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Operator: Thank you for standing by, and welcome to the Santos Limited 2025 Half Year Results Webcast. [Operator Instructions] I would now like to hand the conference over to Kevin Gallagher, Managing Director and Chief Executive Officer. Please go ahead.
Kevin Thomas Gallagher: Thank you, and good morning, and welcome to the presentation of Santos's 2025 half year results. I'm speaking today from the traditional lands of the Kaurna people of the Adelaide Plains and I pay my respects to Elders past and present. I also acknowledge and recognize the support of traditional owners and business people and nationals everywhere Santos operates around the world. Before I commence my report on what has been a strong financial and operational performance for Santos for the first half of 2025. You will have seen our update this morning on progress with a nonbinding indicative proposal from the XRG Consortium. We are finalizing an acceptable scheme implementation agreement and have made considerable progress. Importantly, the SIA will include customary protections for shareholders should the potential transaction take longer than expected to complete. The Consortium requested an extension of the exclusivity period to conclude due intelligence and to obtain all necessary approvals to enter into a binding transaction. On the basis, that we have made considerable progress towards an acceptable SIA. And given the Consortium has also again confirmed and has found nothing in due diligence that would lead it to withdraw its indicative proposals, Santos has agreed to extend the process deed for 4 weeks until the 19th of September. We will, of course, keep the market updated in accordance with our continuous disclosure obligations over the coming weeks. Now turning to our first half results. I am pleased to report on another strong financial performance, underscoring the cash-generative strength of our base business. Our disciplined low-cost operating model continues to deliver efficiency and reliability. I will provide an overview of our first half performance and our Chief Financial Officer, Sherry Duhe, will present the financial details. Following Sherry's presentation, I'll take you through our operational performance and progress against our 2025 strategic priorities, then open up the call to questions. Before we start, I draw your attention to the usual disclaimer on Slide 2. Safety drives everything we do and we have continued to deliver a strong safety performance during a period of high activity levels across our base business and across our development projects. Our lost time injury rate remains better than the IOGP 2024 global average, underscoring our dedication to maintaining a safe workflows. We've achieved an impressive 46% improvement in our total recordable injury rate compared to the first half of 2024. Our process safety performance, measured by the loss of containment incident rate has also improved. While our safety performance is strong, there is never room for complacency, and we will always pursue a culture of continuous improvement. Slide 4 summarizes our financial results. Sales revenue of $2.6 billion generated EBITDAX of $1.8 billion. Free cash flow from operations of $1.1 billion and profit after tax of $439 million. Our production for the first half of the year was 44.1 million barrels of oil equivalent. Our strong performance in the first half delivered positive all-in free cash flow of $258 million while investing in our growth projects. Our gearing remains within target at 23.7%, including the impact of operating leases. I am pleased that our strong performance has enabled the Board to resolve to pay an interim dividend of USD 13.4 per share. The Board has also resolved to frac the interim dividend to 10% this period. Strong execution of our major development projects in the first half of 2025 has been a highlight. Barossa remains on schedule with production expected shortly. The Darwin LNG plant has achieved ready for start-up. The BW Opal, FPSO is on location successfully hooked up to the subsea infrastructure with only final commissioning work to go before reaching RFSU within weeks. This has been achieved within 3 months of schedule and within the original budget, thanks to outstanding self-execution, disciplined contractor management, effective contracting strategies and simultaneous operations that prevented potential delays from the COVID pandemic, regulatory approvals, legal challenges and supply chain disruptions. Our Alaska project is also progressing well, and we've brought first oil guidance forward to the first quarter of 2026, with the ramp- up to plateau expected in the second quarter. This is another outstanding example of Santos' self-execution project delivery model in action. The pipeline was completed a year ahead of schedule and the challenging logistics of river lifting key processing modules from Canada and barging the seawater treatment plan from Indonesia have been executed flawlessly. Our drilling