Santos CFO Resignation and Its Implications for Energy Sector Stability

The recent resignation of Sherry Duhe, Chief Financial Officer (CFO) of Santos, after just one year in the role has sparked renewed scrutiny over governance risks and capital allocation efficiency in the energy sector. Duhe's departure, announced on October 13, 2025, follows the collapse of a $36 billion takeover bid from Abu Dhabi National Oil Co (ADNOC) and raises questions about Santos' leadership continuity and strategic resilience. As the energy transition intensifies and capital costs rise, the implications of such executive turnover extend beyond Santos, offering a case study for broader sector-wide vulnerabilities.

Governance Risks and Leadership Continuity

Santos' governance structure, while compliant with the ASX Corporate Governance Principles, faces challenges stemming from rapid executive turnover. Duhe's exit-her appointment in mid-2024 was initially seen as a stabilizing move-now highlights gaps in succession planning. Kevin Gallagher, Santos' CEO since 2016, remains under contract until 2025, but market speculation about his future persists, according to Capital Brief. Shareholder advisory firm Glass Lewis has previously criticized the lack of clarity in succession planning, noting that Gallagher's controversial incentive package nearing expiry could exacerbate governance risks, as reported in the Australian Financial Review.

Academic research underscores the reputational and operational costs of forced executive turnover. A Harvard Law study found that reactive CEO dismissals-often tied to governance failures-damage director reputations and erode investor confidence. In Santos' case, the abrupt departure of a high-profile CFO like Duhe, who previously served as interim CEO at Newcrest and CFO at Woodside Energy, may signal internal instability. This aligns with broader trends in the energy sector, where a Bain & Company report finds that 44% of executives now expect net-zero goals to be delayed until 2070 or later, partly due to leadership and capital allocation challenges.

Capital Allocation Efficiency in a High-Cost Environment

Santos' capital allocation strategy has been a cornerstone of its post-2024 recovery. The company announced a framework to return at least 60% of all-in free cash flow to shareholders starting in 2026, while investing in carbon capture and storage (CCS) projects to meet its 2040 net-zero target in a Santos announcement. However, the CFO's resignation occurs amid rising capital project costs. According to the 2025 Energy Executive Agenda, 31% of energy firms reported cost increases of over 10% year-on-year, forcing executives to prioritize projects more rigorously (the Bain report cited above).

Santos' Barossa LNG and Pikka projects, now at 97% and 89% completion respectively, are critical to its growth strategy. Yet, leadership transitions can disrupt project timelines and execution. A 2024 Energy Policy study found that firms with frequent executive turnover face a 15–20% higher risk of capital allocation inefficiencies, particularly in capital-intensive industries like energy. For Santos, the appointment of Lachlan Harris as acting CFO introduces uncertainty about whether the new leadership will maintain the disciplined approach to capital discipline that underpinned its low-cost operating model.

Sector-Wide Implications

The Santos case reflects broader vulnerabilities in the energy sector. As companies navigate the dual pressures of energy security and decarbonization, governance frameworks must adapt to ensure continuity. The MSCI framework emphasizes that firms with robust governance structures-such as transparent risk assessments and board independence-are better positioned to manage capital-intensive projects. Conversely, weak succession planning, as seen at Santos, could deter investor confidence.

Moreover, the energy transition is reshaping capital allocation priorities. The KPMG CEO Outlook notes that 78% of executives remain optimistic about economic growth, but 35% cite decarbonizing supply chains as their greatest barrier to net-zero goals. Santos' pivot to CCS and shareholder returns aligns with these trends, but its ability to execute hinges on stable leadership.

Conclusion

Santos' CFO resignation underscores the fragility of governance and capital allocation in the energy sector. While the company's updated capital framework and strategic projects offer long-term promise, the immediate risks of leadership instability cannot be ignored. For investors, the case highlights the importance of scrutinizing governance structures and succession plans when evaluating energy firms. As the sector grapples with rising costs and the energy transition, Santos' ability to navigate this turbulence will serve as a litmus test for resilience in an increasingly volatile market.