Santos Ltd (ASX: STO) shares are edging lower on Thursday morning.
At the time of writing, the energy giant's shares are down 1% to $6.28.
This follows the release of the company's quarterly update.
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Santos shares fall on quarterly update
For the three months ended 30 September, Santos generated US$300 million in free cash flow, taking year-to-date free cash flow from operations to approximately US$1.4 billion.
This was underpinned by the production of 21.3 million barrels of oil equivalent (mmboe) during the quarter, bringing total year-to-date output to 65.4 mmboe, which is broadly in line with the same period last year.
Sales revenue reached US$1.1 billion for the quarter, lifting year-to-date revenue to US$3.7 billion. This was supported by a 1% lift in sales volumes year-to-date to 21.5 mmboe.
Major project milestones
The standout progress this quarter came from Santos' two major growth projects: Barossa LNG and Pikka Phase 1.
The Barossa project achieved first gas into the BW Opal floating production, storage, and offloading vessel, marking a significant milestone as production commissioning begins. The company expects the first LNG cargo to be shipped before the end of 2025.
Meanwhile, the Darwin LNG facility, which will process Barossa gas, achieved ready-for-start-up status in August following successful life-extension works.
In Alaska, the Pikka Phase 1 oil project is now more than 95% complete. There were 22 wells drilled, including a company record of nearly 27,000 feet. Santos expects first oil in early 2026, with production ramping up to a plateau of around 80,000 barrels per day by mid-2026.
Together, Barossa and Pikka are expected to increase Santos' total production by about 30% by 2027, compared to 2024 levels.
Santos' managing director and CEO, Kevin Gallagher, was pleased with the quarter. He said:
Our focus on operational excellence and our disciplined low-cost operating model has been crucial to achieving these results. With around $1.4 billion of free cash flow from operations generated year-to-date, Santos is well positioned to deliver strong shareholder returns with imminent production growth as we bring Barossa LNG online and move closer to the start-up of Pikka.
Outlook
Looking ahead, Santos lowered its full-year production guidance to between 89 and 91 mmboe (from 90-95 mmboe), reflecting minor delays at Barossa and temporary disruptions from flooding in the Cooper Basin.
Capital expenditure and cost guidance remain unchanged, with management reaffirming a focus on delivering efficiency improvements and maintaining balance sheet strength.
Commenting on its outlook, Gallagher said:
Santos has a clear strategy, a high-reliability, low-cost operating culture and significant growth optionality across our global portfolio. I am confident that with the discipline of our capital allocation framework, Santos will be well positioned over the next few years to deliver sustainable results and strong returns for our shareholders.
