Santos Ltd., an oil and gas production company, has revealed a revised capital allocation strategy targeting a minimum of 60% returns of complete free cash flow to shareholders commencing in 2026. This update follows an extensive period of capital investment focused on initiating significant new production from the Barossa and Pikka developments.
During the Investor Day event in Sydney, the company's Managing Director and CEO, Kevin Gallagher, stated, "Starting in 2026, we will guarantee that at least 60% of total free cash flow is returned to our shareholders. Moreover, when our debt level falls below the optimal range of 15-25%, we plan to allocate 100% of free cash flow to shareholders through dividends and/or share buybacks."
Additionally, Santos disclosed its objective of expanding its carbon storage business. By 2040, the company aims to establish and operate a commercial carbon storage venture capable of permanently storing approximately 14 million tonnes of third-party CO2e per year. This target correlates to about 50% of Santos' 2023 equity Scope 3 emissions stemming from the combustion and utilization of its products.
With the commencement of the Barossa and Pikka projects, Santos anticipates a production increase exceeding 30% by 2027 in comparison to 2024. This will substantially reduce unit production costs, thereby ensuring robust free cash flow generation through various commodity price cycles.
The long-term market forecast for liquefied natural gas (LNG) in Asia, domestic gas within Australia, and other related liquids remains promising, extending to 2040 and beyond.
Santos maintains its 2024 projections for production, unit costs, and capital expenditure, with no expected changes to these forecasts.
