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Santos meets forecast with record 2006 production

Santos today announced its highest ever annual production of 61.0 million barrels of oil equivalent (mmboe).

The 2006 result – which was at the upper end of the Company’s forecast range – was 9% higher than 2005 total production of 56.0 mmboe and 7% higher than Santos’ previous record production of 57.3 mmboe achieved in 2002.

Sales revenue increased by 12% to a record $2.77 billion for the year ended 31 December 2006 compared with $2.46 billion in 2005 and $1.50 billion in 2004.

Fourth quarter 2006 production of 15.4 mmboe was 4% higher than the previous corresponding period, reflecting new projects commissioned during the year, including the Darwin LNG project (offshore northern Australia), the Casino gas project (offshore Victoria) and the Maleo gas project (offshore Indonesia).

Sales revenue during the fourth quarter of $664 million was in line with the previous corresponding period in 2005, despite lower realised commodity prices. The average realised gas price in the fourth quarter of A$3.70 and the oil price of A$78.29 (US$61.20) were 3% and 2% lower respectively compared with the previous corresponding period.

For 2007, Santos has previously indicated production guidance of between 62 and 63 mmboe, and on a like for like basis, this guidance remains unchanged. However, with the proposed sale of Santos’ USA assets (1.2 mmboe contribution in 2006) and uncertainty regarding timing for resolution of the current Maleo field offtake constraints, 2007 production guidance has been revised to between 59 and 61 mmboe.

“In 2006, Santos has delivered production at the upper end of its forecast range, resulting in record production and sales revenue,” Santos’ Managing Director, Mr John Ellice-Flint, said today.

“This is an exceptional performance, which further builds on production increases achieved in the previous two years, and underscores our ongoing diversification away from our legacy gas assets in central Australia,” Mr Ellice-Flint said.

“2006 has been a constructive year for Santos – amongst other things, we have produced the first LNG cargos from the Darwin LNG project, brought two offshore gas fields into production, recorded positive early results from the oil exploitation project in the Cooper Basin, and made several exploration discoveries in Vietnam.

“Our outlook for 2007 is for an ongoing strong contribution from our core assets, with growth initiatives countering natural field decline.”

Other Santos developments during the December 2006 quarter included:

  • Ongoing monitoring of the mud flow incident involving the Banjar Panji-1 well onshore Indonesia (Santos non-operating 18% interest). Further announcements in relation to Santos’ share of potential costs relating to the Banjar Panji-1 incident will be made as definitive information becomes available and has been evaluated;
  • Successful testing of the Barossa-1 gas discovery in the Timor/Bonaparte Basin, offshore northern Australia;
  • First production from the $100 million Maleo gas project in offshore Indonesia, giving the Company its first offshore operated gas project outside Australia;
  • An oil discovery in offshore Vietnam with the Blackbird well, with Santos having farmed-in to the offshore exploration acreage in April 2006;
  • Successful testing of the Dua-5X oil and gas discovery in the southern fault block of the Dua structure, offshore Vietnam, in the same block as the Blackbird oil discovery;
  • Signing a Production Sharing Contract with Vietnam Oil and Gas Corporation for exploration Block 101-100/04 in the Song Hong Basin, offshore Vietnam;
  • A $1.26 per share all cash takeover offer for Queensland Gas Company Ltd, valuing the coal seam gas company at $606 million. The closing date for acceptance of this offer by QGC shareholders has been extended until 7 February 2007; and
  • Announcing the intended sale of the Company’s United States assets to refocus on exploration activities in Australia, Asia and the Middle East.