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Santos 2001 Full Year Report

Second Highest Profit On Record

Santos Limited (ASX: STO, NASDAQ: STOSY) today announced an after-tax profit for the 2001 full year of $446 million or 73 cents per share, the second highest earnings in the Company’s history.

The strong result reflected close-to-record production of 55.7 million barrels of oil equivalent (boe) and a close-to-record realised Australian dollar oil price of $45.53 per barrel.

Return on average equity was 17.7% and return on average capital employed was 14.1%.

Gearing (net debt to equity) was stable at 39% (38% in 2000), historically low for the Company.

Commenting, Santos’ Chairman Mr Stephen Gerlach said:

“Directors are pleased that Santos has produced another solid result for shareholders”.

Directors have declared a final dividend of 15 cents per share (fully franked) resulting in total ordinary dividends of 30 cents per share (fully franked) for 2001. This is the same dividend level per share as the 2000 ordinary dividend.

In addition the Company distributed $250 million to shareholders in December by way of a share buy-back, including $143 million (23 cents per share) in fully franked dividends.

The final dividend will be paid on 2 April 2002 to shareholders registered in the books of the Company at the close of business on 8 March 2002. This is over three weeks earlier than in 2000, in line with the earlier release of results.

Commenting on the results the Managing Director of Santos, Mr John Ellice-Flint said:

“2001 has been a pivotal year for Santos. We have, simultaneously, been able to effect significant structural change for the Company and to deliver another set of robust results.

For two years running Santos’ profits have been more than twice previous peaks. While the expected decline in oil prices has now occurred, two years of excellent profits and historically low gearing provide a strong foundation for the future.

At the same time, over the last twelve months we have been actively transforming the Company for growth in a lower oil-price environment. We have a clear strategy, rigorously defined reserves, a new organisation structure based on our major profit drivers, a strong management team and a program to raise productivity and optimise costs.

Critically for the future, exploration performance has improved. In 2001, an estimated mean resource of 67 mmboe was discovered, approximately twice the amount discovered in the previous year. This is the Company’s best result for many years.

We have also provided immediate value to our shareholders through capital management. We bought back 6.5% of our shares, distributing $250 million of cash to shareholders, $143 million of which was treated as fully franked dividends for Australian tax purposes. We also issued $350 million of fully franked convertible preference shares. Both the buy-back and preference share issue were heavily over-subscribed.

All of these initiatives will provide benefits in the years ahead.

Looking ahead to 2002, our target is to increase production by around 3%, as well as to make substantial progress towards achieving the other strategic targets we have set. The final financial results will, of course, be heavily dependent on oil prices and exchange rates.

We are also planning an exploration and appraisal program of approximately $160 million ($151 million in 2001) with the aim of delivering around twice the mean resource of 67 mmboe discovered in 2001. If successful this would make a significant contribution towards reserve replacement”.