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Santos 3Q24 results

3Q24 results saw Santos experience a decline in production and revenue due to planned maintenance in WA, with earnings to be reported at the half and full year. Santos Energy Solutions (SES) capex fell 15% to $41m, while upstream rose 11% to $668m, both driven by WA projects, with no change to 2024 guidance.

Injection at Moomba CCS has begun, with a capacity of 1.7 Mtpa and a target to capture 250,000 tonnes in FY24, marking the launch of Santos Energy Solutions’ first offering beyond midstream processing. While smaller in size, Santos has CCS ambitions comparable to European majors, targeting 10 Mtpa of storage by FY30.

The annual Investor Briefing Day is scheduled for Tuesday, 19 November.

Our view

Santos solely relies on CCS technologies as a revenue source for its low-carbon offerings. With the first phase of Moomba CCS complete, the company has yet to indicate earnings investors can expect from the provision of CCS as a service and the sale of generated ACCUs.

Investors engaging with Santos should ask for:

1) Quantification of levers to decarbonise:

• What alternative transition strategies will Santos pursue if it cannot establish a viable business case for fossil-based fuels like synthetic methane and CCS as a service? Given these solutions are central to Santos’ strategy, what is the contingency plan if they fail to scale commercially or meet emissions targets?

• Will Santos commit to aligning emissions reporting with its financial year to improve clarity? The current July-June emissions reporting cycle creates misalignment with calendar year financials, hindering consistent analysis.

2) Increases in low-carbon investment:

• Can Santos quantify the total cost, earnings potential, and emissions implications of producing synthetic methane and offering carbon capture services? Investors need clarity on whether these initiatives justify investment and align with long-term decarbonisation goals.

• What measures will Santos take to monitor and manage potential liabilities if the Moomba CCS project underperforms? Given that the project is expected to capture emissions from external sources, what safeguards are in place should it fail to deliver the intended results?

Key takeaways