Santos on Track to Meet 2007 Production Targets

Santos announced record second quarter production of 15.6 million barrels of oil equivalent (mmboe) for the period to 30 June 2007, an increase of 4.7% over the previous corresponding period and 7.6% higher than the first quarter of 2007.

Production for the opening six months of 2007 increased to 30.1 mmboe, compared with 28.7 mmboe in the first half of 2006.

The stronger production reflects higher gas output due to increased customer demand, the start-up of the Maleo gas field in Indonesia during Q3 2006, and increased oil production from the Mutineer-Exeter field offshore Western Australia.

Total second quarter 2007 sales revenue of $634 million was 8.3% lower than the second quarter in 2006 due to the timing of oil and gas cargoes, and the stronger A$/US$ exchange rate which resulted in a 10% decline in realized A$ oil prices.

Commenting on the second quarter result, Santos' Managing Director, John Ellice-Flint highlighted that the Company's portfolio continues to deliver positive performance across a large number of different fields.

"We remain on track to achieve full year 2007 production of between 59 and 61 mmboe, which is unchanged from the guidance previously provided to the market," Mr. Ellice-Flint said.

"Particularly pleasing was the continued ramp-up of production from the Fairview coal seam gas field, and an ongoing positive performance from the Mutineer-Exeter oil fields. We expect to further increase production from both of these areas with additional drilling in the second half of 2007," he said.

"Our Cooper Oil Project remains on track to deliver a meaningful uplift in oil production, although flooding in central Australia and short term oil pipeline constraints have resulted in the deferral of some production from the second quarter."

Mr. Ellice-Flint said that the record second quarter production built on Santos' recent history of consistently delivering on its forecasts.

"Our large suite of growth options - which include potential LNG projects in Gladstone, PNG and Darwin coupled with developments such as the Reindeer gas field in Western Australia and the Dua and Blackbird oil fields in Vietnam - augur well for our future growth outlook.

"In addition, our 2007 exploration drilling program focused on the Carnarvon and Browse Basins is weighted toward the second half of the year."

Other activities during and subsequent to the second quarter included:

  • The extension of the Cooper Basin Producer's ethane supply agreement with Qenos, resulting in an additional 56 petajoules of ethane to be sold between late 2007 and the beginning of 2013, at gas prices linked to the world oil price;
  • The announcement of a proposal to construct a 3-4 million tonnes per annum LNG processing facility at Gladstone in Queensland at a total cost of A$5-A$7 billion. This project, which has been granted significant project status by the Queensland Government would see coal seam gas processed and sold into export markets;
  • An off-market buy-back which resulted in Santos acquiring 24.7 million shares (4.1% of its issued capital) at a price of $12.16, representing a 14% discount to market;
  • The commencement of a review of the 15% Santos shareholding cap by the Government of South Australia. The results of this review are expected to be announced by the Government prior to the end of September 2007;
  • The submission of a proposal to the Federal Government in relation to the Moomba Carbon Storage project, which aims to sequester carbon dioxide in depleted and/or depleting oil and gas reservoirs in the Cooper Basin;
  • The signing of conditional agreements to sell Santos' United States operations for US$70 million, together with Santos retaining a 17.5% net profit interest in three proposed exploration wells; and
  • Ongoing monitoring of the Sidoarjo mudflow incident in the Brantas PSC in Indonesia (Santos non-operating 18% interest). A net provision of A$67 million (after recognition of insurance proceeds) was recorded as of December 31, 2006. Further announcements in relation to Santos' share of potential costs relating to this incident will be made as definitive information becomes available and has been evaluated.

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