Well, good morning, ladies and gentlemen, and fellow shareholders. As Chair, it's my pleasure to welcome you to the 2026 Annual General Meeting of Santos Limited. My name is Keith Spence. It's great to see so many of you here at the Adelaide Convention Centre today. Our live webcast is also underway. I begin by acknowledging that we're meeting on the traditional lands of the Kaurna people, and I pay my respects to their elders, past and present. I also acknowledge the traditional owners and indigenous people everywhere we operate, and thank them for working with us.
I hope you enjoyed the opening video and are as proud as I am of the outstanding progress we've made over the year, progressing and commissioning our major Barossa and Pikka projects, and continuing to build strength, efficiency, and lasting resilience into our base business, in addition to our continued success at Moomba CCS. Kevin and I will talk more about the year that's been during the business of the meeting. Please note that the values referred to are U.S. dollars unless we otherwise state. Before we commence the business of the meeting, please familiarize yourselves with the evacuation procedures shown on the screen above. I confirm that a quorum is present and now formally declare the meeting open. Let me commence our business for today with some introductions.
Fellow members of the Santos board here today include, from my far left, Independent Non-Executive Directors John Lydon, Janine McArdle, Musje Werror, Vanessa Guthrie, and seated immediately to my left, our CEO and Managing Director, Kevin Gallagher. Next to me on my right is Amelia Senneck, our Company Secretary, and on Amelia's right are Independent Non-Executive Directors Mike Utsler and Vickki McFadden. A number of our executives are also present at today's AGM. On behalf of the board and our executive management team, we look forward to catching up with you for some light refreshments once the meeting is concluded. Also present are Richard Bembridge, Darren Lewsen, and Fiona Hancock, representing our independent auditor, Ernst & Young. To allow everyone attending the meeting an opportunity to vote, I now open the polls for all resolutions set out in the notice of meeting.
Shareholders and proxy holders can vote using their smartphone, following the instructions on the registration card provided by Computershare, which are also shown on the screen above. Please make yourself known to a Computershare representative if you need any assistance with casting your votes. I invite you to start submitting your votes on your device from this point onwards during the meeting. You can vote on all the resolutions at any point during the meeting, and you don't need to wait until that relevant item of business. Votes can be changed up until the time the polls are closed. To ensure there's sufficient time for all votes to be cast, the polls will be closed 10 minutes after the conclusion of today's meeting. As advised in the notice of meeting, I will vote all available undirected proxies in favor of all resolutions.
I'll display the proxy voting outcomes for each item of business before moving to the next item. The formal results of the polls will be notified to the ASX after the meeting and they'll be posted on Santos' website. You may have seen when you entered this morning that there's a question registration table. Many of you have already registered to ask questions for items of business today, and these will take precedence. For those who wish to ask a question today but are yet to register, please proceed to the question desk located in the adjoining room. The desk will remain open during the meeting, and we welcome you to register to ask your questions at any time. If you have registered to ask a question at the appropriate item of business, you'll be called to ask your question.
If time permits, you may ask further questions on an item of business. However, we ask that you initially restrict yourself to one question at a time on each item of business to ensure that as many shareholders as possible have a chance to speak. There may not be sufficient time available to address all the comments and questions raised. However, I'll provide a reasonable opportunity for shareholders as a whole to ask questions on each item. Further details or comments from the floor may also be considered at the end of the meeting if time permits. If you require more information about the registration process, please see one of the Santos staff members present and they'll be able to assist you. Before we proceed with the formal business of today's meeting, I'd like to reflect on what's been a defining year for Santos.
A year in which the strength of our strategy, the discipline of our operating model, and the dedication of our people have positioned the company for sustainable long-term growth. Under the leadership of our Managing Director and CEO, Kevin Gallagher, and his executive team, Santos has demonstrated the value of an unwavering focus on what we do best, safely and efficiently producing the energy that our customers and communities across Australia and the Asia-Pacific depend on. From continued success in the highlands of PNG, the first cargo from Barossa, key milestones at Pikka, to navigating historic flooding in the Cooper Basin, Santos delivered strong performance. Having completed a phase of intensive capital investment, Santos is now preparing for a 25%-30% increase in production that will deliver a step change in revenue and free cash flow, and ultimately enhance shareholder value.
Our disciplined approach has anchored Santos through many global challenges and market volatility. The current conflict in the Middle East has upended energy markets, making the most significant disruption to core commodity systems since the 1970s, with impact likely to persist for years to come. As a result, Australia's role in ensuring energy security at home and across the region is more critical than ever, and Santos is well-positioned to support this national effort, both domestically and across our Asian markets. Turning to our base business, which delivered a strong operational and financial performance in 2025. We achieved annual production of 87.7 million barrels of oil equivalent, generating revenue of $4.9 billion. Our underlying net profit after tax was $898 million, and we generated strong free cash flow of $1.8 billion from our base business. Importantly, we achieved this while maintaining the best unit production cost in a decade.
This is testament to the rigorous cost discipline that's become the hallmark of Santos under Kevin's leadership. The operational discipline, the rigorous processes, and focus on reliability that derives efficient, low-cost production also underpins safe operations, and I'm pleased to say that our safety performance was equally impressive in 2025. We achieved our best personal safety performance on record, and our process safety performance was the best in 10 years. Safety is a core value at Santos and a non-negotiable expectation of the board. I want to acknowledge every employee and contractor who contributed to this outstanding result. The board remains committed to delivering strong and sustainable returns to you, our shareholders. In 2025, the board approved the payment of a total dividend of $0.237 per share, which is a cash return to shareholders of $770 million, equivalent to 43% of free cash flow from operations.
This reflects the board's confidence in the balance sheet. Following the delivery of our Barossa and Pikka Phase 1 projects, the board's updated capital allocation framework will target returns to shareholders of at least 60% of all-in free cash flow. The framework maintains gearing in the range of 15%-25% and balances shareholder returns with investment in value-accretive production growth and decarbonization. 2025 was a year in which Santos demonstrated its ability to efficiently execute complex, world-class projects while continuing to run the base business efficiently, reliably, and safely. We delivered the Barossa Gas project, a Tier 1 long-life asset, and the Darwin LNG life extension project, shipping the first cargo in early 2026. Barossa Gas will significantly extend the operating life of the Darwin LNG facility and ensure continued supply to our valued customers in Asia.
This achievement is the result of years of planning, engineering, and disciplined project execution, in which Santos overcame the challenges of COVID, global supply chain disruption, uncertain regulatory approvals, and unprecedented litigation. In Alaska, our Pikka Phase 1 project will reach first oil imminently, with ramp-up to plateau production expected around mid-2026. Once at full rates, Barossa and Pikka Phase 1 are expected to lift Santos' production by around 25%-30% by 2027. Turning now to a subject that's of great importance to your board, to our shareholders, and the communities in which we operate, decarbonization and the energy transition. In 2025, Santos achieved its 2030 Scope 1 and Scope 2 equity emissions reduction target five years ahead of plan, underscoring the ambition of our decarbonization targets.
The centerpiece of this success was the Moomba CCS project, one of the world's lowest-cost carbon capture and storage projects, which the board visited earlier this week. Carbon capture and storage is an essential part of the global energy transition that can deliver real emissions reduction at real scale. Since startup, Moomba CCS has stored more than 1.5 million tons of CO2 equivalent, real, permanent, verifiable emissions reduction. We're immensely proud of this project, which positions Santos as a leader in carbon management solutions. We see opportunities to further expand our carbon capture and storage operations through a Northern Australia-Timor Sea CCS hub, supported by vast geological storage capacity. Repurposing our existing infrastructure and through proximity to regional emitters with large CO2 sources. The current conflict has reminded societies and economies around the world of the ongoing importance of both oil and gas in the global energy system.
Historically, energy transitions have taken many decades, depending on the system, the technology, and policy support, and today's energy system is the largest and most complex ever built. Despite the world's best efforts and trillions of dollars of investment over the last 35 years or so, hydrocarbon fuels still make up 80% of the global energy mix, down only around 5% from 50 years ago. There are still limited alternatives for hydrocarbons in many applications. From fertilizers, pharmaceuticals, and plastics, to steel manufacturing and electronic components. We must be pragmatic. The energy transition will take time. Oil and gas will remain critical for the global energy security for decades to come. With material oil and gas resources around our existing infrastructure in PNG, Australia, and Alaska, Santos is well-positioned to grow our production and supply these critical fuels reliably and affordably to our markets in Australia and Asia.
Your board provides rigorous oversight and strategic direction to hold management accountable for performance, and ultimately, to safeguard the long-term interests of you, our shareholders. Over the past year, we've continued to focus on the areas that matter most, safety and sustainability, culture, capital discipline, risk management, returns to shareholders, and the delivery of our strategic priorities. We've maintained a strong and diverse board with the appropriate mix of skills and experience to guide Santos through a complex and rapidly evolving operating environment. We're committed to the highest standards of corporate governance, and we continue to engage constructively and listen to our shareholders, regulators, and other stakeholders. The board also remains disciplined in assessing all proposals against long-term shareholder value. We applied this rigor to the 2025 XRG proposal, prioritizing the best interests of our shareholders.
