Santos Ltd (ASX: STO) shares are slipping today.
Shares in the S&P/ASX 200 Index (ASX: XJO) energy stock closed yesterday trading for $6.83. In late morning trade on Friday, shares are changing hands for $6.78 apiece, down 0.7%.
For some context, the ASX 200 is up 0.2% at this same time.
Santos shares are now right about where they kicked off 2025. Notably, however, the share price remains down 11.4% since market close on 17 September.
That date's important, because on 18 September, investors awoke to news of the unexpected withdrawal of the roughly $30 billion takeover offer from the XRG Consortium. With just days left before the final decision was meant to be made, the Abu Dhabi-led consortium walked away from its US$5.62 per share bid.
But according to the team at Macquarie Group Ltd (ASX: MQG), the year ahead should be much more profitable for shareholders.
Atop expecting Santos stock to materially outperform, the ASX 200 energy share trades on a partly franked 5.4% dividend yield.
Here's why Macquarie is bullish on the company moving forward.
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Santos shares at 'extraordinary value'
In a new Australia Energy report, Macquarie forecast lower LNG and oil prices in the year ahead.
"We lower Brent oil, US gas, spot LNG (JKM) forecasts over the next five quarters (below consensus), in coordination with our Macro Strategy team," the broker said. "Lowering spot LNG prices ~US$2/MMBtu over next three quarters; winter balances look more comfortable. 2027/28E still look very tough."
Of the four big ASX 200 energy stocks, Macquarie said it prefers Santos shares in upstream energy, with an outperform rating.
The broker has a neutral rating on Karoon Energy Ltd (ASX: KAR) and Woodside Energy Group Ltd (ASX: WDS) shares. And it has an underperform rating on Beach Energy Ltd (ASX: BPT).
Commenting on its outperform rating for Santos, Macquarie noted:
Implied oil px US$51/bbl. Lower oil and LNG prices have hit 2026E EPS (-24%), which reduces FCF yield to 9% and our estimated dividend yield to ~6%. Following the recent deal-break (with the XRG-led consortium), we see (i) extraordinary value and (ii) a series of catalysts to drive STO share performance organically: Barossa first LNG cargo (4Q25), Pikka first oil (1Q26), and PNG LNG debt final payment (2Q26), followed by a combination of steady deleveraging (back to within target by end-2026E) and rising dividend yield (7% for 2027E). Gas market review is a current risk.
The broker has a price target of $8.25 on Santos shares. That represents a potential upside of 21.7% from current levels. And it doesn't include those upcoming dividends.
