Adelaide-based Santos Energy is delaying a decision to buy the $3 billion-plus (US$1.87 billion) Dorado oil development in Western Australia to appease shareholders who want less capital expenditure. This is despite executives telling the market the company still has confidence in the project.
The discovery is the third biggest oil field in the greater North-West Shelf.
Instead, Santos will focus on its Barossa project, which is under construction in the Timor Sea, and the Pikka project, which is in Alaska.
“Santos is focused this year on delivering Barossa and Pikka,” a spokeswoman said, “and continues to have confidence in the Dorado and Bedout Basin assets and is committed to extracting maximum value from them for our shareholders and joint venture partners.
“After a detailed assessment of all relevant factors, Santos recommended to the joint venture that the development concept for Dorado be revisited after further evaluation of Bedout Basin resources.
More Focus on Shareholder Returns
As early as August, Santos CEO Kevin Gallagher warned that two soon-to-be-completed projects requiring major capital expenditures would be the last for a while, and that shareholder returns would be given greater priority than investing in higher output.
He said Santos would return at least 60 percent of free cash flow to investors from 2026—up from the previous target of 40 percent.
The decision to take a step back poses a major risk to minority partner Carnarvon Energy, whose primary asset is its 10 percent stake in the Dorado project. Shares in the company fell by 23 percent after the announcement, making it the biggest loser on the Australian all-ordinaries index.
Another 10 percent is owned by Taiwan’s CPC Corporation.
Shares in Santos, which owns the remaining 80 percent, ended 2.2 percent lower.
“Despite this setback, the joint venture expresses confidence in the Dorado and Bedout Basin assets, planning further exploration in 2026. Carnarvon remains financially strong with substantial cash reserves and development cost support,” the company said in a statement.
Carnarvon Chief Executive Philip Huizenga said the company was “disappointed” by Dorado’s deferral but had great confidence in the project and the Bedout Basin region where it is located.