While the transaction didn't proceed, over recent weeks, our share price has regularly exceeded the XRG proposal, taking into account foreign exchange movements and our full-year dividend. As previously advised, I intend to retire from the Santos board at the conclusion of the annual general meeting in April 2027. This is part of our broader commitment to orderly board renewal, a process which has well progressed, including selecting my successor. A primary responsibility of the board is appointing the CEO and ensuring robust and orderly succession plans are in place. Given the timing of my retirement and the CEO's ongoing commitment to his role, the board expects that the appointment of Santos' next CEO will be a matter for the board and my successor.
Santos is proud to employ people whose remarkable talent and drive goes far beyond their day-to-day responsibilities, qualities that were on full display at our 22nd Environmental, Health, Safety and Sustainability Awards earlier this week. Teams from every corner of the Santos portfolio submitted over 90 nominations across nine categories, showcasing the innovation and passion of our people to deliver safer, more environmentally sustainable, and efficient operations. Pleasingly, 1,400 employees voted in the highly coveted People's Choice Award, an award which in many ways embodies the One Santos team culture. Turning now to the strength of our business, which is well-positioned for future growth. In 2016, the company announced a disciplined operating model to ensure the business remained resilient through all oil price cycles.
This has underpinned the strong free cash flow generation that's enabled Santos to invest in two major projects while maintaining a strong balance sheet and increasing dividends per share by more than 13% compound annual growth rate since 2018. In parallel, the company has executed Moomba CCS, the Barossa Gas Project, and life extension of Darwin LNG, and Pikka Phase 1 project, where startup is imminent. Our upgraded portfolio is now anchored by three tier-one assets, PNG LNG, Barossa, and Pikka, and that set us up to meet an all-in free cash flow breakeven price target of $45-$50 a barrel. We have an enviable portfolio of opportunities to power its next phase of growth, including Papua LNG, expansion of Pikka, and development of the highly prospective Beetaloo and Bedout basins. We have the financial flexibility to pursue these opportunities while rewarding shareholders and rapidly reducing gearing.
Santos has the strategy, the capabilities, and the assets to help meet Asia's growing energy demand while fulfilling our decarbonization commitments. The recent disruptions in the Strait of Hormuz and attacks on global energy infrastructure have only highlighted the strategic advantage of Australian LNG for our Asia Pacific partners. Our LNG shipping routes are well removed from high-risk choke points. With a significant shipping emissions and cost advantage and a proven track record for reliable supply, Santos will play an even greater role in supporting energy security across the region. Santos' LNG portfolio is 83% contracted over the next five years, leaving a considerable volume for spot exposure, which allows the company to optimize the portfolio. Our average contract price remains above peers and supports strong cash margins. This is a strong position for Santos to be in.
The board has great confidence in the company's leadership team, its strategy, and operational performance, and we're focused on long-term value for our shareholders and stakeholders. In closing, I'd like to thank my fellow directors for their dedication and counsel over the past year. I'd also like to acknowledge Kevin and his leadership team for their outstanding contribution and to express my gratitude to all Santos employees for their hard work and commitment. On behalf of the board, I thank you, our shareholders, for your continued support and confidence in Santos. I'll now invite Kevin Gallagher, our Managing Director and Chief Executive Officer, to deliver his address, after which we'll proceed with the formal business of today's meeting. Thank you.
Thank you, Keith, and good morning and welcome to Santos' 2026 Annual General Meeting. I'm very pleased to be here to report on what was a pivotal year for our company. We delivered a strong performance across our base business despite lower commodity prices in 2025 and maintained a laser-like focus on executing major growth projects that will transform our portfolio and ultimately our business. This was all undertaken in service of delivering long-term value for shareholders and our stakeholders.
Our planet is being destroyed by your gas, Santos Oil. It's methane. It's destroying our planet.
The global environment has profoundly shifted since I presented our full-year financial results just eight weeks ago. The Middle East conflict has exposed the fragility of the world's energy security, triggering the largest LNG constraint in history and creating unprecedented competition for reliable energy supply. The world's largest oil stock release is underway. Countries are implementing fuel rationing and reverting to coal-fired power to protect industry and households. Australia's role as a stable, reliable energy powerhouse has never been more important. Our gas is the backbone of regional energy security, helping to keep the lights on and factories firing across Australia and East Asia. This is a two-way street. We supply the LNG that our regional trading partners count on, and in return, they provide the diesel, petrol, and jet fuel that Australians need to keep the nation moving and fuel rationing at bay.
At Santos, we're leaning into the national effort, supporting domestic refiners to help keep crude and condensate flowing and refining capacity full through the current instability and beyond. The world has an insatiable appetite for energy, fueled by population growth, industrialization, and the digital economy. Asia, one of Santos' core markets, is the engine room of this growth, consuming almost 50% of global energy, with gas demand set to grow by around 50% by 2050. Access to affordable, reliable energy is also the linchpin to help lift people out of poverty, foster economic prosperity, and support social stability. Without a doubt, the world needs more energy, not less. Just as critical minerals are essential for the energy transition, gas is a critical resource required to get us there.
It's the only scalable, dispatchable fuel capable of supporting the growth of renewables and providing essential feedstock for things that we rely on in everyday life, like fertilizers and plastics. At Santos, we have a clear and compelling strategy to deliver sustainable long-term shareholder value and support our customers and communities. That means generating strong cash flows, progressing our new tier one projects, Barossa and Pikka Phase 1, reinvesting to backfill our infrastructure, build new capacity, and grow production, and investing in the communities where we operate, and operating safely, reliably, and efficiently. Our financial performance in 2025 reflects a strong business built to perform through the volatility of commodity price cycles. Free cash flow from operations was $1.8 billion, highlighting the value of our diversified portfolio, high-performing core assets, long-term high-margin LNG contracts and continued cost discipline.
Sales volumes of 93.5 million barrels of oil equivalent generated revenue of $4.9 billion. Unit production costs reduced over the last few years despite relatively steady production, and in 2025, we delivered the lowest unit production costs in a decade. That's the Santos operating model in action, generating the strong cash flows required to increase shareholder returns despite softer commodity prices. Our balance sheet remains in great shape, funding major development projects while providing improved returns to shareholders, and we maintained our investment-grade credit ratings. Gearing reduced from 33.6% in 2020 to 26.9% at the end of 2025, or 21.5% if you exclude operating leases. This is a marker of real strength as we conclude our peak capital investment phase, having successfully delivered three major projects.
We continued to drive cost out of the business, saving around $50 million annually so far on our path towards a $150 million annual savings run rate target. Importantly, we delivered this performance safely. Santos ranked in the top quartile globally for personal safety, achieved our lowest lost time injury rate and total recordable injury rate on record, and delivered our best process safety performance in more than a decade. I want to take the opportunity to thank all of our teams for their laser focus on striving to be the industry's safest and most reliable operator. 2025 was a year that demonstrated our project execution capability as we built two multi-billion dollar projects concurrently that will set the company up with new production and cash flows for the long term.
Despite its complexity and scale, Barossa was delivered within six months of the original schedule without any additional budget contingency. We've successfully moved past the early-stage commissioning hurdles and have replaced dry gas seals on the FPSO compressors. With heat exchanger flushing underway, we expect to resume production in the coming days. This is a world-class, long-life asset that will deliver low-cost, high heating value LNG for decades to come and will contribute production of around 19 million barrels of oil equivalent a year net to Santos when it reaches steady state production. We're also making great progress in Alaska, which has a rich history of oil production and is clearly one of the world's super basins. Our Pikka Phase 1 project reached mechanical completion in January. Commissioning activities are well underway, drilling performance remains exceptional, and we recently successfully introduced fuel gas to the plant.
First oil is expected imminently, followed by startup of the seawater treatment plant, which will drive our ramp up to plateau production rates in mid-2026. Pikka Phase 1 is just the opening chapter of our plans in Alaska. Recent results from the Quokka-1 appraisal well confirmed the exceptional quality of the Nanushuk reservoir and will significantly extend our development runway on the North Slope. The base business delivered another strong year. Reliability improved, cost reduced, and we continued to extract value from existing infrastructure. PNG LNG is proving its worth as a high-quality, long-life asset and operated at capacity throughout 2025. Plant reliability reached more than 98%. We delivered the first year of full production from Angore and completed the Hides F2 well. GLNG produced six million tons of LNG with more than 99.5% reliability, and I firmly believe this asset still has its best days ahead of it.