and completions team have just finished the 21st well, the first combination well with a 10,000-foot long horizontal section that replaces 2 wells with 1 single well. Combination wells together with deployment of other innovative drilling technologies and techniques are delivering real cost savings and faster job completion times. This represents a significant value upside opportunity for future developments in Alaska. We're now drilling the 22nd well, which will be the longest well in the field with an expected total depth of 27,000 feet. 6 wells have been flowed back in 2025, including 3 producers bringing average expected flow rates per well to 7,000 barrels per day at startup. Pikka and Barossa are expected to deliver around a 30% increase in production by 2027, taking the company up with long-term stable cash flows to support returns to shareholders and disciplined investment in future production growth. Moving to Slide 7. The excellent operational performance of our base business has ensured reliable production and solid cash flows, with LNG assets performing strongly. The development projects nearing completion and our LNG marketers continuing to capture outstanding value through our customer-focused contracting strategy. These achievements demonstrate the strength of our portfolio and our ability to deliver value through the commodity price cycle. Demand for LNG from Asia remains strong, underpinned by economic growth. Our portfolio is well positioned, commanding premium for high heating value LNG from Barossa and PNG LNG and providing reliable regional supply. Santos' diversified LNG contract mix also provides the flexibility to take advantage of market conditions. Our recent contract with QatarEnergy demonstrates our ability to leverage the flexibility of our LNG portfolio. The LNG portfolio is 92% contracted and around 80% oil linked between 2025 and 2029. Portfolio pricing is around 14.7% scope to Brent from 2025 to '27. Our strong release prices in the first half -- realized prices from the first half of 2025 have exceeded our peers and supported strong cash margins. Decommissioning is being delivered to ensure safety of people, property and the environment. We are phasing our decommissioning spend to prioritize safety and facility integrity capturing synergies and applying lessons learned from our own experience and from across the industry to reduce both costs and job completion times. We're also adopting responsible approach to waste management with the Mutineer, Exeter, Fletcher and Finucane decommissioning campaign recycling more than 100 tonnes of metal, plastics and wood this year. Moomba CCS Phase 1 is a great demonstration of our project self-execution, online and under 4 years from FID and performing to expectations. In the first half, it reached a major milestone safely and permanently storing more than 1 million tonnes of CO2 equivalent in start-up. Since the startup of Moomba CCS, Santos emissions intensity has improved by 22% and we have already achieved 84% of our target to reduce Scope 1 and 2 emissions by 30% by 2030. We operate in some of the world's most demanding environments that PNG Highlands, the Australian outback, deepwater basins of WA and the Alaskan North Slope, different environments, different regulations, 1 disciplined low-cost operating model. In an industry with a track record of poor project execution Santos is set to deliver 3 major development projects within months of target and within 10% of the original combined budgets. And we achieved this during the COVID years navigating regulatory approval and legal challenges, supply chain disruption and inflationary pressures. Through it all, we remain disciplined. We focused on our own race and we stuck to our strategy. At the same time, we maintain safe operations and strong base business performance. This has been a phenomenal achievement. Our self-execute capability has been developed and refined over the years because the nature of our assets means we are constantly in development mode, delivering large short-cycle CapEx development projects every year. Self-execution means we reduced costs improve efficiency and accelerate delivery by self-managing our subcontractors. It is how we transform technical excellence into sustained value. Over the past decade, our disciplined low-cost operating model has driven production cost down, strengthened the portfolio and delivered strong free cash flow and returns to shareholders. At the same time, we've successfully executed 3 major developments, Moomba CCS Phase 1, Barossa LNG and Pikka Phase 1, all while keeping gearing within our target range. With production set to rise as Barossa LNG and Pikka Phase 1 come online and unit production costs expected to trend lower over time. Our strategy is clear, generate cash, reward shareholders, reinvest to backfill and sustain our infrastructure and to build and grow our production while continuing to operate safely and reliably. I will now hand over to Sherry to provide an overview of our financial results.
