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Summary

Santos Capital Management Initiative Share Buy-Back and Issue of Preference Shares

Santos Limited (“Santos”) today announced a major capital management initiative. This comprises an off-market share buy-back of up to $250 million and an issue of a minimum of $250 million in Reset Convertible Preference Shares (“Preference Shares”).

Santos Chairman, Mr Stephen Gerlach said:

“Ongoing capital management is an important component of the Company’s strategy announced at its Annual General Meeting on 4 May 2001.

The buy-back will allow the Company to reduce the number of shares on issue and to distribute significant franking credits to shareholders.

At the same time, fully funding the buy-back with Preference Shares maintains the Company’s capacity for future growth.

The Preference Shares will be a less expensive form of equity funding for the Company than ordinary shares and will increase the diversity and flexibility of the Company’s capital base. They also broaden the range of opportunities available for investors in Santos.

Taken together, the buy-back and issue of Preference Shares is expected to have a positive impact on Earnings Per Share .”

Buy-Back Offer

The buy-back is to be implemented by way of an off-market offer to all shareholders on the register as at 31 October, 2001. The price paid for shares bought back will be $6.26 (being the volume weighted average price of Santos shares over the 5 trading days prior to announcement of the buy-back) adjusted upwards or downwards for movements in the S&P/ASX Energy Index from the commencement of trading on 17 October 2001 until the close of the buy-back on 30 November 2001. The buy-back price will be announced on Monday 3 December 2001.

The buy-back price will include a capital component of $2.63 per share, and all of the buy-back price per share above $2.63 will be a fully franked dividend for tax purposes. The tax implications of participating in the buy-back are important, but depend upon the individual circumstances of shareholders. Shareholders will be provided with information to assist them to determine whether to participate in the buy-back. The buy-back also provides an opportunity for shareholders to sell shares free of transaction costs and to dispose of unmarketable parcels

Full details will be contained in the buy-back offer booklet, which will be mailed to all Santos shareholders registered as at 5:00pm Melbourne time on 31 October, 2001. Shareholders wishing to participate in the buy-back will need to complete the personalised acceptance form that will accompany the offer booklet.

Preference Share Offer

The offer of Preference Shares will be made by way of a public offer pursuant to a prospectus and will be for an amount of $250 million, with the right to accept oversubscriptions of up to a further $100 million. Key features will include:

  • An issue price of $100.00 per Preference Share;
  • A preferred dividend at a rate to be determined later this month which will be fixed until 30 September 2006 and which is expected to be fully franked;
  • Santos may reset certain terms of the Preference Shares, including the dividend rate after 30 September 2006;
  • Investors will then have the option to either accept the reset terms, or convert or exchange the Preference Shares at the reset date.

Full details, including the minimum dividend rate, will be contained in the prospectus, which will be mailed to all shareholders with registered addresses in Australia. In the event of excess demand for the Preference Shares, existing Santos shareholders as at the Record Date will receive a priority allocation over general applicants.

The Preference Share offer and the off-market buy-back are being conducted as independent offers. The ability to participate in the Preference Share offer is in no way dependent on participation in the buy-back.

Extraordinary General Meeting

An Extraordinary General Meeting of Santos’ shareholders will be held on 20 November 2001 to seek shareholder approval to permit the Preference Share issue by passing resolutions to:

  • Amend Santos’ constitution to include an article authorising the issue of preference shares; and
  • Approve the specific issue of up to 3.5 million Preference Shares at a face value of $100 each to raise up to a maximum of $350 million.

The Notice of Meeting, together with notes on the resolutions to be considered at the meeting will be mailed to all shareholders by the end of this week.

Timetable and Offer Process

The proposed timetable for completing the offer and buy-back is as follows:

Prospectus and buy-back offer booklet lodged with ASIC