The Cooper Basin demonstrated its operational resilience, returning safely to pre-flood production levels following last year's historic flooding. Our LNG portfolio is weighted towards high heating value gas, primarily from PNG LNG and Barossa, which account for over 75% of our equity volumes. Reflecting the quality of our product, our trading and marketing team executed a series of LNG sales and purchase agreements with tier one customers. We have no shortage of upstream options to backfill and grow our world-class LNG plants. Our 2P reserves and 2C resources position of approximately 4.7 billion barrels of oil equivalent underpins our strategy to continue to backfill existing infrastructure and grow value accretive production into the future. As Keith noted, in 2025, we achieved our 2030 Scope 1 and Scope 2 equity emissions reduction target five years early.
This was strongly supported by our world-class Moomba Carbon Capture and Storage project, where Santos has delivered real, safe, and permanent decarbonization at scale. In 2025, the Moomba CCS project stored the equivalent CO2 of taking about 508,000 cars off the roads and has received over 900,000 Australian carbon credit units since startup. CCS is an incredible opportunity for Santos and Australia. It's now incumbent on policymakers to get the settings right so CCS can be deployed to reduce emissions faster, at scale, and cost competitively, not only for our industry, but for the hard-to-abate sectors like steel and cement. Over the last 10 years, we have transformed, built, and grown Santos into a high-performing, cash flow generative business that has grown its market capitalization by more than five times.
In that same period, we have returned $4.8 billion to shareholders. At current exchange rates, that's more than AUD 6.8 billion. 2025 was a springboard for our next phase of growth, and I'm incredibly energized by our growth agenda in 2026 and beyond. With a high-quality, scalable portfolio, disciplined low-cost operating model, and increasing customer demand, we have a clear pathway towards an all-in free cash flow breakeven target of $45-$50 per barrel. The Barossa and Pikka teams are laser-focused on reaching steady state and plateau production respectively, which will increase overall production by around 25%-30% by 2027. My visit to PNG just last month reinforced the scale of its growth potential. We'll continue to invest in and deliver our PNG LNG backfill projects, including the APF pipeline tie-in and an oil infill program.
Papua LNG represents the next phase of development in our PNG platform. This is a great project in a country with a supportive regulatory system that recognizes our industry's vital role in creating jobs and helping communities thrive. In meeting with the operator's CEO a couple of weeks ago, I was encouraged by the project's progress, including the progress of the project financing, and we're heading towards making a final investment decision in the second half of the year. The Beetaloo Sub-basin in the Northern Territory is a potential game changer for our company. Our appraisal program this year and next is focused on proving commercial flow at scale and demonstrating the basin's development potential.
If fully developed, Beetaloo would unlock the scale of opportunity for the Northern Territory that the North West Shelf delivered for Western Australia 40 years ago, and it will supply both domestic and LNG markets for decades. Right across our portfolio, we have a pipeline of opportunities that is the envy of many companies and extends from Alaska to PNG to here at home in Australia, a country which has the potential to be an energy superpower in the Asia-Pacific. This requires a policy framework in Australia that encourages companies to invest, to drill, and produce more oil and gas, and to decarbonize production operations, because all of our opportunities compete for capital that goes to the highest value projects with the lowest risks. Amidst global instability, Australia must focus on what we can control, policy, approval, and fiscal certainty to underpin investor confidence to commit capital.
Without this, capital will go where it feels most welcome and safe, markets like the U.S. and Canada that are turbocharging their share of the LNG export market. I'm more confident than ever in Santos' future, the strength of our portfolio, and the capability of our people to deliver on our vision. With significant scale, a strong balance sheet, and an imminent material increase in production, Santos is well positioned to deliver higher earnings and shareholder returns for years to come. To you, my fellow shareholders, thank you for your support. I look forward to what we can achieve in the next phase of Santos' transformation. I'll now hand back to Keith. Thank you very much.
Thank you, Kevin. Ladies and gentlemen, we now come to the formal business of the meeting. I'll address each of the agenda items in turn. Shareholders will be provided with the opportunity to ask questions and make comments in relation to each item or group of items. As I mentioned earlier, I ask that you please register to ask any questions at the question booth in the adjoining room. After I introduce each item of business, James Murphy, who joins us in the room, will call forward shareholders one by one to please move to the nearest microphone in the room to ask their question for the relevant item of business. If needed, a microphone will be brought to you. All questions should be addressed to me as the chair in the first instance.
Shareholders are requested to restrict themselves to one question at a time on each item of business. One thing I will ask of you today is to please keep your questions brief so that other shareholders have an opportunity to have their say. Once you've asked your question, please return to your seat. I note that a number of questions from shareholders were received prior to the meeting, a majority of which related to strategy and succession and have been addressed in my or Kevin's earlier comments. However, there's one I'll respond to before we start the formal questions from the floor, and that relates to why the AGM is not being conducted as a hybrid meeting. The topic's something that we as a board have given careful consideration to.
In our view, a physical meeting best supports shareholder engagement because it focuses on generating real-life discussion in the room and minimizes technology risks. This approach isn't out of step with our peers, and in fact, we've seen a trend in recent years away from hybrid meetings towards physical meetings, with companies looking to address technology risks and simplify logistics and cost. I'll now move to the first item of business. The first item of business is to receive and consider the financial report, sustainability report, directors' report, and the auditors' report for the year ended December 31st, 2025. I now lay before the meeting the financial report, the sustainability report, the directors' report, and the auditors' report for the financial year ended December 31st, 2025. I note there's no formal resolution for this item of business.
Rather, this provides shareholders with an opportunity to ask questions about the reports, the management of the Santos group, and its operations. Shareholders may also ask questions of the auditor relevant to the conduct of the audit, the preparation and content of the auditor's report, the accounting policies adopted by Santos in preparing the financial statements and the sustainability report, and the auditor's independence. James, do we have any questions on this item?
Chair, the first question comes from David Everett.
Thank you, Mr. Chair. My question is about your comments about the future of the business, especially gas and oil. Peak global gas production, if we look globally, peak global gas consumption, and peak global gas price is predicted by energy experts to have reached that peak either now or in the very near future. We're already below peak gas reserves in Australia. Gas demand in Southeast Asia and China has started to decline. My question is, what plan does Santos have for transitioning to other forms of energy provision, stay in business in a low gas demand world, and therefore preserve shareholder value?
Thanks, David, for your question. Look, I would make some comments about your assertions around peak gas and peak oil, and I'd refer to the very latest "World Energy Outlook" by the IEA, which is the global expert referred to by many as the authority on oil and gas. Their forecasts are predicting for peak oil. It has moved considerably into the future. It hasn't been reached. It's also saying that for gas, we expect demand, particularly in the Asia region, to continue to grow. I think that sort of supports our strategy very much. Now, that's not to say we're not, as a company, also exploring alternative sources of energy.
I think as we've talked about in previous years, we're looking at things like e-methane, for example, as a potential fuel in the future so that our business will have alternative sources of low carbon fuels when those things eventually become commercially viable. We're pursuing in the short to medium term our business, and we believe it probably will go longer. We are actually also at a very responsible level, exploring alternative low carbon fuel sources as potential sort of supplements to our business in the future. Thank you. Kevin, do you want to add anything to that?
I would only add that the IEA, among others, have all agreed, most experts agree that gas in Asia, gas demand, I should say, in Asia, it will grow by 50%-60% between now and 2050. It's actually very much a growth market, and that's driven by a billion people or so still coming out of poverty that have no access to any reliable energy or electricity to this day. It's very much a growth market for some time. The latest IEA forecast show peak oil beyond 2035, so a decade or so away. I think I would add to Keith's point, since the day I joined this industry, I've had people telling me that, "Why are you joining this industry?
Peak oil is just around the corner," and it keeps going to the right. We are very committed, and we spend money every year on activities to explore, to develop, and identify economic new forms of energy. Because if it's not economic, it's not good for the company, and it won't be good for anybody. It won't work. We've looked at hydrogen, we've looked at e-methane, which is methane made from hydrogen, so the gas made from hydrogen, which is close to if not carbon neutral. This year alone, we're planning to drill in the Cooper Basin a geothermal well, to see if we can make that work. Again, that would significantly reduce our emissions out of our Moomba gas plant. Thank you.
Thank you, David. James?
Chair, the next question comes from Michael Davey from the Australian Shareholders' Association.
Thank you very much, and thank you for your addresses, Chairman and CEO. My first question actually refers to pricing. You did mention this, but let me just say, last year's profit was affected by lower commodity prices. As you've quite rightly said, there's been a significant increase since the war started. Could you say something about how this affects Santos' pricing, given that it's not going to happen overnight? Some contracts must be tied to other factors than the price. How does your hedging policy affect returns?
Okay, thank you, Michael, for your question. I think as both Kevin and I mentioned in our addresses, one of the lasting impacts of the current conflict is really the light it's shone on energy security. I think for Santos, that's a key point. We're strategically placed facing the Asia region. We have the shortest shipping distances. We have a track record of reliability of supply. There are no choke points in terms of shipping as well. Strategically, we are very well-placed from Australia, but also Alaska assets are facing the North Asia refineries. Our portfolio is ideally placed in terms of the whole energy security concerns that people have now seen elevated. I think that energy security has fundamentally changed the view of the world's supplies of hydrocarbons and where they're going to come from.