Sherry Leigh Duhe: Thanks, Kevin, and thank you, everyone, for joining us today. Santos has delivered a strong set of financial results underpinned by solid base business performance. Our disciplined low-cost operating model continues to deliver. Highlighted by a unit production cost of $7.28 per barrel and free cash flow from operations of $1.1 billion. The business had a positive all-in free cash flow of $258 million for the period while continuing to invest in our 2 major development projects, Barossa and Pikka. Our balance sheet remains robust with gearing of 23.7%, including leases at the end of the half and excellent performance during a period of significant investment. And on this basis, we are pleased to declare an interim dividend of $435 million. Last year, we rolled out our updated capital allocation framework. The updated framework is designed to prioritize and enhance shareholder returns as we move beyond the capital-intensive period of a major growth cycle and new production comes online. It provides a clear pathway to sustainable, improved returns across the cycle. The framework is built around 3 key pillars, maintaining a strong balance sheet, delivering improved shareholder returns and generating strong free cash flow from operations. Together, these give us the flexibility and the resilience to create long-term value for our shareholders. This slide really shows the strength of our disciplined low-cost operating model. On the left, you can see our strong free cash flow generation, even through periods of commodity price headwinds. In the first half of 2025, we've delivered more free cash flow than the first half of '24 despite significantly lower commodity prices. On the right, the impact is clear. Since adopting our disciplined low-cost operating model, we've returned more to shareholders than the company's entire market cap back in 2016. We remain focused on prioritizing shareholder returns. And with a strong balance sheet, we have the flexibility to keep delivery through the cycle. Shareholder returns of $435 million, equivalent to 40% of free cash flow from operations and up on last year have been delivered this half, in line with our capital allocation policy. In the first half of 2025, free cash flow operations -- from operations was around $1.1 billion. This result is higher than the first half of 2024 and supported by lower production costs and lower CapEx. Our operating free cash flow for the first half of 2025 held its own story, a resilient, diversified portfolio powered by high-performing core assets, secure LNG offtake agreements, inflation-linked fixed price domestic gas contracts and an unwavering commitment to low-cost operations. Our underlying earnings show that product sales revenue remained strong at over $2.6 billion generating EBITDAX of more than $1.8 billion and underlying profit of $508 million. Underlying profit is lower than the prior comparative half due to lower revenue from realized domestic gas and crude oil pricing and sales volumes, higher restoration and financing costs, offset by lower tax expenses. We recorded a one-off nonrecurring exploration and evaluation impairment of $119 million against the PNG business. These are historical costs, which were capitalized as a part of the Oil Search acquisition and since then, the Hides footwall prospects being unsuccessful. Despite the footwall section being plugged and abandoned, pleasingly, the hanging wall section was successful with the operator planning to bring it online between late 2025 and early 2026. Building on a strong first half performance, we've tightened our unit production costs guidance for 2025 to $7 to $7.40 per BOE. Once Barossa LNG and Pikka Phase 1 are online, we remain on track to target unit cost below $7 per BOE. And we continue to target an unhedged operating free cash flow breakeven of under $35 per barrel in 2025, ensuring our portfolio stays resilient in an ever- changing commodity price environment. Retaining our investment-grade credit ratings from Fitch, Moody's and S&P reflects Santos' focus on disciplined capital management and our low-cost operating model in place since 2016. Net debt stood at less than $4.9 billion at the end of the first half with gearing in our target range. As noted previously, we do expect that gearing will increase temporarily later this year as we near project completion for Barossa and Pikka and with the inclusion of the lease liability from the Barossa FPSO, after which it is forecast to reduce as development capital expenditures declined and new revenues materialize. We continue to hold a high level of liquidity with $3.9 billion at the end of June and a combination of cash facilities and undrawn finance facilities. In accordance with our capital management framework, we look to protect the balance sheet and save our financial position through hedging strategies for commodity and FX exposures. We have 7.5 million barrels of oil hedged at a floor of $65 and an average cap of $80.67. Further, we have hedge positions in place for FX of AUD 930 million in the second half of 2025 and AUD 1.06 billion in 2026. This heading has been undertaken at rates well below the long-term Australian dollar FX averages, providing strong FX protection as we complete our current period of major capital expenditure. Overall, we had a strong financial performance in the first half of 2025, returning $435 million to shareholders. Thank you, and I'll now hand back over to Kevin.
