Bernstein Research has upgraded its rating on Santos to ‘outperform,’ anticipating robust free cash flow compared to its Asian counterparts at projected 2026 crude oil prices. Santos is an Australian oil and gas exploration and production company. It supplies energy to homes, businesses and major industries across Australia and Asia.
Analysts, led by Neil Beveridge, noted that the commencement of two key growth projects, the Barossa gas project in the Timor Sea and the Pikka oil project in Alaska, should drive an increase in Santos’ cash flows. This is expected even with a forecast Brent crude price of $US65 a barrel this year, which is lower than anticipated for 2025. The Barossa gas project is currently overdue in shipping its first LNG cargo, originally slated for the December quarter of 2025.
Bernstein estimates Santos’ free cash flow yield at 11 per cent this year, compared to an average of 5 per cent for oil and gas producers outside of China. They noted that both Santos and Woodside had recently underperformed due to concerns about a potential LNG oversupply in coming years, which could negatively impact spot prices. Santos has faced diminished investor confidence as well because of failed takeover attempts and ongoing management uncertainty, according to the analysts.
Bernstein increased its 12-month target price on Santos shares to $7.30, up from $6.30, indicating a potential upside of 20 per cent from the January 5 closing price of $6.08. Bernstein maintained its ‘market perform’ rating on Woodside, with a target price of $24, compared to Woodside’s closing price of $23.33.