Everyone is going to want an element of secure supply in their portfolio. That places us extremely well. In the short term, we've seen what happened with oil price, and we'll see some benefits through that, of course. Most of our gas is actually contracted long-term. I think 92% of the contracts are actually linked to oil pricing that will flow through eventually into our LNG pricing. I would also say, though, that on the other side, as supply chains become more complex, services, equipment, et cetera, we're going to see pressures on costs, which will put considerable stress on our low-cost operating model, which we will manage. Certainly, there are going to be impacts on both sides of the equation. Do you want to add anything to that?
Santos, it's time to pay a war profits tax into war profits tax. Okay? This is a war profits tax, a war profits tax. Did you know-
Get out.
it should be 100% and it can help pay-
Get out.
For the damage that's done to the environment by
Get out.
Oil burning by Santos. We should have a war profits tax. Just think of all the people who've died and all the people.
Get out.
Who have a war profits tax. 100%, it should be 100%. That's insane.
Thank you, James. Do we have another question?
Chair, the next question comes from David Hansma.
Thank you, Mr. Chairman. First of all, I'd like to express our family's delight that the company wasn't taken over. It's a proud company, the only major company in South Australia, and I'd like to express our pleasure that we're still independent. My specific question relates to Carnarvon Dorado. As both the Northern Territory Gas project and Pikka are now virtually or actually working, the demand on capital will reduce. Will the board consider the early development of Dorado's excellent reserves of both gas and oil?
I might make just a couple of quick comments, and then I'll throw to Kevin. I think it's really important to just note that the board has put in place a capital allocation framework. The intention of that framework is to prioritize returns to shareholders, managing the balance sheet, gearing in the range of 15%-25%, and with gearing potentially going even lower, greater returns to shareholders. A disciplined allocation of capital across the business with the remaining capital, if you like. We're not looking to be in a world where we kind of go after every project. We think the best value creation for our shareholders is to be very disciplined about the investment we make. If the Dorado project comes to the top of the heap in terms of its benefits, then it would be the first project off the rank.
We still have a lot of work to do in Dorado. We're going to be drilling some wells there, and I think, Kevin, you will talk about that now.
Thank you.
Thank you.
Yes. Thank you, Keith, and thanks, David, for the question. It's a great question. Look, we're very excited by the Dorado opportunity in the Bedout Basin offshore Western Australia. Of course, we couldn't progress that project over the last few years because we were progressing Pikka and because we were progressing the Barossa project. As you rightly say, that put a lot of capital demand on the business and took our efforts at that time. I think what the current crisis has shown and highlighted is the importance of energy security, and oil energy security. The world stops when the flow of oil stops, and that's just a reality. That's a fact. I've been very impressed with the commendable efforts of our prime minister who recognizes this, traveling around Asia right now trying to secure fuel supply for us because we don't have enough domestic oil production.
Dorado is something that's come back very much to the top of our thinking, and the broader Bedout Basin, which has, we believe, a lot more liquids and gas in it as well. Our plans for the end of this year, early next year, are to drill two to three wells in that basin to further appraise it. Yes, we stand ready to accelerate the development of that project if the regulatory and government support is there.
Thank you very much for your detailed response.
You're welcome.
Thank you. Thank you, David. James.
Chair, the next question comes from Michael Davey from the Australian Shareholders' Association.
I did have a few questions, but most have been answered. You've mentioned, of course, the Moomba CCS, which has been a great success. It's been previously mentioned the possibility of its use for using it for carbon dioxide from other sites and outside companies. How has that progressed? Secondly, you also mentioned the possibility of direct air capture.
Mm-hmm.
What does this entail, and is Santos actively pursuing it?
Let me start with direct air capture. We are actively pursuing that. We've actually run trials in the field. I think a second phase of trials are about to commence on some new technologies. The challenge with direct air capture is the low concentrations of CO2 in the air that need to be extracted and the costs that are associated with that. New technology is going to play a role in getting those costs down, but it's got a lot of potential. Really, the thing for us at the moment is to spend not huge amounts of money, but to find out which technologies are the ones that are most likely to proceed, and then we'll go to the next stage of potentially trialing that at a larger scale and then eventually doing something with it.
We're taking a very cautious approach to trialing a whole suite of technologies in the direct air capture space to understand that. In terms of hubs and sort of commercial services for carbon reduction, that's one of the big ambitions we have for the Bayu-Undan CCS hub, where we see a lot of interest from not just emitters in the immediate area but emitters at some distance away where CO2 could be transported to the site. We do have a suite of memoranda of understanding or expressions of interest from various people in that regard as well. Likewise, in the Cooper Basin, phase two has the potential to actually offer carbon reduction services as well.
It's important to say also, I think, that around the world now, in the North Sea, there are several opportunities that are now operating on that sort of commercial basis, collecting CO2 from other. It's not something that's sort of a dream in the future, it's actually something that's happening now. Thank you. Do you want to add anything there? No?
Yeah. I would just add to that you would have read recently we signed a contract or an agreement with the South Australian Government to supply gas to them from 2030 to 2040, and that's primarily for the Whyalla hub, the industrial hub in Whyalla. As part of that, our bigger vision is to see CO2 coming back from Whyalla to the Cooper Basin, third-party CO2 from some of the industries that would be supported there. That's all part of a bigger play, a longer-term vision of building that infrastructure to support third-party carbon capture and allow industries to thrive here in South Australia, but be low carbon industries in the future.
The third party CO2 coming from overseas, I have to concede that has slowed down, really by virtue of those countries themselves pushing some of those plans out further because the big capital investment is really at their end for the aggregation hubs to be built to capture CO2 from their industries. Thank you.
Yep. James.
The next question comes from Dean Lambert.
Thank you, Chair. Can you please explain how AUD 387 million in total income tax expense, in the 2025 annual report, reconciles with AUD 1 million recorded in the dividend franking account? As an individual Australian resident shareholder, I eagerly await the return of franked dividends.
Well, let me start with franking then. Look, our franking capacity is driven by our Australian taxable earnings. We've had a very capital-intensive phase of investment in the Barossa project, the Darwin Life extension project. As those projects start to generate earnings over time, that will support the potential return of franked dividends, but it will take time for that to come through the system. We paid the residual of our franking account in 2025, so we have no franking credits available at the moment. Just on your point around tax, we are very transparent in our tax affairs. We comply with all the tax obligations. We pay our taxes as required in accordance with the laws, the rules, the regulations, et cetera. We paid over $770 million in government royalties and excises, royalty-related taxes, employment taxes, income taxes in 2025.
Some of that was in Australia, AUD 628 million, and some of it was in our other assets overseas. We pay considerable tax on an annual basis, but not all of it's in Australia.
Thank you. Shouldn't the AUD 128 million in Australian income tax translate to a fairly considerable figure in the franking account?
I tried to explain it to you earlier. Basically, there's a depreciation element that accounts for the large capital investments we've made over the last few years, and that actually doesn't earn us tax credits. Thank you.
Thank you.
Next question, James.
Chair, the next question comes from Mark Wilson.
Thank you, Mr. Chair. This is a question about sports sponsorship.
Oh, yeah.
The South Australian Tourism Minister has described Santos' sponsorship of the Tour Down Under as, quote, "significant." Earlier this year, however, high-profile cyclists called for the sponsorship to cease, generating substantial media controversy. Given the resulting brand damage, can the board explain how this significant scale expenditure delivers value for shareholders?
I personally feel that we have an obligation as a company like Santos to invest in the communities where we operate, including through sport, and recognizing the role that we play as being part of the communities where we operate. Our sponsorships are focused on delivering tangible benefits to local communities and to broader economic activity. Sport plays a really important role, both at grassroots and professional levels, in supporting participation, both in things like the Tour Down Under, but actually in regional development as well. It delivers significant economic benefits and tourism benefits to South Australia, so we're really committed to that. It's just, how can you be part of a community and not participate in it?
Basically, it's community support.
No, it's actually being part of a community. Thank you. Next question, James.
Chair, the next question comes from Michael Davey from the Australian Shareholders' Association.
You'll be pleased to know this is my last question. All the others have been answered. There's been some progress with the development on the Narrabri Project, with positive legal action and increased land access for pipeline installation. Is there now a clear way forward?
Well, the Narrabri project is still subject to an appeal process, and basically until that process is resolved, there will be no progress on the project. We're minimizing our capital spend on that project, awaiting all the approvals that we need to get in place before we would seriously invest in that project.
Thank you.
Anything you want to add there, Kevin?