Kevin Thomas Gallagher: Thanks, Sherry. I want to turn the focus now to our operational performance. As I said earlier, Santos' disciplined low-cost operating model continued to deliver through the first half. PNG LNG performed strongly driven by high plant reliability and sustained FEED Cap from Santos operated upstream assets, which produced more than 4 million barrels of oil equivalent and accounted for 17% of total supply into PNG LNG. Santos successfully lifted and sold 8 equity LNG cargoes on behalf of Santos lifting groups. Looking ahead to 2035, 100% of our LNG share will be equity listed and integrated into our LNG contract portfolio. We are making strong progress on backfill projects that will sustain PNG LNG into the future. Starting with Angore, which was brought online in November last year, we are seeing strong production of over 360 million standard cubic feet of gas per day into PNG LNG. The IDD6 infill oil well continues to contribute to production and has helped identify further backfill and sustain opportunities. The Hides F2 well from the hanging-wall reservoir has been completed and is planned to come online late this year or early next year. And the Papua LNG project is making good progress towards an expected FID early in the new year. And Muruk, P'nyang and Juha have remained in the pipeline to support PNG LNG's long-term supply. GLNG delivered over 3 million tonnes of LNG production, equating a 51 contract cargoes. This was an excellent result underpinned by 100% plant reliability. We completed a planned 7-day shutdown of Train 2 on schedule and with a strong safety performance and GLNG continues to support the East Coast domestic market through offering seasonal shaping of LNG supply. GLNG upstream production has remained steady underpinned by high reliability and strong drilling performance with 74 wells drilled and 58 connected in the first half. Both Roma and Scotia fields achieved new daily production records at 215 terajoules and 110 terajoules respectively, demonstrating our team's operational excellence. 4 rigs are now dedicated to the multiyear Fairview campaign, positioning us for sustained production levels and maximum resource recovery. Development is also being advanced across Roma, Scotia and Arcadia. Electrification supported around 2 petajoules of additional production, along with reduced emissions. In the Cooper Basin, production was impacted by floods on a scale not seen since 1974, with more than 200 wells and several upstream compressors affected. We are actively managing safe recovery at flood levels receipt and access is restored. The impact of the floods has led to top end production guidance for the full year being reduced to 95 million barrels of oil equivalent. Pleasingly, all 4 rigs have remained in operation. Multi-stage simulation was successful in 2 horizontal granite wash wells and Moomba South with one well online and the second expected online during the third quarter. Moomba Central Optimization is an exciting opportunity for the Cooper Basin, over 90% of the future resource set in the Moomba Central and Northern fields. That's where our focus will be going forward. We can optimize infrastructure by replacing 25 gas compressors with just 5 electric compressors. From a reliability and maintenance point of view, that will be transformational for the Cooper, materially reducing unit production costs. In February, Halyard-2 began production 6 weeks ahead of schedule and has been consistently delivering approximately 90 million standard cubic feet per day to the Varanus Island Hub compared to the expected rate of 65 million standard cubic feet per day. This achievement highlights the immense value derived from developing reserves close to existing infrastructure. Small, low-cost tiebacks like Halyard-2 allow us to maximize plant capacity, boost production and reduce unit costs. We are now concept screening a number of near field resources such as John Brooks infill, Spar Deep and Kultarr, and we're evaluating prospectivity at Stern. Plant performance has steadily improved at Varanus Island since 2022, achieving 98% reliability in the period. Across our portfolio, Santos is a range of low CapEx development opportunities that can boost production levels. These initiatives are embedded in our base business plans, leveraging existing infrastructure to deliver strong investment returns and maximize value from our current assets. In PNG, the APF tie-in project is on track to be FID ready by 2026 with projections to deliver up to 125 million standard cubic feet per day gross. As I noted earlier, in the Cooper Basin, the Moomba Central optimization project is focused on replacing higher cost barrels with more cost-efficient production. In Western Australia, the impact of Halyard-2 and production cost highlights the advantages small tie- ins can offer. Further development opportunities around Varanus Island promised value for years to come. In Eastern Queensland, Santos can leverage its comprehensive CSG experience and expertise in low-cost drilling to unlock significant value from our acreage positions. And in Alaska, we have a low capital project that