Q1 crude prices. Japan Customs-cleared crude prices recovered above $100 per barrel in Q2 2026, suggesting potential for significantly higher realised LNG prices in Q3. Management cites this expected price improvement as a key driver of increased cash flow in H2 2026, barring adverse commodity price shifts.

First-Half Free Cash Flow of $378 Million Affected by Commissioning Costs and Cargo Timing

First-half free cash flow from operations was approximately $378 million, reflecting production gains but substantially impacted by one-off commissioning expenses for Barossa and Pikka, cargo timing around the half-year cutoff, and an under-lift position in Papua New Guinea of about 1.3 million barrels of oil equivalent. Barossa and Pikka combined recorded a free cash flow loss near $151 million in H1, including costs for third-party cargoes purchased during commissioning. These losses are temporary and expected to cease once steady-state operations commence.

Timing effects created a headwind, with five equity-marketed cargoes lifted before 30 June but proceeds of around $300 million to be received shortly after quarter-end. Additionally, Santos received a $200 million prepayment on 1 July 2026 following a 10-year, 200 petajoule domestic gas sales agreement with the South Australian Government, earmarked for capital investment in the Moomba Central Optimisation project. Revenue recovery from Papua New Guinea underlifted volumes is also expected in H2, normalizing the balance sheet.

Capital Expenditure Declines 20% as Projects Shift from Development to Operations

Capital expenditure in H1 2026 was 20% lower than in H1 2025, reflecting Barossa and Pikka’s transition from major development to commissioning and operational phases. This reduction indicates completion of significant capital deployment for these flagship projects and a move toward sustainable, operations-focused capital allocation. The timing aligns with management’s expectations for ongoing production growth and improved cash generation efficiency.

Capital spending is expected to continue declining as steady-state operations are established, with investment shifting toward smaller, high-return brownfield projects and maintenance. Management highlighted recent final investment decisions on the Agogo Production Facility tie-in and Papua New Guinea LNG oil infill drilling campaign, both featuring compact capital requirements and rapid paybacks.

Papua New Guinea Operations Deliver Strong Returns with Final Investment Decisions on Two Brownfield Projects

In May and June 2026, Santos approved final investments in two Papua New Guinea brownfield projects, focusing on disciplined capital allocation to quick-payback, high-return opportunities. The Agogo Production Facility tie-in targets first gas in Q2 2028, with an expected internal rate of return exceeding 50% and payback under four years. The PNG LNG oil infill drilling campaign, also approved, targets an internal rate of return above 30%, with drilling planned for Q4 2026.

PNG LNG plant reliability exceeded 98% in Q2, sustaining an annualized run rate of 8.7 million tonnes per annum. Upstream assets averaged 703 terajoules per day gross production, with the Roma field setting a record daily production of 230 terajoules per day gross. These operational results highlight the strength of Santos’ established assets. PNG LNG remains on track for a final investment decision in Q4 2026, supported by regulatory approvals and the July 2026 commencement of the government-led Development Forum, a key milestone before formal investment approval.

Moomba Central Optimisation and South Australian Gas Agreement Secure Long-Term Supply

On 29 June 2026, Santos executed a 10-year, 200 petajoule gas sales agreement with the South Australian Government for the South Australian Strategic Gas Reserve, receiving a $200 million prepayment on 1 July 2026. These funds are allocated to the Moomba Central Optimisation project, a high-return brownfield development aiming to significantly reduce unit production costs across Cooper Basin operations. The agreement ensures long-term gas supply commitments while funding critical capital projects.

The Moomba carbon capture and storage facility has safely and permanently stored two million tonnes of CO2 equivalent since September 2024, and the Moomba Plant achieved over 99% reliability in Q2. These milestones demonstrate the success of Santos’ integrated operations and the technical strength of its carbon capture system. The Moomba Central Optimisation project, supported by the South Australian prepayment, is expected to improve Cooper Basin operational efficiency and cost structure, sustaining cash generation.

Beetaloo Basin Appraisal Program Receives Approval and Set to Start in Q3 2026

Santos obtained regulatory approval for its 2026–27 Beetaloo Basin appraisal campaign, with two appraisal wells planned to begin drilling in Q3 2026. The Beetaloo Basin represents a significant exploration and appraisal prospect in the Northern Territory. The appraisal program aims to de-risk and mature the asset base for potential future development. Regulatory clearance completes a critical step, enabling drilling to commence promptly in Q3.

This appraisal initiative aligns with Santos’ disciplined portfolio development strategy. Results will guide future investment decisions regarding commercial development and potential reserve additions in northern Australia’s onshore region, expanding beyond offshore and LNG operations. The timing leverages improved capital availability following major project commissioning and a shift toward sustainable, lower-capital intensity operations.