Yes, I'd just say we have made progress in the approvals processes, and it was pleasing to sign an ILUA recently with the Gomeroi for the pipeline, the Hunter Valley pipeline. We're continuing to work through those processes with all stakeholders to finalize the last couple of approvals that we need. As Keith said, we're not spending any major capital there. We're just maintaining our current operations in Narrabri until such time as we get to that. It's a very critical project for the East Coast, probably more critical than ever now when you look at the energy shortages around the country. Ultimately, other projects will go in front of it as long as it's held up, because they'll take priority for capital.
James?
Chair, the next question comes from Catherine Geluwa.
Thank you, Chair. My name is Catherine. I'm representing communities in Papua New Guinea. In the last six months alone, 12 major financial institutions have fallen like dominoes to rule out funding for Papua LNG project. This was after a formal Equator Principles complaint was filed on Papua LNG project by a coalition of international NGOs at the end of last year, citing severe human rights and environmental risks misaligning with the Equator Principles framework. My question is, how can the board justify to shareholders the continued capital allocation to this project when Santos partner TotalEnergies is as yet to provide evidence of prior informed consent to 12,700 indigenous people in the Gulf Province who face potential forced eviction, irreversible loss of biodiversity from the Papua LNG project?
Thank you for your question. Look, in relation to Papua LNG, we're not the operator of the project. You would need to, I think, direct that question to the operator, who I understand will support the PNG government as they facilitate the development forum where issues such as you have raised will be discussed in detail as is required under PNG law. What I can say with confidence is the way Santos operates in PNG, we engage with local communities really positively, where we operate. We have 483 agreements with stakeholders and landowners across our operations. I think in 2025, we did over 7,000 engagements with landholders and landowners. Those relationships are really important to us, and I would hope they're important to the operator of Papua LNG as they go forward. Our Santos Foundation is having a huge impact.
We delivered over two million vaccinations across the regions. 7,300 cervical cancer screenings since 2024. As I said, when we're talking about the sport thing, it's all about us. We're part of the community where we operate, and our intention is that the communities where we operate benefit from our presence. I think that's the discussion that can be had with the operator of the Papua LNG project as well. Thank you.
Yeah. That I would, but you being a partner and having a huge equity interest in that also means that you have a part to play in this as well.
Yeah. As a partner, we will play an influence, that's for sure.
Thank you.
Thank you. Next question, James.
Chair, the next question comes from Angelika Mantakis.
Thank you. Chair, you have repeatedly described your PNG assets as the jewel in the crown of the Santos portfolio, and emphasized that your strategy is built on proximity to near Asian markets and partners. Specifically, the Papua LNG project is a key pillar of your future production growth. My first question is, can the board confirm if the financial support of MUFG and other major Japanese financial institutions is critical for the Papua LNG project to reach its final investment decision as you flagged in the second quarter of this year and proceed to construction?
I think I can be clear that for Papua LNG, our joint venture operator, TotalEnergies, is progressing project financing with both export credit agencies and commercial banks. I think as Kevin indicated, we would expect to be making a decision on that investment in the second half of the year. The project's committed to reflecting the IFC's performance standards, the World Bank EHS standards and guidelines, and the Equator Principles and all local laws. There's strong engagement and consultation also with the state of Papua New Guinea and other stakeholders.
Yes. However, given that MUFG is currently facing a formal Equator Principles complaint and serious intense pressure from civil society, both in Papua New Guinea and Japan over these irreversible biodiversity loss and human rights risks, I think it's important that all the shareholders in this room know how Santos intends to convince these banks that the project is actually compliant with those very Equator Principles that you mentioned.
As I understand it, the finance is almost complete. Kevin, you might want to make a comment on that. You were there recently.
Well, that process is actually being led by the operator Total, and they'll keep us informed, of course. There will be a lot of governance around that process as it completes, and we'll be part of that process. It's really Total who are leading the effort, but there's a lot of banks in the consortium. I don't think it's appropriate for us to talk on behalf of any one bank in particular if they've got any matters such as you've raised, that they're dealing with for themselves. That's for them to comment on.
Yeah. I think over 29 banks have now ruled out the project due to all of these risks. I think the shareholders deserve to know what those risks are.
I think we've just told shareholders that we believe that the financing is progressing. Thank you. Next question, James.
Chair, the next question comes from Meg Heko.
Chair, my name is Meg Heko. I'm a customary landowner from Mareke Village in Kikori District, Gulf Province, Papua New Guinea. I stand today in front of you representing around 30,000 voices from communities within the Papua LNG project area. Communities whose land, rivers, sea, and livelihood are directly in the path of your decision. Your partners are working on our land without consulting or even so much as talking to everyone, and clearing our land without consent, drilling without our consent. On top of that, the pipeline from this project runs directly through my village, yet we haven't been consulted. You don't have the right to work in our land. You are just walking in, cutting trees, drilling. Who gave you the right or the consent to come to my land?
We have a right to be able to understand what is happening on our lands and to be informed and properly consulted. Because of this, it's just not a project on paper, it is our lives. I'm here because I want to know what the fate of my village and my people is. I have two questions for you today. Will you confirm out loud today that the Papua LNG pipeline will displace our communities? And if so, what is your plan for the relocation of 30,000 of my people? The second question is, and why aren't we being properly consulted or informed of the risk of this project? I invite you and the board to come to my village, Mareke, and walk the pipeline routes yourself to see the land, the homes, the community that is going to be affected by your actions.
Thank you. Look, I think as I mentioned earlier, Meg, the process as I understand it is that the PNG government, together with the operator, will facilitate a development forum with all the landowners where these sorts of issues and risks will be discussed and resolved, as is required under law in PNG. I really can't say any more than that. The development forum needs to occur and is planned to occur, I understand. Thank you.
Thank you.
Next question, James.
Chair, the next question comes from Chris Warren, who has a question for the auditors.
Thank you, Chair. The Australian Accounting Standards Board standed 137 provides illustrative examples to assist auditors and companies in understanding what sufficient disclosure of provisions looks like in practice, and emphasizes that disclosures of provisions should enable investors to understand the nature, timing, and uncertainty of major operations. Carbon Tracker, an independent financial think tank specializing in climate-related financial risk, recently analyzed Santos' disclosures and found that the company is providing just 19% of the type of material asset retirement obligation information investors would expect Santos to disclose. Key gaps include cash flow estimates, discount rates, and precise timing of expenditure. How did your audit consider those illustrative examples and the underlying disclosure principles in AASB 137? And what criteria did you apply to conclude that the disclosures were sufficient, particularly in relation to timing, discount rates, and cash flow estimates?
Thank you for the question. Look, I'm going to throw that to our auditor who knows these standards intimately and of course checks our accounts equally closely. Darren?
Thank you, Chair. Thank you for your question, Mr. Warren. Note 3.5 to the financial report describes the accounting policies and the significant judgments considered by the directors in determining the asset retirement obligation provisions. It also includes a maturity profile, a table showing the expected timing of the expenditure, which I think addresses part of your question, and it categorizes that expenditure between less than one year, one to two years, two to five years, and greater than five years. Our audit report, specifically page 267 of your annual report, describes why we considered this topic to be a key audit matter. It lists a number of the procedures we performed, and it includes a specific statement that we considered the adequacy and the appropriateness of the disclosures, including the assumptions, the judgments, and estimates.
To the part of your question regarding illustrative examples, we absolutely do consider the illustrative examples in the standards, noting that they are, one, illustrative, and two, very limited. From memory, the 137 examples include just one example on decommissioning costs. It relates to a single company with a single asset, which is very different to the Santos portfolio, of course. Lastly, and perhaps most importantly, Mr. Warren, the basis of preparation of the financial report is not the views of organizations that analyze the disclosures with a particular lens, be it climate-related or other. The basis of preparation of the financial report is the requirements of the accounting standards, the Corporations Act, and our opinion clearly states that we consider the financial report to be prepared in accordance with those regulatory requirements. Thank you.
Thank you, Darren. James, next question, please.
Chair, the next question comes from Peggy Smith.
Thank you, Chair. Given the significant discrepancies between the production estimates for the Narrabri Gas Project and the statements both Santos and government officials have presented to the public and to shareholders, I'd like to address concerns regarding transparency. Santos has repeatedly claimed the project could supply up to 200 TJ of gas per day, translating to 73 PJ annually, as stated in the 2017 environmental impact statement. More recently, Santos has claimed the project could produce up to 150 TJ a day, which equates to 54 PJ per annum. An independent analysis suggests the actual production is anticipated to be on average only 17-28.5 PJ per year over an anticipated 35-year life of the project, according to guidance updates released on the ASX on the 11th of November in 2021 and the Santos and Oil Search merger scheme.
During the Independent Planning Commission hearings in 2020, it was revealed that the CO2 content in the targeted coal seams may average between 25% and 30%, based on Dr. Andrew Grogan's analysis of publicly available data, contradicting the 10% figure provided in the environmental impact statement and Santos CEO Kevin Gallagher previously stating that gas samples showed less than 5% CO2, classifying the project as a low-CO2 asset. This descriptor was later omitted in investor presentations. It's also been reported that New South Wales gas demand was 114 PJ per annum in 2022, and to supply half of this demand, the Narrabri Gas Project would need to produce 57 PJ annually. How does Santos justify these conflicting figures?
