Santos Ltd (ASX:STO) will cut about 10% of its workforce and undertake a strategic review of its Australian integrated oil and gas portfolio after reporting a sharp fall in annual profit, as the energy major pivots from heavy project spending to cash generation.
The Adelaide-based company outlined the measures alongside its full-year results, with managing director and chief executive Kevin Gallagher saying Santos was “targeting a headcount reduction of around 10%, rightsizing the business” as key growth projects shift into steady-state operations.
With just over 4000 employees listed in its latest annual report, the reduction points to roughly 400 roles being affected.
The move comes as Santos transitions the Barossa gas project and Darwin LNG from construction into production and approaches first oil at the Pikka development in Alaska. The company is moving beyond peak capital expenditure and positioning the new assets to drive output and free cash flow.
Cash generation focus after takeover talks collapse
As part of its 2026 priorities, Santos also confirmed it would conduct a strategic review of its Australian integrated oil and gas portfolio. While no detail was provided on timing or scope, the announcement is likely to prompt speculation around potential asset sales or a reshaping of its domestic footprint.
The operational reset follows weaker financial results for the year. Statutory net profit after tax fell 33% to $818 million, while underlying profit declined 25% to $898 million, reflecting softer realised prices and inflationary cost pressures. Revenue eased to $4.9 billion from $5.4 billion a year earlier.
Gallagher said the result highlighted the resilience of Santos’ base business, built on a disciplined, low-cost operating model introduced in 2016. The company reiterated its target of maintaining a free cash flow break-even below $35 per barrel of oil equivalent from operations, a threshold it said has been met each year despite inflationary pressures.
Investor focus has intensified following the collapse of takeover discussions with Abu Dhabi’s ADNOC, which had been seen by some as a potential valuation catalyst. With earnings under pressure and the bid no longer in play, shareholders have sharpened their attention on capital discipline, portfolio quality and returns.
Santos shares were down 2.4% to $6.51 in afternoon trade.
Despite the profit decline, the company generated $1.8 billion in free cash flow from operations for 2025 and declared total dividends of US23.7 cents per share, returning $770 million to investors. The board cited a strengthened balance sheet and reduced project risk following the first cargo from Barossa and Darwin LNG in early 2026.
Production is forecast to rise to between 101 million and 111 million barrels of oil equivalent in 2026 as Barossa and Pikka ramp up. Barossa is expected to underpin long-term LNG supply through Darwin, while Pikka phase one is targeting first oil in the first quarter of 2026 before building to plateau output.
Santos said the transition of its major projects into production, combined with cost savings and portfolio optimisation, is intended to support stronger cash flow and shareholder returns after a year of softer earnings.