Santos has announced a new strategy to prioritize liquefied natural gas (LNG) and oil production in three core regions, including Alaska and Papua New Guinea. The company's CEO, Kevin Gallagher, emphasized the importance of focusing on major oil and LNG production across these regions. By leveraging existing infrastructure on Tier-1 basins, Santos aims to drive scale and profitability in its operations.
The company's decision to prioritize LNG and oil growth is a response to the changing market landscape and policy environment in Australia. The strategic review of Santos' Australian domestic oil and gas business has taken place amidst unprecedented market volatility. This move will allow Santos to optimize capital allocation and strengthen its balance sheet resilience.
Santos will focus on fulfilling domestic gas supply commitments and decommissioning obligations, with reduced capital intensity. The company's investment strategy will be concentrated in the Moomba Central fields of the Cooper Basin. Development in other areas is being deprioritized, which is expected to reduce expenses by $300 million from 2027 to 2030 and $150 million annually thereafter.
The repurposing of Santos' domestic business allows for better capital allocation and strengthened balance sheet resilience. The company remains committed to its capital allocation framework that will drive shareholder value. At least 60% of all-in free cash flow is expected to be returned to shareholders.
Santos has also announced plans to cut about 10% of its staff and review its Australian Integrated Oil and Gas portfolio in February. This move is part of the company's efforts to optimize its operations and improve efficiency. The reduction in staff will help reduce expenses and improve profitability.
The development comes after Santos achieved first oil from the first phase of its Pikka development project in Alaska, with first sales revenue expected within two to three months. This milestone marks an important step forward for the company's growth strategy.
Santos' shares rose as much as 1.8% to A$80.08 following the announcement of its new strategy. The benchmark stock index.AXJO traded 0.5% lower. The positive reaction from investors suggests that Santos' efforts to prioritize LNG and oil production are expected to drive growth and profitability.
The company's focus on LNG and oil expansion is a response to the current market conditions and the need for diversification. By prioritizing these regions, Santos aims to reduce its dependence on any one market and improve its overall resilience.
Santos' new strategy demonstrates the company's commitment to growth and profitability. The prioritization of LNG and oil production in three core regions is expected to drive scale and profitability, while reducing net debt by $2.5 billion by 2030.