With Santos' stated production expectations seemingly misaligned with this demand, can the company publicly clarify how much gas the Narrabri Gas Project can realistically supply to the East Coast gas market? Is there an intention to update disclosure to accurately reflect the true potential of the Narrabri Gas Project in terms of both gas production and greenhouse gas emissions, particularly given concerns about potentially inflated perceptions of the project's value?
Okay, thanks for the question. Do you want to make a few comments on this from an auditor's perspective at all?
I guess from an auditor perspective, we do look at forward-looking information and do understand that there is a lot of uncertainty in all forward-looking information. We look at what is available at the time of undertaking those procedures. We do make sure that any statements that are made in the disclosures can be validated by evidence. I think that's probably the auditor perspective. Thanks.
Sorry. Next.
Can you hear me? Yeah. I would just say that the comment you made about whether it's 50% of New South Wales' future gas needs or not will change with time. The longer the project's delayed, I guess that number would change with time. It's not changed materially. It's still approximately 50% of the future gas supply needs for New South Wales. Those other numbers we say up to because it depends on the development concept that we actually develop it as. There's a phase one, there's a phase two, and it depends how many. It's just a function of how many wells we drill at any point in time. As for the expert you refer to who suggests it would be 17 TJ per day production.
I'm glad that individual doesn't work for Santos. That's all I can say. I trust my reservoir experts over anyone coming up with numbers like that. I'm pretty confident in the numbers that we have publicly released. Of course, if we ever take FID on that project, at that point in time, based on cost, economics, and the concept that we will develop, we'll give the latest estimate what those numbers are when we take FID. Of course, we would then be held to account on the promises that we make at FID, because that's the promises that really matter. Thank you.
Thank you. James?
Chair, the next question comes from Matthew Tomkins.
Thank you, Chair. With Santos pursuing multiple new and expanded projects in a rising cost environment, how critical are new and renewed debt facilities to delivering the company's growth strategy?
I think in both Kevin's and my presentation, we sort of indicated that the cash flows we expect from our business going forward will prioritize returns to shareholders but will actually also enable us to predominantly fund our growth out of our existing cash flows. Thank you.
Chair, that leads me to my second question.
Sorry, if you could restrict yourself to one question at a time.
One at a time. Okay.
Is it a short question?
Reasonably short, yes.
Okay. Go on.
Since last year's AGM, two of Australia's biggest banks and longtime financiers of Santos, CommBank and NAB, have both released policies that make Santos ineligible for new and renewed finance. This is because, in their view, the company does not have a credible Paris-aligned transition plan. ANZ and Westpac, however, appear to remain supportive, including through reported participation in a refinancing in November last year. My question: how important are ANZ and Westpac to Santos' growth strategy, and what gives the company confidence that these banks will continue backing it? Can you assure shareholders that this support will remain in place?
I think I can tell you quite clearly that we have very strong relationships with our banking partners, not just in Australia, but overseas. I'd also highlight that our recent debt capital market, where we have raised $1 billion on a bond issuance, we were over five times subscribed on that. I think in terms of our attractiveness for banks and investment into the future, we're very confident about that. Thank you.
Chair, I was.
No, you've done your two questions. Thank you.
Thank you.
Next question please, James.
Chair, the next question comes from Karra Kinchela.
[Non-English content] I'm Karra Kinchela, Gomeroi woman from Narrabri. My question to you today, Santos, is will you accept two documents from me? The first is the Breeza Declaration. It rejects the Narrabri Gas Project and associated pipelines. It pledges united opposition to compulsory acquisition of land along the pipeline routes. The second is a statement from the Gomeroi people. It was written by the Gomeroi people in Breeza in March with the same gathering of people. It clearly states the Gomeroi people oppose coal seam gas and do not consent to the destruction of our country. We, as Gomeroi people, as traditional owners of our lands, stand united in opposition against coal seam gas extraction in the Pilliga Forest.
The alliance behind the Breeza Declaration affirms that it will stand with Gomeroi in defense of country while protecting water and prime agricultural land as it rejects forced industrialization, and we call for a different path to invest in our sustainable region, our communities. The declaration is endorsed by Gomeroi people, NSW Farmers' Association, Country Women's Association of New South Wales, and Lock the Gate Alliance. Will you accept our declaration?
If you pass those to our security people, I'm sure that we will. Thank you.
We would like to hand them to you directly today, please.
Afraid you pass them to them, please.
Can I just state that is not respectful, and the respect of the shareholders in this space for people who don't have a say is also respectful. You guys are coming into our communities, so there is no respect in this place.
Let me just say.
We will not let you.
Please
Come into our communities like this.
Please take a seat. I would make the point that Santos has engaged with the Gomeroi people over many years, and we recently. Please be quiet and.
You are in federal court now.
I know we are, and if you could please pay me the respect you were just demanding as well. We have engaged with the Gomeroi people over the years, and together, we recently executed a voluntary Indigenous Land Use Agreement, which was voted on. Sorry. If you won't take your seat, I'll ask you to leave the meeting.
Are you serious right now?
No, I'm not.
Do you recognize that we had to while we waited for you to lie?
Please take your seat.
Do you recognize that we had to while we waited for you to lie? Do you recognize that you're a liar?
No, I would like you to please sit down.
We would have gotten this done and this settled if we did not.
That's not true.
That is the truth.
Please take a seat.
I'm not staying because you're a liar.
Fine.
No, we would lose. I stand by what I said.
Please take your seat.
I gave you time and you said no. You were going to wait for us and to wait while we were in court for how you had said no. There is no respect, and you're a liar, and you're not welcome to put our action.
Thank you. Next question please, James.
Chair, the next question comes from Joseph Kena'e Ka'au.
Thank you, the chairman and the CEO, and the boards of Santos, the shareholders. I am Joseph Ka'au, a tribal leader from Kaimari tribe in the Baimuru area of the Gulf Province of Papua New Guinea. That's where Santos and its partners, Total and the others, operate in. Their operation is upstream from where I come from. I live on the downstream in the delta area, Purari Delta. It covers about 250,000 hectares, and in it's my clan, Kaimari tribe and seven other tribes, about 30,000 people. We are not part of the project because we've been excluded by some stupid laws that were set up in our country, that if you are 5 km away from the area that the company operates in, you're excluded.
In October this year, the 23rd of October precisely, we saw an ad in the paper that said this, that it said clearly that an environmental permit has been issued to TotalEnergies, your partners in the Papua LNG project. Part B of that permit said this, and I quote, the exact wording, that the company is allowed to discharge of waste into the environment. It doesn't tell us what waste. It doesn't tell us what environment. You are partners with TotalEnergies and ExxonMobil in this project, and we are led to believe that you have some social and environmental responsibilities that will take care of my people and make people as well. We are not part of the project, but if the company's allowed to discharge the waste, they don't tell us what it is.
In the EIS, there's a statement which says it could be hydrogen sulfide and wastewater. This is scary. They don't even tell us where they will dump it into. They just said into the environment. You can check it out. The permit is issued already, and it's for 25 years, which means this, you and your partners will be dumping this waste into my people's environment for the next 25 years. This is not on. This, for me, looks like it's a human rights abuse. My question is, as responsible corporate entities in this country and my country as well, can you make a statement to tell us if this is so, and what are you going to do about it? I repeat again, this amounts to human rights and environmental abuse. Thank you.
Well, thank you for your question, Joseph. It was a very powerful question, so thank you. I appreciate the comments. I certainly would like to find out more about this myself. Certainly as part of the assurance process that we go through as this project goes forward, I'll undertake that we will ask the sort of questions that you are asking as well. Kevin, do you want to add anything to that?
I think the only thing I can say is obviously the government, PNG government, will work with the operator, Total, to have the development forum later this year where all valid landowners and land holders will be invited to attend. I think that's where they negotiate the benefits and the terms for the project, and we'll wait to be updated by the operator on that. When it comes to the standards that the project will operate to, every partner will do its own assurance on those project plans before a final investment decision is taken, and we would need to be satisfied that the project meets our standards, just as we have at PNG LNG, for example, before we would be able to move forward with the project.
I'd be very confident they would, but I say that only based on my track record and Santos' track record and Total's reputation. Obviously we will focus on this aspect of that assurance process, given your comments. Thank you.
Thank you, Joseph.
Just, you are aware, too, that the development forum will not take place. The environmental plan is the prerequisite for the development forum. Without the environmental plan, the development forum will not take place.
We are questioning the environmental permit.
Yep.
