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Allocation Policy for Santos Preference Shares

On 17 October 2001 Santos Limited announced a major capital management initiative comprising an off-market share buy-back of up to $250 million and an issue of a minimum of $250 million of Reset Convertible Preference Shares, with provision for total subscriptions of up to $350 million.

Santos today announced allocation details for the issue of Preference Shares pursuant to the prospectus dated 24 October 2001. The Preference Share offer closed oversubscribed on 30 November 2001, and accordingly valid applications received by the close of the offer will be scaled back in accordance with the following policy. Santos will allot 3.5 million Preference Shares to the value of $350 million, including $100 million in oversubscriptions.

As outlined in the prospectus, Australian resident Santos shareholders who submitted a shareholder priority application form will receive a priority allocation over public applicants.

Shareholder Priority Applicants

All shareholder priority applicants who applied for up to 100 Preference Shares ($10,000) will receive the full amount of their application. Applications for more than 100 Preference Shares have been scaled back so that 24.5% of the excess number of Preference Shares applied for above 100 ($10,000) will be received. Allocations are subject to a maximum of 200 Preference Shares ($20,000). Fractional allocations will be rounded up to the nearest whole number.

General Public Applicants

Given the strong demand from existing Santos shareholders, it will not be possible to provide an allocation of Preference Shares to general public applicants and their application monies will be refunded in full.

Dividend Rate

As outlined in the Prospectus, the dividend rate will be fixed until 30 September 2006 as the greater of 6.50% per annum, or the swap rate prevailing on the date of allotment of the Preference Shares plus 1.20%. Allotment of the Preference Shares and determination of the dividend rate will occur on 4 December 2001, and a further announcement will be made at that time.

Allotment Confirmation Notices and Refund Cheques

Allotment confirmation notices and refund cheques are expected to be despatched on 10 December 2001.

Trading of Preference Shares on the ASX

Santos Preference Shares are expected to commence trading at 10:00 am Wednesday 5 December 2001 on a deferred settlement basis under the code STOPA. Trading is expected to commence on a normal settlement basis on 11 December 2001.

It is the responsibility of all holders of Preference Shares to determine and confirm their allocation prior to selling any shares after trading commences. Applicants who sell shares before receiving their holding statements or allotment confirmation notices do so at their own risk.

Applications received after the close of the offer or that were accompanied by dishonoured cheques will not be allocated any Preference Shares.

All enquiries regarding allocations should be directed to the Santos Information Line on 1300 555 541.