Santos to Cut Workforce by 10% After Slump in Annual Profit
(Bloomberg) -- Santos Ltd. is targeting a 10% headcount reduction after Australia’s second-biggest natural gas producer reported a slump in profit on lower oil and gas prices.
The layoffs will include short-term staff and contractors as major projects are completed and the company pursues cost savings, Chief Executive Officer Kevin Gallagher said in an interview on Wednesday. Santos has about 4,000 employees, according to the filing.
“The market should like the targeted headcount reduction as a sign of lower forecast operating costs,” Jarden Group analysts Nik Burns and Joshua Mills-Bayne said in a note.
Attributable net income after tax fell by a third to $818 million in the year through December, the Adelaide-based company said. That was below all analyst expectations. Shares fell as much as 3.8%, before paring some of those losses in Sydney.
Despite short-term uncertainty, demand for coal, oil and gas continues to increase, Santos Chair Keith Spence said in a statement. Geopolitical tensions and slowing economic growth meant global energy markets remained volatile last year, he said.
“Volatility is the new norm,” Gallagher said in the interview. “Having flexibility in your product portfolio allows you to react to that volatility when it occurs. And hopefully opportunistically take advantage of it.”
Santos is betting that Asia will underpin growth in demand for liquefied natural gas, despite forecasts of a supply glut that could begin as early as 2026 and mounting global pressure on nations to accelerate the shift away from fossil fuels and reach net zero commitments. The company argues that LNG provides a lower carbon alternative to coal for key import markets like Japan and South Korea.
“Asia remains at the center of LNG demand growth, with consumption forecast to expand strongly through to 2050,” Gallagher said in an investor call, adding that gas plays a “unique role” in the energy transition.
“It is the only scalable, dispatchable fuel capable of supporting renewables while maintaining grid stability,” he said. “That makes it a foundation fuel for economies that are growing.”
There is particularly strong demand for the high heating value LNG that comprises 75% of Santos’ portfolio, as customers in Asia pursue energy security, he added in the interview.
The role of LNG in the energy transition is highly contested, with environmentalists arguing that the fossil fuel industry isn’t properly taking into account methane emissions and pollution from shipping the fuel.
Santos’ average realized oil price in 2025 dropped 14% to $73.05 a barrel and LNG was down 10% to $11.12 per million British thermal units. That contributed to an 8% cut in sales revenue to about $5 billion, it said.
The start of production from the Barossa gas project in September and first oil from the Pikka development in Alaska this quarter are forecast to lift output to 101 million to 111 million barrels of oil equivalent in 2026.
(Updates with comments from CEO interview from second paragraph.)
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