If it is questioned and if it is put in doubt, then the development forum will not take place, which means the FID will not eventuate. Can you assure us that this environmental plan is safe enough to guarantee the development forum taking place? I want to invite you, my brother, to come. You always go to PNG, I know that, but you must come to Baimuru. I invite you to come to Baimuru and see my place and my people, then you will understand what I'm talking to you about here.
Thank you.
Thank you.
Thank you. James, next question please.
Chair, the next question comes from Amanda Holley.
Thank you, Chair. Last month, Morgan Stanley published a bear case scenario for Santos. Their worst-case credible outlook for the share price landed at $3.70, roughly half of today's value. That assumes just a 25% decommissioning cost escalation. Page 220 in your annual report states that Santos has calculated its decommissioning liabilities, assuming that major subsea pipelines will be abandoned in place. If full removal is required, the restoration liability jumps by another $550 million-$750 million. The discussion paper underpinning the Australian government's current reforms for offshore decommissioning and financial assurance reinforces the government's position that full removal will remain the legislative expectation. What has the board done to assess the risk that these assumptions around abandonment may not hold in practice? And how has it satisfied itself that investors are adequately informed about the potential for a three quarter of a billion dollar cost blowout in cleanup liabilities?
Thank you for the question. Well, look, on decommissioning, every year we do our own review, but we actually bring in independent experts to review all our decommissioning costs, and it's done on an annual basis. We're very confident about the costs that we actually have there. We have an ongoing program of investment in decommissioning, and we're progressively removing, which is the most efficient way to do it. It's part of our core business, and we have a great understanding of what our decommissioning liabilities are, and we're progressing with those. We've even taken quite a conservative position on some assets where they may be repurposed for opportunities, for example, like CCS. We're actually taking as a base assumption in these costs that they will be removed. I think we actually have quite a conservative approach to estimating our decommissioning costs.
Kevin, do you want to make a point there?
I'd just say that over the last three years, we've spent about $300 million each year doing decommissioning activities around older assets. Many of those projects, we've delivered them for less than we were carrying in our liabilities on our books. We've actually delivered under budget on those. I'd just like to say, too, that Morgan Stanley brokers target price for Santos is just under $8 currently.
Thank you.
Just on that, you haven't addressed the question about that AUD 550 million-AUD 750 million, having to take the pipelines out of the ocean. Why does the board feel that it's okay to leave that number off the books?
Well, we do assessments on every pipeline. Sometimes, the assessment is that the risk of removing it is greater than the risk of leaving it in the ground. That's the sort of approach that we will take to each pipeline.
Have you ever had approval to leave major subsea pipelines in the ocean by NOPSEMA?
Well, yeah, a great example there would be where we use the pipeline for repurposing.
Thank you.
Thank you. Next question please, James.
Chair, the next question comes from Ferris Robert.
Thank you, Mr. Chair. It's actually Robert Ferris. My question is about the International Court of Justice decision in July last year, described as a landmark decision. The court gave its advisory opinion that a state's legal obligations extend to its downstream or Scope 3 emissions. That put Australia on notice that it may face increasing legal risks for the climate harm caused by the Scope 3 emissions of the large amounts of fossil fuels it exports, the exporting of which may become, in the court's phraseology, internationally wrongful acts. The court clarified that although its decision applied to states, those states are expected to take appropriate measures to regulate private actors such as this company.
Given the importance of this decision and its clear implications of future increased regulatory burden and legal liabilities in relation to the Scope 3 emissions of all its LNG and oil exports to Asia, and just in relation to legal liabilities, I can say that Columbia University has reported that by the end of 2025, there were 3,000 climate litigation cases filed in 60 countries. Not all, of course, relating to Scope 3 emissions, but increasing constantly. My question is: Is the company concerned about these escalating risks? And if not, why not?
Clearly, we actually have a plan around Scope 3 emissions in general. We have emissions upstream of our business and downstream, and we have worked in a very collaborative approach with shareholders over the last few years to understand their emissions, and we're working with them on emissions reduction plans over time. That's our supply chain. In terms of the downstream, I think probably the thing I would point to there is that we actually have a target underpinned by CCS to actually dispose of around 14 million tons of third-party CO2 per year by 2040. We see technologies like CCS as enabling those sort of Scope 3 emissions, if you like, third-party emissions, to be addressed using a technology we are confident in, a technology that we believe can address those emissions at scale. Thank you.
James.
Chair, the next question comes from Dean Lambert.
Thank you. This question I formulated before your announcement earlier in the meeting that the share price has gone up past the XRG offer at different times lately. However, I think that makes it even worse. I've been a shareholder in the company for over 20 years, consider myself a loyal supporter. The 16 June 2025 announcement of discussions of a takeover at a 28% premium to the prevailing share price did not seem to me to be a good enough reason to be interested, given that in the event of the offer proceeding, I would forgo any prospect of future income or capital appreciation and chance of having a say as a shareholder in the running of the company. Indeed, I'm horrified at the prospect of a takeover of the company by foreign interests who may not have as much regard for sensitive local issues facing the company.
Was the initial support for the takeover given on purely financial grounds, or was there some consideration of a moral or patriotic component?
To be clear here, Dean, our obligation as a board is to act in the best interests of shareholders. In this particular case, we felt that the level of the proposed offer was sufficient that shareholders needed to be consulted and given the opportunity to decide whether it was something they wanted to do or not. Based on the consultations I've had with many, many shareholders since that time, there is strong consensus that there would have been a lot of anger if we hadn't put that proposal and made it obvious so that shareholders would actually be able to have a say. They may not have supported it, but at the end of the day, for a board to say, "Here's an offer," it's just not good enough. We need shareholders to have the opportunity to have their say, as you're saying right now. That's our obligation.
Thank you.
Thank you. Next question, James.
Chair, the next question comes from Jack Green.
Thank you, Chair. Today, I want to speak on NT, Northern Territory. Aboriginal people there, we're all cultural people. We're very tied to the land and where they're going to be fracking, we're worrying about our water. The water means a lot to Aboriginal people, not only Aboriginal people, but non-Aboriginal people. We're really worried about that. When they do a lot of fracking to some of the spring that went dry and some of the bore in the community, a couple I know near Borroloola, when they start drilling there, the bore went dry. I still don't know whether it's any water in there. The way they're going to drill is tied with a lot of Aboriginal culture, totem. My people back home, Alawa, Marra, Gurindji, Garawa, you name it, we're all worried what's going to happen.
That's why I came up here to try and speak today too. We're worried about that fracking and the pipeline that's going to go through. That's one of the questions. The other question I got, if that's all right, Chair?
Yep. All right. Do you want me to address that first question?
Yeah.
Yeah. Okay. Well, look, I think the key point to say is you're talking about a pipeline. We actually don't have a project there. The drilling that we're intending to be doing there is to test the potential into whether there could be a project. That's the first point I'd make. We will be drilling some sort of wells, and there is strict regulatory requirements around things like groundwater protection. It's governed by the Northern Territory, but it's also got oversight by the Commonwealth Government, the EPA. And there are very strict requirements that pick up the recommendations from a major scientific review that was done in the Northern Territory. Well-designed, well-construction standards, they're all specifically designed to isolate aquifers and prevent any contamination impacts on groundwater.
I don't know whether that gives you any confidence, but there are extreme levels of risk protection that get put in place before these activities can proceed.
Okay.
Do you want to ask your second question?
Yeah, I'd like a second question. I was in Darwin a few months ago, and I was on one of the tour around Darwin on the boat. We came across where they're putting gas in. What we heard, the gas was leaking, the tank was leaking when they put the gas in there. That's what I wanted to find out. Thank you.
To be clear, the first point I'd like to make is the tank actually poses no safety risk. There have been fugitive emissions from the tank since when it was first built, when a small incident occurred that spilled a little bit of liquid gas inside the tank. As a result of that, we've had continuous monitoring of the emission levels in place. That level's remained static over the last 20 years. It hasn't changed. It's just recently gone through a major hazard facility licensing process, and that process is run by NT WorkSafe, and that was renewed in July 2025. We maintain monitoring, continuous monitoring of those emissions. It's stable and it's safe. Thank you.
Thank you.
Yeah. Next question, James.
Chair, the next question comes from Werner Bluett.
Thank you, Mr. Chair. I'd like to say that I applaud the board's stated commitment to environmental stewardship. However, Narrabri, as we've heard this morning from many people here, is an example of a Santos project that has been criticized for risks to aquifers, to wildlife habitat, and long-term climate pollution, and has considerable local objections. Santos has stated commitments to environmental stewardship. If the projects go wrong and there is environmental damage, what accountability will there be for the board?
Well, clearly, all our activities in Narrabri are governed by very strict regulations that are put in place by the New South Wales government, and we're subject to those rules. They're designed to protect the environment. We comply with those rules. They set the bar extremely high. I think that's about the most I can say on that.
With respect, you have not answered the question. What is the accountability if things go wrong? What will happen?
I think the whole point of our environmental process is to explore all the risks and things that could potentially go wrong and put mitigations in place to prevent them from occurring in the first place. Thank you.
