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Highlights
- Santos plans to enhance shareholder returns with a revised capital allocation strategy starting 2026.
- New production projects in the Timor Sea and Alaska will drive operational growth.
- Focus on carbon capture and storage aligns with long-term sustainability goals.
Santos (ASX:STO) has announced plans to increase shareholder returns starting 2026, supported by major production projects in the Timor Sea and Alaska. This decision follows long-standing concerns raised by institutional stakeholders regarding the company’s performance and valuation in the oil and gas sector.
Under its revised policy, Santos aims to return 60% of its free cash flow, an improvement from its previous commitment of at least 40%. Additionally, when gearing levels fall below the lower range of its 15% to 25% target, all free cash flow will be directed towards shareholder returns through dividends and buybacks, according to chief financial officer Sherry Duhe. This announcement was made during an investor briefing in Sydney, reflecting the company's commitment to prioritizing shareholder rewards.
The Barossa gas project, located in the Timor Sea, is slated to commence operations by the September quarter of the upcoming year. Similarly, the Pikka oil project in Alaska is expected to begin production in the first half of 2026. These developments are central to Santos’ strategy to boost operational efficiency and financial performance.
Santos has also adjusted its production guidance for 2026–2030 to a range of 100 to 120 million barrels of oil equivalent annually. This revision reduces the upper limit from 140 million, emphasizing a streamlined capital expenditure strategy focused on maintaining core operations and maximizing shareholder benefits.
In terms of sustainability, Santos has outlined plans to expand its carbon storage business significantly. By 2040, the company targets capturing 14 million tonnes of carbon dioxide annually from third-party sources. This builds on the recent successful startup of its carbon capture and storage project at Moomba in South Australia. The new target represents approximately 50% of Santos’ Scope 3 emissions, aligning with its broader environmental goals.
While these developments have bolstered investor confidence, evident from a recent 2.4% rise in the company’s share price, challenges persist. Activist shareholder groups have filed a Federal Court case, alleging inaccuracies in Santos’ clean energy and zero-emissions hydrogen claims.
Santos remains focused on delivering shareholder value through its revised policies, production growth, and environmental initiatives, while addressing market and regulatory challenges.
