It has already been a huge year for Santos Ltd (ASX: STO) shares.
The Santos share price is down 1.72% to $8.58 at the time of writing, but the stock is still up almost 40% since the start of 2026.
Just yesterday, it traded as high as $8.75, a level not seen since late 2014.
Yes, buying after a run like that can feel uncomfortable. Nobody wants to turn up after most of the gains have already been made.
But despite the much higher share price, I'd still be happy buying Santos today.
Here's why.
Image source: Getty Images
Production is about to step up
The biggest reason is that Santos is entering a very different stage of its growth phase.
After years of heavy spending, major projects such as Pikka in Alaska and Barossa are now producing and ramping up.
Pikka achieved first oil in May and has already reached around 40,000 barrels of gross production per day.
Santos is targeting roughly 80,000 barrels per day by the end of the third quarter.
Barossa is starting to contribute as well, giving the company another source of production growth.
Santos expects second-half production to be around 20% to 30% higher than the first half.
And that's the part I really like.
The company has already done much of the expensive work.
Investors should now start to see greater benefits from those projects, including higher production and stronger cash flow.
The next project is already lined up
Pikka and Barossa aren't the end of it either.
Santos recently agreed to increase its interest in the Papua LNG project by an additional 3.3% for approximately US$189 million.
That gives the company another sizeable growth project beyond those already contributing.
Papua LNG is still further down the track, but it adds another potential production source without Santos having to rely too heavily on Pikka and Barossa.
The company also has operations across Australia, Papua New Guinea and the United States, which gives it a decent spread of assets.
And with oil prices above US$100 a barrel, Santos is getting some help from higher energy prices as well.
Would I worry about the valuation?
TipRanks shows 9 ranked analysts covering Santos, with 7 buys and 2 holds.
The average 12-month price target is $8.64, which is nearly identical to the current share price.
But there are more bullish targets out there.
Bernstein sits at $10.10, while Citi has a $9.35 target and Macquarie recently lifted its target to $9.25.
So, I wouldn't buy Santos expecting another 40% gain in the next few months.
My interest is more about what the business could look like over the next few years.