The accountability?
Well, we're accountable under the law.
Okay. Thank you.
Next question, James.
Chair, the next question comes from Yvonne Moore.
Thank you, Chairman. There is a cost of living crisis in Australia at the moment, and the high cost of gas and electricity in general feeds into that cost of living. Has Santos considered, given that our gas here that it's extracting is a national resource and a lot of people feel it is an Australian resource, has Santos considered ever providing cheaper gas for Australians than it charges to international customers in order to help address the cost of living crisis?
The gas that we do provide for our domestic customers is cheaper than the gas that's provided to our LNG customers in Asia.
Well, can you tell me how much then? Because people are not aware of this at all. You read letters to the paper about the high cost of gas.
Do you want to say something there, Kevin?
I can assure you, without giving specific numbers because unfortunately we can't divulge.
Contract
T he price that we sell gas at to individual customers. The cost of domestic gas today is around AUD 8 or AUD 9 Australian into our markets. That's available on the spot market today. That would be the price of domestic gas today here on the East Coast. That's Australian dollars. The equivalent going into customers in Asia would be well over AUD 20. By the time it's the price that we sell it for, which is higher than that AUD 8 or AUD 9, I can assure you. Then you've got to liquefy it, ship it, transport it on the other end. It's very significantly higher. The other thing it's worth saying too is that because of the size and the scale of these remote developments, we have to get the gas to market.
Without LNG to provide the scale and the revenue that is required to justify those investments, you could never develop those fields simply for the Australian market. It's too small, and hence the gas price would be far too high. The two industries actually work, the export industry and the domestic industry, work hand in hand. The export industry enables our ability to develop fields and bring gas to the Australian market.
Thank you. James, next question, please.
Chair, the next question comes from Kevin Codron.
Thank you, Chair. In light of the significant community opposition and subsequent reports of your sponsorship withdrawal from the 2025 Koori Knockout, how does Santos plan to address the clear lack of social licenses from Gomeroi traditional owners for your Narrabri Gas Project, while continuing to seek major partnerships within First Nations sporting events?
I'm going to have to pass that one to Kevin. I'm not aware of that.
That's what I call a handball. Look, Kevin, with sponsorships, we review the benefits to the communities, and we don't want to sponsor things if people don't want us to sponsor them. I'm very happy to keep the money in the bank and give it back to shareholders. We do look to sponsor and be part of communities, and more often than not, we're welcome for it. There was a question earlier on about the Tour Down Under, and what I can say on that one, without Santos' sponsorship, that event simply just would not happen here in Adelaide. It wouldn't be affordable. We work with local communities. We'd like to think that we will sponsor. We do sponsor events out in the Narrabri region, a lot of sporting events that are very popular with the communities.
We sponsor First Nations events in PNG and all over Australia. With that particular one, yeah, that was regrettable, but the sponsorship wasn't welcomed, and that's just what it was. We move on.
Yeah, I think it's a clear statement from the Gomeroi people that we do not want Santos on our country. Thank you.
Thank you. Next question please, James. I believe this is the last question.
That's correct. The last question comes from Yvonne Moore.
Well, basically, it's a question about taxation. You often read green activists claiming that the gas industry is very lightly taxed, and I understand there's a Green senator that's got a Senate inquiry going into the taxation paid by the gas industry. There have been references here today to the amount of taxation paid by Santos, but I just wondered if we could have it repeated again. Thanks.
Sure. Well, I think the first point I'd make is that the oil and gas industry, I think, is the second largest contributor to taxes in Australia. Something in the order of AUD 29.1 billion paid last year by the industry. Last year, Santos paid in total taxes across Australia and remember, we have operations in places like Papua New Guinea and Alaska. We have offices in Singapore. We pay taxes in many places. We paid over $770 million last year in taxes, of which around AUD 628 million was in Australia. The year before, we paid over $1 billion in taxes across our global operations. We pay taxes as company tax, government royalties and excise. We pay petroleum resource rent taxes, royalty-related taxes. There are many different taxes that we pay.
I'm just giving you the total that we spent in Australia last year, AUD 628 million. Thank you. All right. Well, look, I think we have no further questions, so I'm now going to move to the next item of business, which is the re-election of directors, item two. Item 2A relates to the re-election of Janine McArdle. Janine was appointed to the board on the 23rd of October, 2019, and she's a member of the Audit and Risk Committee, the Safety and Sustainability Committee, and the Nomination Committee. In accordance with the constitution, Janine retires, and being eligible, offers herself for re-election. The board, with Janine abstaining, recommends that shareholders vote in favor of Janine's re-election. Shareholders will have an opportunity to ask questions in relation to Janine's re-election at the end of this item of business.
I now turn to item 2B, relating to the re-election of Vickki McFadden. Vickki was appointed to the board on the 11th of April 2024, and she's Chair of the Audit and Risk Committee and a member of the People, Remuneration & Culture Committee. In accordance with the constitution, Vickki retires, and being eligible, offers herself for re-election. The board, with Vickki abstaining, recommends that shareholders vote in favor of Vickki's re-election. I'll now invite questions in relation to the re-election of Janine and Vickki. James, do we have any questions?
Chair, there are no questions on this item.
Thank you. The results of the proxy voting for the director re-elections are now shown on the screen behind me. The proxy results indicate that each of these resolutions will pass, and I congratulate Janine and Vickki on their re-election. I now move to item three of the remuneration report, and this item of business asks shareholders to adopt the company's remuneration report. Firstly, I'd like to thank shareholders and other stakeholders for their feedback on our remuneration framework as part of our commitment to the ongoing improvement in and transparency of our remuneration report. We believe this year's report clearly demonstrates alignment with the company performance and shareholder value creation. The board's committed to a proactive approach of engaging with shareholders in 2026 to continue to address remuneration queries in a transparent manner to ensure that we have a robust framework.
In 2025, the base business has generated strong cash flows while delivering outstanding personal and process safety results. While the base business has continued to perform strongly and Barossa first gas production was achieved in September 2025, due to commissioning challenges, the first LNG cargo wasn't achieved before the end of year 2025, which is reflected in our scorecard performance outcome. The highlights for 2025 include free cash flow of $1.8 billion from the strong base business performance, our best unit production costs in a decade of $6.78 per barrel of oil equivalent, excluding Bayu-Undan, gearing of 21.5%, excluding leases and strong liquidity, an underlying net profit after tax of $898 million. Sales volumes of 93.5 million barrels of oil equivalent, generating revenue of $4.9 billion. Our best personal safety performance on record and best process safety performance in 10 years.
Moomba CCS has stored more than 1.5 million tons of CO2 equivalent since start-up. These results contributed to a company scorecard outcome of 76.1% of target out of a possible 167%. The long-term incentive award was tested following the end of the four-year period. The relative TSR measures against both the ASX index and the S&P Global 1200 Energy Index, which accounts for half of the LTI, were not achieved. Overall, the vesting outcome was 39.5% based on performance in relation to the free cash flow breakeven and return on average capital employed performance measures. The performance period for the growth incentive projects concluded on the 31st of December 2025. The growth projects incentive was subject to the delivery of key milestones related to major growth projects and energy transition strategy. Performance was measured over a five-year performance period, with progress locked in along the way.
Overall, the vesting outcome for the CEO growth projects incentive was 90%. With the conclusion of the CEO growth incentive, we've moved back to a more traditional remuneration framework. The vote on this resolution is advisory only and doesn't bind the board of directors or the company. Now, I'm pleased to take questions from you that you may have in relation to the 2025 remuneration report. If you have any questions that relate to the Managing Director's proposed grant of share acquisition rights, please hold those and you can raise them during item four. James, do we have any questions from shareholders registered for this item?
Chair, there are no questions registered for this item.
Thank you, James. On the screen behind me, you will see displayed the proxy voting outcome for this item. I'll now move to the next item of business, item four, which relates to the grant of share acquisition rights to Mr. Kevin Gallagher. This item asks shareholders to approve a grant of share acquisition rights to the Managing Director and Chief Executive Officer, Mr. Kevin Gallagher. A detailed explanation of this item is set out in the notice of meeting. The board is confident that the targets for the CEO's share acquisition rights are aligned with shareholder interests. I'll now take questions on this item. James, do we have any questions from shareholders registered for this item?
Chair, there are no questions on this item.
Thank you, James. On the screen behind me, you will see displayed the proxy voting outcome for this item. Ladies and gentlemen, that completes the formal business of the 2026 Annual General Meeting, and I now declare the meeting closed, subject to finalization of the polls. Please note that the polls will remain open for another 10 minutes. Please ensure you lodge your vote within that time. If you need any assistance with voting, please raise your hand and a Computershare representative will come and help you. Thank you for your time, for your questions, and your continued engagement and support. The board and management team look forward to catching up in the foyer through the doors at the back of the room over light refreshments. Thank you.