Annual Report 2004 11
DEPRECIATION, DEPLETION AND
AMORTISATION
All things being equal, DD&A
could have been expected to 
be lower this year, as Santos
produced lower volumes and had
written off the Heytesbury plant
in the onshore Otway Basin 
last year.
However, two factors caused an
increase in 2004 DD&A. Firstly,
while reserve revisions were
positive overall, negative
revisions were predominantly in
producing areas which increased
depletion rates in 2004, while
positive reserve revisions were in
areas where Santos is not yet
producing or where straight line
depreciation is dominant; for
example, Casino and John
Brookes.
Secondly, on the future
development cost side, depletion
is up partly because Santos is
starting to factor in higher steel
and service company costs into
long-term economic models.
CASH FLOW LOWER
While Santos had a strong profit
year, this is not fully reflected in
cash flows.
There were large movements 
in trade debtors between years,
reflecting the timing of liftings
and the payments for them.
In addition, Santos has not yet
been paid for the insurance claim
relating to the Moomba incident.
A total of $117 million was
recognised in sundry income,
which represents an estimate 
of the amount receivable from
insurers for lost revenue,
additional costs and replacement
plant and equipment. At year end
the money was still owed and so
is not shown as part of operating
cash flow. The final quantification
of the claim with insurers is
progressing.
RECORD CAPITAL EXPENDITURE
Capital expenditure ended 
right on target at $930 million –
a record year for Santos –
approaching a level which is
double DD&A, reflecting how
rapidly the portfolio is changing.
Santos will continue with a high
development expenditure in 2005,
but expects to spend more in line
with cash generation. Exploration
spend is estimated to be about
$150 million, while development
spend is expected to be reduced
to $530 million and delineation
to $90 million. Other capital
spending is expected to be
reduced to $80 million.
This results in a total planned
capital expenditure for 2005 of
approximately $850 million.
FINANCIAL FLEXIBILITY INTACT
Santos ended the year in a 
strong financial position with its
financial flexibility intact, despite
the record development spending.
The FUELS issue was successful
and Santos’ gearing increased
only marginally, despite the large
capital program in 2004.
This is important in Santos’
business as the Company needs 
to be able to fund exploration
success as it occurs, and our
development projects are
increasing in size.
’01 ’02 ’03 ’04
OPERATING CASH FLOW AND CAPITAL EXPENDITURE
$million
Operating cash flow Capital expenditure
0
200
400
600
800
1000
717
660
761 750
605
821
897 930
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