Santos 2003 Full Year Results Accelerating the pace of change John Ellice-Flint Chief Executive Officer 24 February 2004 1 Disclaimer & Important Notice This presentation contains forward looking statements that are subject to risk factors associated with the oil and gas industry. It is believed that the expectations reflected in these statements are reasonable, but they may be effected by a variety of variables which could cause actual results or trends to differ materially, including but not limited to: price fluctuations, actual demand, currency fluctuations, drilling and production results, gas commercialisation, development progress, operating results, reserve estimates, loss of market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory developments, economic and financial markets conditions in various countries, approvals and cost estimates. All references to dollars, cents or $ in this document are to Australian currency, unless otherwise stated. 2 1
2003 At a glance 2003 2002 NPAT ($million) $327 $322 Operating cashflow ($million) $897 $821 Dividend (cps) 30c 30c TSR (%) 1 20% 2% Gearing (%) 2 23% 29% Production (mmboe) 54.2 57.3 1 Source: Bloomberg 2 Net debt/ (Net debt + equity) 3 2003 Operational Performance Gas Commercialisation (a) Year End 31 Dec 2003 2002 510PJ 340PJ 1P Reserve Replacement Production Optimisation Acquisitions & Divestments Cost Leadership ($m) (b) Finding Costs (boe) Finding & Development Costs (boe) 148% 61 TJ/d $100m $188m $US1.77 $US5.62 119% 75 TJ/d ($133m) $78m US$3.82 US$6.78 (a) Santos share (b) Cumulative 4 2
2003 Gas Commercialisation PJ (Net Santos) 600 500 400 300 200 100 0 Bayu LNG Casino Cooper Basin East Spar 5 2003 Exploration Review Disappointing drilling results Growing acreage in key areas Increased quality opportunities 6 3
2003 Oil Program Success Base building projects (including water floods) Bottom water drive opportunities New Technology Pelican Oil Development 2003 4,000 P11 BOL 800 Oil Production (bopd) 2,000 P11 ESP P12 BOL P8 JetPump P12 Jet Pump 400 Cumulative Oil (kbbl) 0 0 Jan Apr Jul Oct Jan Apr Jul Oct Jan 7 2003 1P Reserves Review (mmboe) 1P 312 (54) 69 14 7 1P 338 Production (10) Divestment 1 Exploration Commercialisation Acquisitions Revisions 2002 148% 1P Reserves Replacement US$5.62 Finding & Developing Cost 2003 8 4
2003 2P Reserves Review (mmboe) 710 (54) (40) (29) 1 25 24 636 Production Divestment Revisions Exploration Commercialisation Acquisitions 2002 2003 9 Moomba Critical Path Stage 1 & 2 Storage gas 3 Jan (100 TJ/d) Storage + field gas 4 Jan (200 TJ/d) Stage 3 Gas rate 500 TJ/d Oil at 90% Stage 4 Full gas processing capacity LRP rebuild Stage 5 & 6 LRP resumes May Complete recovery July January February March April May June 10 5
Moomba Incident the Impact Production impact - Sales Gas and Ethane 2.7 mmboe - Natural Gas Liquids 1.0 mmboe - Oil 0.1 mmbbl Net profit impact - $25 to $30 million Cashflow impact - $35 to $40 million 11 Accelerating the pace of change 12 6
Development Profile 2001 The Challenge Scotia Bayu-Undan Liquids 01 02 03 04 05 06 07 08 09 10 Gas Oil & Liquids 13 Development Profile 2003 Delivered The Opportunity Scotia Bayu-Undan Liquids Mutineer Exeter Bayu-Undan LNG Gas Casino Petrel/Tern Evans Shoal Hides 01 02 03 04 05 06 07 08 09 10 Patricia Baleen John Brooks Maleo/Oyong Sole Kipper Gas Oil & Liquids 14 7