aims to extend the plateau of Pikka and debottleneck facilities. With disciplined investment, Santos is uniquely positioned for profitable growth. Momentum is building behind the Narrabri gas project. We've signed an MOU with ENGIE to supply up to 20 petajoules a year for 10-plus years into the East Coast domestic market. The Native Title Tribunal has remade a favorable Future Act decision for production 10-year awards, and we continue to work constructively with the Gomeroi on both the gas project and the pipelines. Around 30% of land access to the Hunter Gas Pipeline is now secured, and other approvals are progressing well. In PNG, the Papua LNG project continues to progress through FEED with FID expected early 2026. We have a strong acreage position on Alaska's North Slope which positions us well for future growth there and an appraisal well in Quokka is planned for the coming year. In Western Australia, we're assessing an integrated gas and liquids concept at Bedout with appraisal wells being planned to refine scope and timing. In the Beetaloo, we have already booked 1.4 trillion cubic feet gross of 2C contingent resource from only 2 wells and an appraisal program is planned for next year. The Beetaloo has the potential to reshape energy supply in the Northern Territory and materially boost both domestic gas and LNG markets in the North and East. Santos continues to invest in the communities where we operate and where our people live and work. Through the Santos Foundation, the Barossa Aboriginal Future Fund partnerships such as our Cooper Basin ranger programs and our award-winning training collaboration with KAEFER integrating services, we're supporting jobs, skills and better outcomes for our host communities. While the current market environment is challenging, our focus for the remainder of 2025 remains clear, operating our base business safely and reliably, bringing our development projects online and implementing our disciplined low-cost operating model. Our first half performance has been strong, and we're committed to bringing 2025 home safely with a strong finish by continuing to ramp Cooper production to full rates following this year's record floods, maintaining unit production costs within our guidance, delivering structural cost savings of $150 million per year going forward. Starting Barossa up successfully and safely and delivering our first LNG cargo at GLNG from Barossa gas. Keeping Pikka on track and on budget and aiming for early first oil in the first quarter of 2026, progressing Papua LNG, Bayu-Undan CCS and Narrabri to FID ready status and finalizing appraisal programs for Beetaloo and Bedout Basin to support getting these projects FID ready. In closing, the momentum we anticipated for 2025 is well underway and delivering value for our shareholders. Thank you, and it's now time to take questions.
Operator: [Operator Instructions] The first question today comes from Tom Allen from UBS. Please go ahead.
Tom Allen: I'll start with a question on the transaction. So this morning, Santos has announced another extension to the exclusivity period for the potential transaction. Can you please provide some color on the customary protections, which read like a ticking fee under discussion just to ensure that shareholders are supported if the time line continues to slip further out?
Kevin Thomas Gallagher: Look, thank you for the question. Look, the -- we gave color on the reasons for the -- or we flagged last week, the reasons for the extension and our announcement to the market last week. This morning's announcement on the further extension is really as a result of us moving to finalize those -- the acceptable scheme implementation agreement, and we have made considerable progress. . We did say that it would include customary protections for shareholders, should the potential transaction to take longer than expected to complete. However, we're not going to comment on specific terms and conditions until we get to the binding agreement, which we're targeting for the end of this extension period. And at that point, that document, of course, will become public, and we'll update the market accordingly in line with our obligations at that time.
Tom Allen: And if a binding transaction is agreed by 19 September. Can you outline just an indicative time line on securing reg approvals and when investors might expect a scheme vote?
Kevin Thomas Gallagher: Too premature to be speculating on what that time line will be, Tom. We will -- we looked at those customary approvals taking normal durations, but obviously, we'll talk about that at the time when we reach the point of having a binding agreement.
Tom Allen: Okay. And then on the result itself, PNG LNG continuing to annualize production that 25% above nameplate continues to look really strong. But following the drilling at Hides F2 and the hanging wall, can you provide a comment on how long current upstream supply into PNG LNG can sustain production at those levels? And when the joint venture might consider fee decision on the P'nyang gas development just in the event that Papua LNG development schedule continues to shift further to the right?
