Key Highlights

  • Production reached 26.3 mmboe in the September quarter, about 14 per cent above the June quarter.
  • Year-to-date production reached 71.9 mmboe, roughly 10 per cent above the same period last year.
  • Sales Revenue was about $2,006 million, up 49 per cent on the second quarter.
  • Full-year 2026 production guidance was narrowed to 99 to 102 mmboe from 99 to 105 mmboe.

What changes for an oil and gas producer when two large projects it has spent years building finally start delivering? For Santos (ASX:STO), the answer is visible in its third-quarter 2026 report, released on 22 October 2026: record quarterly production, a sharp rise in sales revenue and free cash flow, and a shift in management attention from construction towards running the new Assets steadily and deciding on the next growth step in Papua New Guinea. All figures below are in US dollars and come from that report unless stated.

The quarter in numbers

Santos produced 26.3 million barrels of oil equivalent (mmboe) in the September quarter, about 14 per cent more than the June quarter's 23.1 mmboe and 23 per cent more than the 21.3 mmboe of the third quarter of 2025. Year-to-date production reached 71.9 mmboe, roughly 10 per cent above the same period last year. Sales Volume was 26.4 mmboe for the quarter.

Sales revenue was about $2,006 million, up 49 per cent on the second quarter and 78 per cent on a year earlier. Free Cash Flow from operations was about $1,069 million, and after Capital Expenditure of $511 million the quarter produced free cash flow of about $957 million. For the first nine months, free cash flow was about $839 million. CEO Kevin Gallagher described the result as an inflection point and said he expected more to come in the fourth quarter. That is management's expectation rather than guidance, and quarterly cash flow will move with oil and LNG prices.

Why the new projects matter

Barossa is the offshore gas field north of Darwin that feeds the Darwin LNG plant. The report describes steady production in the third quarter, with Darwin LNG reliability of 98.5 per cent, feed gas at a record of roughly 600 million standard cubic feet per day, and 10 LNG cargoes plus two condensate cargoes lifted.

Pikka, in Alaska, is the more volatile part of the story. Gross production was about 69,000 barrels of oil per day at the end of September, compared with about 23,000 at the end of June. Instantaneous rates exceeded 80,000 barrels per day before curtailments, and the plan is to hold near 70,000 temporarily before ramping to 80,000. Its first cargo was lifted in August, and five cargoes were lifted in the quarter, two carrying Santos Equity volumes.

Guidance: narrowed, not raised

Full-year 2026 production guidance was narrowed to 99 to 102 mmboe, from 99 to 105 mmboe. Sales volume guidance was narrowed to 102 to 105 mmboe from 102 to 108. Capital expenditure guidance of roughly $1.95 billion to $2.15 billion, unit production cost of $6.95 to $7.45 per Barrel of Oil Equivalent and Depreciation and Amortisation of about $2.2 billion were all unchanged.

For readers, the key implication is that the year-to-date total of 71.9 mmboe needs only about 27 to 30 mmboe in the fourth quarter to land in the guided range, a level broadly consistent with the third quarter's run rate.

Papua New Guinea: the next decision

PNG LNG produced 10.2 mmboe in the quarter, flat on the second, with plant reliability above 98 per cent and an annualised run rate of 8.7 million tonnes per annum. The PNG segment generated $845 million of sales revenue. The larger question is Papua LNG. Santos plans a final Investment decision in the fourth quarter of 2026. After the PNG State's back-in, Santos would hold 21 per cent, subject to approvals and the decision itself, and operatorship has transferred to ExxonMobil after quarter end. A Tier 1 Benefit-Sharing Agreement was signed in early October.

A final investment decision commits capital over many years, so the choice matters for gearing and for the pace of any future Shareholder returns. Until it is made, it remains a plan rather than an approved project, and slippage is possible.

The same applies to the other approvals mentioned in the report, which are conditions rather than certainties and could shift timing if regulators or counterparties take longer.

Portfolio moves and low-carbon activity

Other items in the report show a portfolio being tidied while a gas position is built. The Mahalo joint venture divestment is complete. Santos is progressing the Acquisition of an interest in the Greater Meridian coal seam gas assets in Queensland, with a 30 per cent Santos stake and completion targeted for late 2026.

At Moomba in South Australia, the carbon capture and storage project injected 182.2 thousand tonnes of CO2-equivalent in the quarter, below the 237.5 thousand in the second quarter and 214.0 thousand a year earlier. Cumulative storage since start-up in September 2024 exceeds 2.5 million tonnes.

Sector context and risks

Santos competes with Woodside and international producers for LNG customers, and its fortunes depend heavily on oil and LNG prices. Pikka adds weather and logistics risk at a remote Alaskan site.

The main risks are specific. Pikka could ramp more slowly than the company wants, as the narrowed guidance indicates. A sustained fall in oil prices would pressure free cash flow. Papua LNG carries large capital, political and execution risk. Approvals for transactions, including the increased stake in Papua LNG and the Greater Meridian acquisition, are not certain. The report also gives no net Debt or gearing figure, so Balance Sheet capacity cannot be assessed from it alone; that should be checked in the full-year results.

What to watch

The fourth quarter holds the main catalysts: the Papua LNG decision, Pikka reaching and holding 80,000 barrels per day, installation work for the Kutubu floating storage vessel, and the Greater Meridian completion.