Santos’ investor update reflects progress in scaling back aggressive production targets. However, its strategy is now firmly locked in on oil and gas under its new capital allocation framework, while doubling down on CCS services as its sole meaningful transition offering with a new 14 Mtpa third-party storage target by FY40.

Santos’ FY24 production, unit cost, and capital expenditure guidance remain unchanged. The company will provide 2025 guidance in its 4Q24 report in January 2025

Our view:

Santos’ strategy is reliant on CCS as its primary low-carbon lever, with limited progress on diversifying revenue streams or addressing its significant scope 3 emissions. The company has yet to indicate earnings investors can expect from the provision of CCS as a service and the sale of generated ACCUs.

Priority questions ahead of 2025:

01 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.

02  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: