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Highlights
- Santos plans to enhance shareholder returns starting in 2026.
- Projects in the Timor Sea and Alaska expected to drive cash flow.
- Focus on carbon storage expansion aligns with environmental goals.
Santos (ASX:STO) has unveiled plans to boost shareholder returns beginning in 2026, following the commencement of production from two key projects: the Barossa gas project in the Timor Sea and the Pikka oil project in Alaska. The ASX energy stock plans to raise its payout to 60% of free cash flow, up from the current policy of returning at least 40% of free cash flow from operations.
Additionally, when Santos’ gearing drops below its target range of 15% to 25%, the company plans to return all free cash flow to shareholders through dividends and buybacks. These updates were shared ahead of a briefing in Sydney, underscoring Santos’ focus on maximizing shareholder value.
The Barossa gas project is slated to begin operations in the September quarter of the coming year, with the Pikka oil project following in the first half of 2026. Chief Executive Kevin Gallagher emphasized that this revised capital allocation strategy reflects Santos’ dedication to prioritizing returns after significant investments in projects such as Barossa and Pikka.
Santos has faced increasing calls from institutional investors to enhance shareholder payouts and explore strategies to improve returns. In response, these new initiatives aim to balance operational growth with shareholder benefits.
In addition to financial updates, Santos has outlined ambitions to scale its carbon capture and storage (CCS) business. The company has set a goal to store approximately 14 million tonnes of CO₂ annually from third parties by 2040. This target represents around 50% of Santos’ scope three emissions, which include emissions from the use and combustion of its products.
The company recently commenced operations at its first carbon capture and storage project at the Moomba site in South Australia. This project forms part of Santos’ broader environmental strategy, aligning with its commitments to reducing emissions and advancing sustainable energy solutions.
Santos is currently involved in a Federal Court case initiated by an activist shareholder group. The group alleges the company has misrepresented claims regarding clean energy and zero-emissions hydrogen. Despite this, Santos remains focused on its dual goals of achieving operational excellence and environmental responsibility.
These developments mark a significant step in Santos’ journey to balance shareholder returns with sustainable growth, signaling its adaptability in a dynamic energy market.
