Santos has released its 2Q26 report, with financial and operating updates.

Disciplined delivery as projects ramp-up

• Barossa is now producing at 97% of planned rates, with two project cargoes loaded towards the end of the quarter, with a current cadence of cargoes approximately every eight days.
• Pikka phase 1 is progressing toward plateau, with the initial set of production wells currently online delivering gross production of approximately 23 000 bpd.
• Seawater injection for reservoir pressure support and additional production wells are expected to come online in the coming weeks. Plateau production of approximately 80 000 bpd (gross) is targeted for 3Q26, with first sales revenue expected in August.
• Production of 23.1 million boe for 2Q26, a 3% increase on the prior quarter, with first-half production of 45.6 million boe. 2H26 production expected to increase around 20 – 30% on the first half.
• Higher realised LNG pricing combined with expected production uplift are likely to drive free cash flow in 2H26.

Financial performance

• Sales revenue of US$1349 million for 2Q26, an increase of 6% on the prior quarter.
• Free cash flow from operations of ~AUS$378 million for the first half. This has been impacted by one-off Barossa and Pikka commissioning costs, timing of cargo movements across the half-year reporting date, and an under-lift position in PNG of approximately 1.3 million boe which is expected to reverse in the second half.
• Barossa and Pikka together recorded a combined free cash flow from operations loss of ~AUS$151 million for the first half, including the cost of cargoes purchased from third parties during commissioning.
• Cash flow was impacted by cargo movements timed around the 30 June cut-off: two Barossa and three PNG equity marketed cargoes were lifted before 30 June with ~AUS$300 million proceeds due to be received shortly after quarter end.
• Santos also received a prepayment of ~AUS$200 million on 1 July following execution of its 200 PJ domestic gas sales agreement with the South Australian government, proceeds of which will be used to fund the Moomba Central Optimisation (MCO) project. Santos also expects to receive the revenue for the PNG underlifted volumes (1.3 million boe) in the second half.
• CAPEX was 20% below 1H25 reflecting the transition from Barossa and Pikka major project development to commissioning and operations.
• Realised LNG pricing was AUS$11.21/million Btu during the quarter, up 4.9% on the prior quarter. This was achieved despite the first quarter JCC price averaging AUS$67/bbl – the lowest JCC price since 2022. The majority of Santos’ LNG contracts reflect sales on an industry-standard three-month pricing lag. JCC average pricing has subsequently lifted to more than AUS$100/bbl in 2Q26, which is expected to drive higher realised LNG pricing and cash flow in the third quarter.

Operating performance

• PNG LNG plant reliability remained above 98% during the second quarter, delivering an annualised run rate of 8.7 million tpy.
• GLNG upstream production was stable, averaging 703 TJ/d (gross), with the Roma field achieving record daily production of 230 TJ/d (gross).
• Moomba carbon capture and storage reached 2 million t of CO₂-e safely and permanently stored since start up in September 2024, and the Moomba Plant achieved reliability of more than 99% for the second quarter.
• Santos took a final investment decision (FID) on the Agogo Production Facility (APF) tie-in project in Papua New Guinea in May 2026. The APF project is targeting first gas in 2Q28, and is expected to deliver an internal rate of return (IRR) greater than 50% with a payback period of less than four years from FID.
• Santos also reached FID on the PNG LNG oil infill drilling campaign, with drilling scheduled to commence in 4Q26. This project is targeting an IRR of greater than 30%, and the oil wells are convertible to gas as APF tie-in comes online.
• Papua LNG remains on track for FID decision in 4Q26 with key regulatory approvals secured and the government-led Development Forum having commenced in July, a key milestone ahead of FID.
• Santos secured regulatory approval for its 2026 – 2027 Beetaloo Basin appraisal campaign, with two appraisal wells expected to commence drilling in 3Q26.
• Santos executed a 10-year, 200 PJ gas sales agreement (2030 – 2040) with the South Australian government on 29 June 2026 for the South Australian Strategic Gas Reserve. The prepayment, received on 1 July 2026, will support Santos’ capital investment in the MCO project.

Santos Managing Director and CEO, Kevin Gallagher, said the June quarter demonstrated strong operational performance, resulting in production growth and disciplined capital allocation. However, the first half was shaped by challenges during the final stages of commissioning and ramp up at the Barossa and Pikka projects, and the timing of cargo receipts, with five equity marketed cargoes lifted before the end of the reporting period and receipts following shortly after the end of the half.

“Production increased towards the end of the second quarter as Barossa ramped up and Pikka came online, with Barossa now producing at 97% of planned rates. The challenges encountered during commissioning activities have essentially delayed our transition to a higher production, higher cash flow generating portfolio, until the 2H26. Subsequently, we expect continued strong production growth through the third quarter as Barossa maintains steady state production and Pikka grows to plateau rates.

“2026 was always going to be a transition year for Santos with two major development projects coming online and significant commissioning activities to be completed before establishing steady-state performance at both assets. Our initial production guidance had a large band of uncertainty as a result. However, with Barossa’s ramp-up nearing completion and Pikka’s first wells online, we have narrowed our production guidance to 99 – 105 million boe for the full year.

“This quarter, we also took FID on two high-return brownfield projects in PNG: the Agogo Production Facility tie-in, targeting an internal rate of return above 50%; and the PNG LNG oil infill drilling campaign, targeting an internal rate of return above 30%. In the Cooper Basin we also took FID on the Moomba Central Optimisation project during the first quarter, another high return project which should result in a significant reduction in unit production cost in the Cooper Basin once online. These projects demonstrate our disciplined approach to capital efficiency by growing our portfolio through quick pay-back, high-return investment opportunities.

“Our realised LNG price of AUS$11.21 per million Btu remained strong, particularly against a backdrop of multi-year low JCC-linked pricing in 1Q26 which directly drives second-quarter realised pricing. We expect stronger realised LNG pricing in the second half of the year, driven by average JCC of more than AUS$100/bbl in the second quarter with the majority of our LNG contracts having an industry-standard three-month lag in pricing.

“The board will consider the timing of expected cash flow over the full year in determining the amount of the interim dividend, with first-half free cash flow impacted by a number of timing items that are not reflective of the company’s underlying cash flow capacity,” Gallagher concluded.

Read the article online at: https://www.lngindustry.com/liquid-natural-gas/23072026/santos-announces-2q26-report/