Santos, Australia's second-largest gas producer, has announced significant organizational changes, including a 10% reduction in its workforce and a strategic review of its Australian gas assets. This move comes as the company faces declining profits and shifting market conditions.
Workforce Impact and Strategic Review
Approximately 400 employees out of Santos' workforce of just over 4,000 will be affected by the layoffs. The company describes this as "rightsizing" the business, following the completion of major projects like Barossa and Darwin LNG, which have transitioned from growth phases to core operations.
Simultaneously, Santos will conduct a strategic review of its Australian gas portfolio, including assets in the Cooper Basin, Western Australia, and the Narrabri Gas Project in New South Wales. This review raises questions about potential asset sales or co-investment opportunities to share risk.
Financial Performance and Market Reaction
Santos reported a 25% decline in underlying profit to US$898 million (A$1.3 billion) for calendar 2025, attributed to soft commodity prices. Despite an increase in production volumes, sales revenue fell from US$5.4 billion (A$7.6 billion) in 2024 to US$4.9 billion (A$6.9 billion) in 2024.
Investors reacted negatively, with Santos shares falling around 2.5% to $6.50 in early afternoon trading following the announcement.
Leadership Perspective and Future Outlook
CEO and Managing Director Kevin Gallagher emphasized the company's disciplined approach, stating, "Our base business has performed exceptionally well with production maintained and the best unit production costs in a decade." He added that Santos is positioned to grow with financial flexibility while reducing gearing.
Guidance for calendar 2026 remains unchanged, with Santos targeting sales volumes of 101-111 million barrels of oil equivalent and projected per unit costs of $6.95 to $7.45.
Legal and Environmental Context
The announcement follows a recent Federal Court decision that dismissed a shareholder advocacy group's case against Santos over greenwashing allegations related to its net zero claims and "clean" energy production. The Australasian Centre for Corporate Responsibility had accused Santos of misleading conduct, but the case was unsuccessful.
Santos will pay a final dividend of 10.3 US cents unfranked, bringing the full-year dividend to 23.7 US cents per share, representing 43% of free cash flow from operations.
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