Santos tightens 2026 output guidance as Barossa and Pikka enter production phase
Commissioning costs weighed on first-half free cash flow, but second-half outlook strengthens with Barossa operating at 97% of planned rates and Pikka targeting 80,000 barrels per day plateau.
Santos has narrowed its full-year 2026 production guidance to between 99 million and 105 million barrels of oil equivalent (mmboe), reflecting the successful commissioning of its Barossa LNG project in Australia and the Pikka oil development in Alaska. The Australian energy producer anticipates that second-half production will exceed first-half output by approximately 20% to 30%, driven by the ramp-up of these major assets.
Barossa is currently operating at 97% of its planned production rates, with LNG cargoes being loaded roughly every eight days. Meanwhile, Pikka’s initial production wells are delivering approximately 23,000 barrels per day. The company targets a plateau output of 80,000 barrels per day (gross) for Pikka in the third quarter, with first sales anticipated in August.
Second-quarter production rose 3% quarter-on-quarter to 23.1 mmboe, bringing first-half output to 45.6 mmboe. Sales revenue increased 6% to $1.35 billion during the same period. However, first-half free cash flow from operations was reported at approximately $378 million, impacted by one-off commissioning costs at Barossa and Pikka, the timing of LNG cargo receipts, and temporary under-lift positions in Papua New Guinea.
Santos indicated that these headwinds are expected to reverse in the second half, supporting stronger cash generation. The company also noted that rising LNG prices are likely to boost earnings, having realized $11.21 per mmBtu in the quarter. With most LNG contracts linked to the Japan Crude Cocktail benchmark and a three-month pricing lag, the rise in JCC prices above $100 per barrel during the second quarter is expected to lift realized prices in the third quarter.
Beyond the production ramp-up, Santos approved two new brownfield investments in Papua New Guinea: the Agogo Production Facility tie-in project, targeting first gas in the second quarter of 2028 with an expected internal rate of return above 50%, and a PNG LNG oil infill drilling campaign expected to deliver returns above 30%. The company also secured regulatory approval for its 2026-27 Beetaloo Basin appraisal drilling campaign.
The Papua LNG project remains on track for a final investment decision in the fourth quarter of 2026 following key regulatory approvals. Operationally, PNG LNG plant reliability remained above 98%, while the Moomba carbon capture and storage project has surpassed two million tonnes of permanently stored CO2 since start-up.
Chief Executive Kevin Gallagher stated that the first half reflected the challenges of commissioning two major projects simultaneously, but the transition toward a higher-production, higher-cash-flow portfolio is now underway.