Kevin Thomas Gallagher: Well, look, I think over the course of the next year, we'll provide an update on longer-term developments like P'nyang. But look, I mean, currently, our focus is on a number of different projects, as we talked about in the presentation this morning, including ABF tie-in to continue to maintain plateau production all the way through until Papua comes on. Our confidence in the Papua project is increasing, and we're looking forward to getting that FID ready around the end of this year and then taking FID, hopefully, early in the new year. And so P'nyang would come after that. And we'll give information in terms of moving into FEED-ing stuff. I'd imagine throughout the course of the next year or so. But really, our focus in the short term is on many of those infill projects to provide plateau -- to maintain plateau production all the way until Papua comes on.
Operator: The next question comes from Dale Koenders from Barrenjoey.
Dale Johannes Koenders: Firstly, just on the Barossa lease coming on to the balance sheet. Can you give us a steer as to how large that is? And just in terms of the lease payments that are coming with it. How should we think about that because I understand there's a level of prepayment?
Kevin Thomas Gallagher: Thanks, Dale. I'm going to handball that one right over to Sherry, who loves talking about leasing. Sherry?
Sherry Leigh Duhe: I do love that, Dale. Thank you for the question. We've guided previously that you should think low single digits in terms of the lease coming on to the balance sheet. We do expect that as soon as we come on production in first gas, we'll be able to update exactly what that is and then talk about how that actually hits the income statement and the cash flows that go along with that. As you say, there is a right of use assets that will be made up of both the prepayments and the natural lease obligations for the operations going forward. So we'll disclose all that in the future reporting period.
Dale Johannes Koenders: Can you give us any steer in terms of how much of the leases have been prepaid or what time frame you get beneficial treatment for?
Sherry Leigh Duhe: No. I think other than what we put in our financial statements already. I can't go any further than that, Dale, but we do expect to update you fully on that and then look at the income statement and cash flow once we have it online and producing.
Dale Johannes Koenders: And then secondly, it doesn't seem to be any sort of comment around the proposed price from the XRG Consortium being adjusted for the dividend declared today. I'm just wondering if you could provide any comments on that, Kevin, or is that one of the things that's up to discussions still?
Kevin Thomas Gallagher: Well, the offer indicated that any dividends would be deducted from the price and that is the status of the offer. But we're not -- as I say, I really don't want to start comment on -- commenting on specific terms and conditions of the deal until we get to a binding agreement. The terms of the offer, the nonbinding indicative offer we made public some weeks back when we announced the opportunity. And we'll talk more about the details when we get to the binding agreement, hopefully in around 4 weeks' time.
Operator: The next question comes from Gordon Ramsay from RBC Capital Markets.
Gordon Alexander Ramsay: Kevin, just another question about the bid. When XRG asked for extended time, do they have to go back to the UAE for government approval on this once it's agreed -- once the SIA is agreed?
Kevin Thomas Gallagher: As we flagged last week, Gordon, they have to go back for what we would call corporate approvals. And as part of the discussions we've had with them they've provided some color on those approvals. But again, we don't want to comment publicly on XRG's internal processes. That's a matter for XRG, but we're pleased with the progress we've made. We've worked well with the folks from XRG over the last few weeks. And as a result of the progress that we've made, the considerable progress that we've made towards an acceptable SIA and given that the Consortium has again confirmed that it found nothing in due diligence that would make it consider withdrawing its offer. We've agreed to extend the process deed as you heard this morning for a further 4 weeks until the 19th of September.
Gordon Alexander Ramsay: And just one more. You made a comment this morning on increased confidence on Papua LNG, potentially moving forward early in the new year. Can you just remind us what the critical path items are there? Is that achieving acceptable EPC contracts? Or are there other factors in play that have held up this project?
Kevin Thomas Gallagher: Really, it was -- the operator recycled some FEED activities at the time which I think now was late '23, I think, costs were looking a bit higher. So we've recycled some of that and they've done a good job of taking considerable cost out. Again, we'll update the market when we get to the point of making that decision. But we're confident that project is heading in the right direction and that we should be in a position at least to be FID ready around the end of this year.
Operator: The next question comes from Rob Koh from Morgan Stanley.
Robert Koh: Congratulations on the result. Just first question about PNG LNG. If you could give us any color on what kind of a plateau you're anticipating for Angore, please?
