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Summary

Increase in Santos Full Year Profit to $206 Million Reserves Increase to Over One Billion Barrels

INCREASE IN SANTOS FULL YEAR PROFIT TO $206 MILLION

RESERVES INCREASE TO OVER ONE BILLION BARRELS

Santos today announced an after tax operating profit for the 1997 full year of $206.2 million, an increase of 5.3% on the 1996 result of $195.9 million.

The increased profit was primarily the result of record production and sales revenue.

The company’s proved and probable reserves also increased, from 860 million barrels of oil equivalent (boe) at the end of 1996 to 1009 million boe at the end of 1997, a production replacement rate of 463%.

Commenting, Managing Director – Mr Ross Adler – said:

“This is a pleasing result. 1997 was a transition year while new gas and oil projects were advanced for start up during 1998. Further benefits are expected to be realised from these projects over the next couple of years.

Going forward, Santos has before it a wider range of opportunities than at any other time in the companys history. In particular our substantial reserves base forms the foundation for future growth. The Queensland and Northern Territory Business Unit now has a higher level of reserves (384 million boe) than any other part of the Group and the Offshore Australia Business Unit has reserves of over 200 million boe.

Net profit after tax, before foreign currency gains increased by 13.3% from $179.9 million in 1996 to $203.9 million in 1997.

Operating cash flow increased by 11.5% from $413.1 million in 1996 to $460.7 million in 1997.

Directors declared a final ordinary dividend of 13 cents per share, fully franked. The final dividend will be paid on 30 April 1998 to shareholders registered in the books of the company at the close of business on 8 April 1998. The final dividend brings Santos’ total 1997 dividend to 25 cents per share, one cent higher than the 1996 total dividend of 24 cents per share.

Earnings per share were 35.3 cents compared with 35.4 cents in 1996.

Highlights of 1997 include:

The acquisition of petroleum interests which provide the company with additional producing interests and exploration acreage in the Carnarvon Basin and the Gulf of Mexico.

Delivery of first gas from South West Queensland to Brisbane.

Drilling of 112 exploration wells with a 65% success rate, including the largest onshore Australian gas discovery since 1971 and five discoveries Offshore Australia in the Zone of Cooperation, Bonaparte Basin and the Carnarvon Basin.

Substantial progress on the development of the Stag and Elang oil fields Offshore Australia and the SE Gobe oil field in Papua New Guinea, all for first production in 1998.

Establishment of the South East Asia Business Unit following the acquisition of petroleum assets from MIM.

A successful 1 for 8 rights issue which raised $267 million after costs to assist in funding the companys expansion programme.

Commenting on the outlook for 1998, Mr Adler said:

“The first half of 1998 will be affected by the lower oil and liquids prices currently prevailing. However, during 1998, a number of development projects will come on line which are expected to increase significantly production in the second half. The results achieved for the 1998 year will depend on the precise timing of commencement of production of these projects and on prevailing oil prices and the US/Australian dollar exchange rate. At this stage it is expected that results in the first half will be somewhat lower compared with 1997. However, assuming that oil and liquids prices remain at around current levels, it is presently expected that results for the full year will be similar to or exceed 1997 results. This is because new production projects will compensate for the adverse effect of lower liquids prices in Australian dollar terms”.

Reflecting the success of the 1997 exploration program, the company plans to increase its oil and gas exploration program to $206 million in 1998. This program, which involves drilling 117 wells, compares with a 112 well program costing $190 million in 1997.

Commenting on the exploration program, Santos’ Managing Director, Ross Adler said:

“Santos spent a record amount of $190 million on exploration in 1997. It is pleasing that this program has produced such good results.

The further increase in spending in 1998 reflects the breadth of opportunities in our exploration portfolio.

This year’s program contains a good balance of low, medium and high risk prospects. About half of the total expenditure will target opportunities in Offshore Australia, South East Asia and the United States.”