Santos Ltd (ASX:STO) recorded a pronounced decline in profitability for the 2025 financial year, with management attributing the drop primarily to weaker commodity prices. The Australian oil and gas producer reported an underlying net profit after tax of $898 million, down 25% from the prior period, while revenue fell 8% to $4.94 billion.
The company said the earnings compression was largely due to a steep fall in commodity prices through 2025. Oil prices slid by almost 20% during the year amid growing concerns around weakening demand and the risk of an oversupplied market in 2026, which translated into lower prices realized on Santos’ sales.
Management noted that the impact of softer prices was partly mitigated by higher sales volumes, which provided some offset to the decline in realizations. The company also set out cost-reduction measures as it looks to rightsize operations after a period of significant expansion.
In a statement, CEO Kevin Gallagher said the company was "targeting a head count reduction of around 10 per cent" as part of efforts to cut costs and align the organisation with a lower-cost operating model. The reduction follows a major growth phase and is intended to slim operating expenditure while Santos executes its production ramp-up plans.
Santos declared a final dividend of 10.3 cents, unchanged from the prior year.
Looking ahead, the company said production is expected to rise by 25% to 30% by 2027 as output from its Braossa and Pikka projects is increased. Santos also reported that it had been granted new gas exploration permits by the Queensland government, a development that comes amid broader calls to boost energy supplies to meet rising demand.
Santos remains a large operator in Australian onshore and offshore oil and gas, with assets in Australia and Papua New Guinea. The company is also a material gas supplier to parts of Asia, including China, Japan, Singapore, and Taiwan.
Key points
- Underlying net profit after tax fell 25% to $898 million; revenue down 8% to $4.94 billion.
- Company to pursue a headcount reduction of around 10% and maintain a low-cost operating model.
- Production slated to increase 25% to 30% by 2027 as Braossa and Pikka projects ramp up; new Queensland gas permits awarded.
Risks and uncertainties
- Persistently weak commodity prices could continue to reduce realized sales prices and pressure margins, affecting the oil and gas sector.
- Cost-savings initiatives including a roughly 10% staff reduction carry execution risk and potential operational impacts during the transition.
- Market risks related to demand and supply dynamics in 2026 may influence future price and revenue outcomes for producers and energy markets.
Note: The article reflects company-reported figures and statements regarding profit, revenue, dividend, workforce changes, production guidance, project ramp-up, and permit awards.