Kevin Thomas Gallagher: Well, really, we're not giving any specific guidance on Angore itself at this point in time. I think we always said that we watched this production for the first year before the operator be in a position to give us their views on the longer-term, bigger picture for that for any upside or otherwise. And likewise, our subsurface people said the same thing. But the great news is it's performing really strongly. As I said in my speech earlier, around 360 million standard cubic feet per day going into PNG LNG and it's been a very successful project thus far. So I can't really give you any more than that, I'm afraid.
Robert Koh: No worries. All right. Well, good start. And then I guess just a question on GLNG, there's been some commentary around the domestic gas review around the potential extension of a KOGAS option. Are you able to provide any color on the KOGAS option in 2031 and if that's already been exercised or whose right it is to exercise?
Kevin Thomas Gallagher: Look, I'm not going to give any comments on contractual discussions or decisions that haven't been made yet. Ultimately, the project is performing well. Our gas is contracted, the majority of our gas at GLNG and we'll continue to operate and we'll update the market if anything changes. But there is nothing really to say on that at this point in time.
Operator: The next question comes from Saul Kavonic from MST Marquee.
Saul Kavonic: Yes, just I guess, last week's announcement of the 4-plus weeks XRG corporate approval time frame did seem to come as a surprise. Didn't you check with XRG about these approval time frames before putting out all the ASX releases, including the one on 11th of August, which indicated that you could have a binding deal much sooner than that time frame allowed?
Kevin Thomas Gallagher: Look, I think the question there really around the clarity of XRG's internal corporate approvals is really a question for XRG. Look, we've put the announcement out at the time that said 6 weeks to negotiate a SIA, at that time, both parties believed that was achievable. However, this is a big transaction. I believe it would be the largest all-cash transaction ever on the ASX. And I think the largest all-cash energy sector transaction globally. And so what's become apparent during that period and during the SIA detailed discussions was that things were taking a bit longer, and we got more clarity on the internal corporate approvals processes. And so as soon as that became -- as soon as we became aware of that, we flagged that to the market last week.
Saul Kavonic: I guess if XRG haven't been honest with you about the time frame of these basic procedural steps in this process, what do you think is the faith our government can have that XRG being honest about their plans for the business and our critical infrastructure if the deal is allowed to go through?
Kevin Thomas Gallagher: Well, look, I don't think any of those comments are really for me, Saul, and those are your words, not mine.
Saul Kavonic: Fair enough. And if ADNOC ever make a decision maker available to us to ask questions, we will. So far, they're not exactly playing -- don't appear to be playing a straight bet here. Just earlier, you mentioned in reply to an earlier question, that you were targeting a binding agreement by the end of this period, ending on the 19th of September. I just want to see, is that a full binding of approved agreement? Or that's just agreed terms and then there'll still be the subsequent corporate approval process that would happen after that?
Kevin Thomas Gallagher: We're targeting a full binding agreement by the 19th of September.
Operator: The next question comes from Nik Burns from Jarden Australia.
Nik Burns: Apologies another couple of questions on the proposed bid. So last week, your announcement did say that it would take the XRG Consortium at least 4 weeks to obtain relevant approvals. You've now granted them a 4-week extension. Based on what you said last week, it's clear that it feels like 4 weeks is the best case outcome for the Consortium to get those internal approvals. So I guess the question is, is 4 weeks enough here? Or is this a case of the Santos Board really drawing a line in the sand and saying we really need you to get there within the next 4 weeks. And is there a risk that the Consortium does ask for a further extension?
Kevin Thomas Gallagher: Thanks, Nik. Look, I mean, I think those are really questions for XRG. From our perspective, we've had a very positive discussions and made a lot of progress over the last week or 2 on the SIA terms. And consequently, because of that, and as I said earlier on, because the Consortium is again confirm it's found nothing in due diligence that would make it -- lead to it to consider withdrawing its proposal. We've granted them the extension to the 19th. The other thing I would say is that they've also demonstrated a commitment to the transaction, a very strong commitment to the transaction and a commitment to expedite those approvals over the 4-week process. And so following those discussions following the progress following the strong commitment from XRG, the Board selected to grant that extension. And we'll be working very diligently with XRG to help them make that happen.
