The broker has a 12-month price target of $15.50 for the shares, 31% higher than the $11.83 they were trading for when its latest report on Santos was released yesterday.

It believes the next potential catalyst for lifting Santos' shares will be a result from the Hides Deep well in Papua New Guinea's southern highlands region during the March quarter.

Located at the key field of the ExxonMobil-led PNG LNG operation, Santos has long flagged that the Hides Deep prospect could possibly underpin a third train expansion.

While commenting that the Santos-operated GLNG project was "nearing the finish line without incident" and not "going to be the development disaster that many in the market are anticipating", it was not convinced the existing $US18.5 billion ($A21.6 billion) capital expenditure budget was enough to hit the total 7.8 million tonnes per annum of nameplate capacity.

"With the $18.5 billion budget merely covering development costs to the end of 2015 (when the upstream will be unable to feed two trains at nameplate) it is difficult to argue project completion," the broker said.

"So while we are confident of first LNG in 2015, including the capex associated with GLNG's domestic operations, required growth capex from 2016-2020 to ramp up train 2 and actual exchange rates witnessed to date, we estimate the $18.5 billion budget has grown by 44% to $26.6 billion."

Santos recently-released 2015 production guidance of 57-64 million barrels of oil equivalent was below Macquarie's forecast of 64.2mmboe. Santos' 2015 capital expenditure guidance of $A2.7 billion was also $400 million higher than Macquarie's estimate while Santos' 2015 operating expenditure guidance of $US14.6/boe was a little higher than Macquarie's forecast of $14/boe.

The broker also took into account falling oil and east coast gas prices as it consequently estimated an $A800 million fall in free cash flow, saying 2015 was looking like another year of negative free cash flow for Santos.

"While GLNG looks increasingly likely to be delivered without issue, the free cash flow story is being pushed out by falling commodity prices and rising sustaining capex," Macquarie summarised of the recent news.

"That said, even at $US80 a barrel Santos seemingly offers an impressive free cash flow yield of 14% in 2017."