Annual Report 2004 5
is also located in relatively 
shallow water with infrastructure
nearby, creating options for 
early production.
At Santos, we are proud that an
Australian company took on that
challenge and succeeded, and I
congratulate the exploration and
drilling teams on a great effort.
With the Jeruk discovery behind
us, Indonesia is at the forefront
of our international exploration
efforts. With eight wells planned
in the region for 2005, Santos is
currently the most active explorer
in Indonesia. 
A STRONG FINANCIAL
PERFORMANCE
It was pleasing that Santos 
was able to conclude 2004 
on a higher note than it started. 
We achieved record annual
revenue thanks to higher oil and
gas prices combined with the
return of full production at
Moomba to produce a 21.5% jump
in second half sales: the best
result for any six-month period 
in Santos' history. 
The average realised price for
crude oil was up nearly 19% 
to A$51.83 per barrel.
These results have left Santos
well positioned to continue its
strong investment program which
saw capital expenditure peak at
$930 million in 2004. 
In 2005 we expect to invest
around $850 million of new
capital in projects and our
strategy is to plan for firm
developments based on
affordability at relatively low oil
prices. If higher prices continue
and some projects mature quickly
and can be given the green light,
our overall capital expenditure
may be higher.
Production is expected to rise 
in 2005 when, as usual, our
financial performance will be
subject to oil prices, exchange
rates and interest rates. These
factors have a significant effect
on our bottom line. A US$1 per
barrel change in the oil price
equates to a A$16 million change
in net profit after tax in 2005. 
A one US cent movement in the
Australia–US dollar exchange rate
would produce a change in profit
after tax of A$8 million, and 
a 1% change in interest rates
equates to a change in net profit
after tax of A$9 million.
2004 has also been an important
period for shareholders, with a
significant improvement in the
Santos share price combined with
an increase in the dividend.
PRODUCTION TO REBOUND
While we expected lower
production overall in 2004, our
output was obviously curtailed
further by the incident at the
Moomba plant. The good news 
is that several projects emerged
from the development pipeline
during the year and made positive
contributions to our expanding
suite of oil and gas facilities.
Production is forecast to increase
by 15% in 2005, or by 4% after
excluding the effect of the
Moomba downtime, to about 
54 million boe. We expect this
positive forward trend to be
followed by further production
growth of more than 10% in 2006.
The Bayu-Undan liquids project
came on line in April 2004 
and, at its increased design
throughput of just over one
billion cubic feet of gas per day,
produced liquids at a rate of
100,000 barrels per day. 
Bayu-Undan is currently stripping
liquids and re-injecting the gas
pending tie-in of the pipeline to
Darwin in May 2005 for future
LNG production. The onshore LNG
facilities are more than two-thirds
complete. With a gross production
of 19 million barrels, 22% above
expectations for the year, we were
pleased with the performance of
Bayu-Undan and look forward to 
a full year contribution from this
exciting project in 2005.
The Minerva gas field off
Victoria's western coast started
production in December 2004 
and is ramping up to full field
production of around 150 TJ 
per day. Our share in this project
is 10%, and is significant because 
it represents our first foray 
into marketing gas directly to
customers or into the Victorian
spot market through our sales
vehicle, Santos Direct, aimed 
at delivering higher prices.
RECORD EXPLORATION 
EFFORT AHEAD
Exploration is a great way to
increase shareholder value so 
I am pleased to be able to report
that in 2004, Santos drilled 16
wildcat wells resulting in seven
hydrocarbon discoveries.
Growing our oil and gas reserves