Santos has flagged the prospect of resuming dividends in 2017 as it looks to benefit from a slow recovery in oil prices and a ramp up of its Gladstone liquefied natural gas plant in Queensland.
The optimism comes despite the oil and gas producer posting a full-year loss of $US1.05 billion ($A1.36 billion), mainly due to the $US1.1 billion writedown in the value of the Gladstone project that it accounted for during the first half.
Santos had posted a $US1.95 billion net loss a year ago.
Underlying profit, which strips out the impact of significant items, rose 29 per cent to $US63 million and the company said it generated $US370 million in free cash flow over the last eight months of the year.
"We have gone from a business struggling at low oil prices to a business that can sustain through the cycle," chief executive Kevin Gallagher said.
"This is pleasing progress but there is still more to be done."
Santos has struggled with debt over the last two years as a prolonged slump in oil prices coincided with the start of its $18.5 billion Queensland project.
The company has been under pressure from investors - including its largest shareholder, China's ENN Group - to revise its strategy and cut debt in an effort to improve shareholder value.
It responded in December by raising $1.2 billion through a share sale and outlining a plan to sharply cut debt and spin off its second-tier assets into a separate business.
The company has also ramped up production at Gladstone and gained from the nearly 40 per cent rebound in oil prices during 2016.
Santos said it cut 580 jobs, slashed capital expenditure by 51 per cent and garnered $US447 billion through asset sales during the year.
It also cut net debt by $US1.3 billion to $US3.5 billion by the end of December.
"With the strong progress being made in reducing costs and improving free cash flow, the board is confident in the company's ability to return to paying dividends," Santos said in a statement.
It will review the position in at its half year results. Santos had suspended dividends last August.
RBC Capital Markets analyst Ben Wilson said the results largely confirmed to expectations.
Santos said production and sales volume guidance for this year remained unchanged at 55-60 million barrels of oil equivalent (mmboe) and 73-80 mmboe, respectively.
By 1425 AEDT, Santos shares were up 1.5 cents, or 0.25 per cent, $3.985.
SANTOS NARROWS FY LOSS
* Net loss down 46.4pct to $US1.05b
* Net debt down 26pct to $US3.5b
* Underlying profit up 29pct to US$63m
* No interim dividend