Acquisition of East Spar Joint Venture Interests and 1 for 8 Rights Issue 19^th Mar 1997

Acquisition of East Spar Joint Venture Interests and

1 for 8 Rights Issue

Santos today announced that it has entered into sale and purchase agreements with WMC Resources Limited to acquire its:

• 30% joint venture interest in the production licence WA-13-L, which contains the East Spar field,
• 30% joint venture interest in the adjoining exploration permit WA-214-P, and
• 33.33% joint venture interest in exploration permit WA-264-P,

for a total consideration of $181 million, subject to working capital and other adjustments. The acquisition is effective from 1 January 1997 and is subject to the grant of regulatory approvals and the satisfaction of certain other conditions.

The acquisition of the joint venture interests will increase Santos ownership in the East Spar field and in permit WA-214-P to 45%, making it the largest equity participant.

WMCs 30% interest in East Spar has been independently assessed as having proven and probable reserves of 160 petajoules (PJ) of gas and 8.5 million barrels of condensate (a total of 36.2 million barrels of oil equivalent) and possible reserves of a further 9.6 million barrels of oil equivalent.

The East Spar field commenced production in November 1996 and is currently supplying gas to WMCs nickel and gold operations in the Eastern goldfields and to BHPs iron ore operations at Mount Newman. Gas sales to Kwinana Nickel Refinery will commence in 1998.

For the field as a whole, 188 PJ of gas has been contracted, with average daily gas production expected in 1997 of 46 terrajoules per day. Other gas sale opportunities are currently being pursued.

The Managing Director of Santos, Mr. Ross Adler said today:

The acquisition of the additional interests in the East Spar field, WA-214-P and WA-264-P represents a further important step in the development of Santos Offshore Australia Business Unit. East Spar is an attractive asset and the acquisition of the WMC interests will increase Santos ownership to 45%.

Following completion of the acquisition of the WMC interests the joint venture participants equity interests in the East Spar field (WA-13-L) and WA-214-P will be:

Following the acquisition of its additional interest, Santos interest in WA-264-P will be 66.66%.

The acquisition of the additional interests in East Spar forms part of a major expansion programme which Santos has underway, which is designed to achieve significant growth in production and reserves, both in Santos core Cooper/Eromanga Basin interests and in a number of other areas in Australia and overseas.

Key elements of the expansion programme include:

a major expansion of gas production facilities in SW Queensland to supply new gas sale contracts to customers in SE Queensland and NW Queensland;

a major gas exploration programme in the South Australian and Queensland portions of the Cooper/Eromanga Basins in order to satisfy the growing demand for natural gas in South Australia, New South Wales and Queensland;

the acquisition of petroleum interests from Parker & Parsley and M.I.M. Holdings, announced in 1996, including an interest in the SE Gobe oil field development; and

two new oil field developments on the North West Shelf – Stag and Elang/Kakatua.

Santos spent in excess of $550 million on its expansion programme in 1996 (including exploration, development and acquisitions) and is expected to spend some $800 million in 1997, including the acquisition of the WMC interests.

In addition to these initiatives, Santos has a number of potential new development projects which could require significant expenditure in the medium term.

To help fund this major expansion programme, while maintaining the companys financial gearing at a sound level, Santos is to make a new issue of shares by way of a renounceable rights offering to raise approximately $270 million, before costs.

The issue will be on the basis of one New Share at a price of $4.00 per share for every eight ordinary shares held. The New Shares will not participate in the recently announced final dividend of 13 cents per share for 1996, but will otherwise rank equally with existing ordinary shares. Rights to the New Shares are renounceable and will be traded on the Australian Stock Exchange.

The Issue has been fully underwritten by E.L. & C. Baillieu Limited and J.B. Were & Son. Full details of the Issue are set out in a prospectus which will be lodged with the Australian Securities Commission shortly.

The new issue announcement in the form of ASX Listing Rule Appendix 3B is attached.

Acquisition of the East Spar interests is expected to enhance Santos earnings in 1997. However, the expansion of the capital due to the Issue, is expected to have a modestly dilutive impact on Santos earnings per share in 1997.

Directors have confidence in the future of Santos and commend the Issue to shareholders.