Nik Burns: That's clear. I fear this question, you might give us another straight bat, that's ask XRG, but I mean there's been a lot of a fair bit of focus on the Consortiums requirements to obtain all necessary regulatory approvals before the SIA is taken to the Santos shareholders for approval. And there's a particular focus, I guess, on FIRB. I'm just wondering, can you comment at all on whether the delay in executing the SIA here is impacting the time line behind the scenes to obtain those regulatory approvals? Or is that a separate work stream as far as you understand?
Kevin Thomas Gallagher: Look, I think if I was giving any guidance on the time line for the expected time line, I should say, for regulatory approvals, it would be from the signing of the SIA, and so I'd say I'd be able to give you more color on my expectations or thoughts around that at that point in time, Nik, but now would be premature.
Operator: The next question comes from Henry Meyer from Goldman Sachs.
Henry Meyer: Just to follow up on the Barossa leases. If gearing rises over the 25% target this half, how do you think about dividends in February if you're considering the gearing trajectory over '26, would you still see a minimum payout?
Sherry Leigh Duhe: That's an excellent question, Henry. We've been very clear throughout that we did expect a gearing subject in particular, to commodity prices in the second half may increase. However, that should not have any impact in terms of our ability to pay out dividends in accordance with the capital allocation framework because a lot of that is noncash as well as coming on to the balance sheet, as you can imagine. So again, no impact should be expected in terms of our ability to stick to our cash.
Kevin Thomas Gallagher: Yes. I would draw your attention, Henry, to the fact that if you exclude those operating leases gearing, excluding those is under 21%. So coming to the end of a heavy investment cycle, we're pretty pleased with where we are on that front.
Henry Meyer: Perfect. And I guess a few months away from 2026 now, it seems the major drilling programs are shaping out for '26 and '27 and you're getting line of sights to Papua or getting closer to FID as well. Can you give us a sense for what you think that CapEx ceiling for 2026 might be set now?
Kevin Thomas Gallagher: As normal, we'll give that CapEx guidance towards the end of the year, Henry. It's too premature to be giving that guidance at this point in time.
Henry Meyer: Okay. If I can a quick third one. In the accounts, we can see the commitments for expenses across the CapEx exploration and leases have all fallen since December last year. Could you maybe just step through what's driving some of the changes in the key buckets there?
Sherry Leigh Duhe: Yes. I think the biggest single one, Henry, without looking through the details of that is that we're coming to the back end of our spending on both Barossa and Pikka. So a lot of those longer-term commitments and long lead items that are related to those major projects have now been extinguished. That's really the story line there.
Operator: The next question comes from Mark Wiseman from Macquarie Group.
Mark Andrew Wiseman: In Note 1 to the XRG announcement today or the announcement separately on the XRG offer. You've clarified that all dividends would be adjusted. And obviously, you're trying to get customary protections to protect investors. I guess the question I've got is the business is improving substantially over the next 6 months with Barossa achieving start-up and then Alaska starting to come on as well. And under your capital framework, the dividend steps up quite materially in Cal '26. Should we assume that if this drags through to mid-2026, including regulatory processes, there'll be some sort of provision to protect investors against that sort of dividend step-up that would be deducted?
Kevin Thomas Gallagher: Look, I mean, we'll make -- presumably, you're talking about in the terms of the binding SIA. And as I said earlier, Mark, we'll make -- we'll provide guidance and clarity on what those terms are at the point of getting or announcing that we've got the signed and binding agreement, but I can't really speculate or I don't want to comment on the specific terms at this point in time. As we said in the announcement this morning, there are customary protections in place.
Mark Andrew Wiseman: Yes. Okay. So are you able to give any sort of insight into the timing from which investors would be protected? Is there any logical point in time that things would kick in?
Kevin Thomas Gallagher: No, as I said earlier, I don't want to comment until we've got a signed and binding agreement, we don't want to comment on specific terms of conditions.
Operator: [Operator Instructions] At this time, we're showing no further questions. I'll hand the conference back to Kevin for any closing remarks.
Kevin Thomas Gallagher: Well, thank you for tuning in this morning. We appreciate your support and we'll look forward to talking to many of you over the next coming days. So thank you very much. Speak soon.
Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.