Investors came close to recording a first strike against Santos at its AGM last year in protest at executives' pay levels, with 23.5% of shareholders rejecting the oiler's remuneration report.
A vote of more than 25% for two consecutive years - or two strikes - gives shareholders the power to spill the board, and Santos, still Australia's second-largest exploration and production company by production, had copped some flak from outgoing CEO David Knox receiving $3.4 million in 2014.
However, outgoing chairman Ken Borda said at last year's AGM in April that this was half what Knox could have received, as oil prices had plunged to six-year lows last year which had pushed Santos' stock down some 45% since the previous August.
Returning chairman Peter Coates called that vote "embarrassing", particularly after the company had already frozen executive and directors' pay at 2014 levels and reduced short-term bonuses.
Yet the $1.6 billion impairments and $935 million annual loss it booked last April have raised shareholders' hackles.
The arrival of new CEO Kevin Gallagher, who started his rescue mission on February 1, has injected new hope into the South Australian oiler, and he's expected to give further updates on his internal review at next week's AGM, having already overhauled the executive team.
Noting that Woodside received its own first strike on its remuneration report last Thursday, RBC Capital Markets said in a note to clients that Santos was a "lower risk" of copping the same treatment given it has cut executive discretionary pay materially.
"However, we would not rule out a protest vote given it received a 24% vote against its remuneration report last year," RBC cautioned.
"Gallagher is seeking to identify cost cuts and operational efficiencies to reduce Santos' sustainable cash flow breakeven oil price to mid-$US30s from current high $40s."
An important plank of Santos' forecast 2016 cash breakeven level of $32/bbl was put in place during the last quarter when the Kipper gas asset sales proceeds of $520 million dropped in.
However, Santos got less than expected for its Stag asset when Sona Petroleum announced it had managed to halve the $US50 million purchase price for the oil field through a deed of variation.
Santos has already stated that further asset sales were "off the table" at its full year result as the focus remains squarely on its productivity and cost efficiency initiatives.
While RBC said it believes Santos is "a strongly levered play on slowly recovering oil prices", the bank added that it is still concerned about its debt load of roughly $6 billion, and the oiler's ability to retain an investment grade credit rating, which currently stands at BBB-.
