RBC Capital has re-rated Santos Ltd., moving the stock from Sector Perform to Outperform and increasing its price objective to AUD7.50 from AUD6.75. The upgrade comes as Santos has produced a strong market performance recently, with the share price up roughly 20% year-to-date and nearly 26% over the last 12 months.
The analyst team highlighted Santos’ ability to deliver solid results that tracked expectations while operating from a low-cost base, even amid softer commodity prices. Management left its 2026 guidance intact with no revisions, a point noted by RBC as evidence of operational stability.
Market-data referenced by analysts indicates Santos may still trade below its Fair Value estimate. Additional investor-focused metrics cited include the company’s uninterrupted dividend record over eight consecutive years and unusually low price volatility, reflected in a five-year beta of 0.06.
Central to the bullish case is the company’s production outlook. RBC is forecasting production to expand by more than 25% by 2027 compared with 2024 base levels. That projection rests in part on the assumption that a final investment decision for the Papua LNG project will be taken around mid-2026.
On cash flow, Santos reported free cash flow from operations of $1.78 billion, effectively flat year-over-year. That stability persisted despite lower commodity prices and restoration charges of $286 million in the reporting period, versus $319 million the prior year. Analysts flagged the company’s all-in free cash flow break-even at $58.90 per barrel as a current baseline.
Santos has set a target to lower that all-in free cash flow break-even to a $40 to $50 per barrel range through to 2030. The company also quantified free cash flow sensitivity to changes in Brent crude: a $10 per barrel movement is expected to translate to $550 million to $600 million in free cash flow impact after the Barossa and Pikka projects reach full contribution, up from an estimated $400 million sensitivity in 2024.
This analysis concentrates on the rating change, production trajectory and cash flow sensitivity disclosed by the company and assessed by RBC. Where the source material is limited, this report reflects those constraints rather than extrapolating beyond provided figures and assumptions.