Major Projects 15 Exploration Program 2002-2004 Resource mmboe 250 200 150 100 Casino Titan & Calypso Agung Maleo 2003 50 50 Exeter 2002 Norfolk 0 0 0 10 20 30 40 50 Number of Wells Legend Pre Drill Expected Discovered Exploration Program Mean Resource 2002/2003 Mean Commercial Resource Expected Mean Resource 2004 Nuri Melville Amrit 250 200 150 100 Resource mmboe 16 8
Strategic Gas Exploration Focus East Java 160 BCF 1 Well 1 Well 150 BCF (LNG) 22 TCF 4 Wells 9 Wells 550 BCF Market Annual Demand Gas Exploration Wells Total Gas Wells - 16 1 Well 17 High Margin Oil Exploration Kutei 3 Deep water Wells East Java 1 Well Carnarvon 2 Wells Oil Exploration Wells Total Oil Wells - 7 Otway 1 Deep water Well 18 9
Sustainability Sustainability for Santos means economic progress, protecting the environment and being socially responsible. Doing the right thing 19 2003 Sustainability Initiatives Project Greenhouse Management Produced Formation Water Waste Management EH&S Management System Indigenous Policy Human Rights Policy Employee Engagement Measurement Energy Efficiency Supply Chain Management Ethics Policy/ Code of Conduct Disclosure Strategy for Sustainability Indicators Key Facts Policy formation & measurement Measurement system established Measurement system established 18 management, 30 hazard standards Policy formation Policy formation Survey and analysis complete Significant progress 0.5 PJ in 2003 Program established and implemented Policy formation Sustainability review available 2004 20 10
SCIP - taking us to the next level Scope for Improvement Business Improvement Strategy Process Defined Centralised Services Re-organisation Shared Services Santos Continuous Improvement Program Operation Improvement Projects Starting the Journey 2001 Working on the Core 2002-3 Defining the future Now 21 Looking Ahead Four tools to deliver growth We have the people and systems Substantial progress to date and accelerating 22 11
Finance Peter Wasow Chief Financial Officer 24 February 2004 23 Successful In Creating Value Production growth 5-8% -5% Production grows 9% Reserve replacement ratio 150% 148% 2003 outcome Reserves grow TSR 14% 20.3% Replacement cost shrinks Finding Cost US$1.25 Finding & Dev Cost US$5.50 Margin grows $1.77 $5.62 Cash flow growth 10% EPS growth 10% 0% 24 1
Gas Prices Up Sales Revenue ($ million) 1600 1400 1,478 60 1 (13) Gas prices Gas volumes Liquid prices (61) Liquid volumes 1,465 1200 1000 2002 2003 25 Turning The Corner On Production Costs 450 400 350 ($ million) 410 (25) 6 429 PRRT/ royalty Production cost savings 300 275 250 225 200 175 150 125 100 270 (10) (5) 21 2002 Production Cost $4.71/boe New prod n MBP leak Saving 264 2003 Production Cost $4.86/boe 300 250 200 2002 Operating Cost 2003 Operating Cost 26 2
Netback Per Barrel Climbs Netback ($/boe) 23 Market Movements Management Action 22 21 20 19 18 17 18.64 2.36 (2.64) US$ Oil Price FX 18.36 1.66 (0.15) Gas Prices Mix/ Volumes (0.60) PRRT (0.15) Production Costs 19.11 16 15 2002 2003 27 Minor Exposure To USD (USD) 100% 2003 2004 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% USD Revenue Hedging USD Opex USD Interest USD Capex Remaining currency exposure 0% -20% USD Revenue Hedging USD Opex USD Interest USD Capex 28 3
EBITDAX Exceeds $1b For Fourth Year EBITDAX ($million) 1300 47 (60) 1100 1087 Higher gas prices Lower volumes (25) 6 (23) 46 Higher PRRT Lower prodn costs Stock movement Sale of OCA (10) Lower dividends & other revenue (7) FX losses 1061 900 700 2002 2003 29 Profit After Tax Marginal Increase Net profit after tax ($million) 400 350 322 (13) 13 (14) (39) 55 327 300 Lower EBITDA Lower write downs Heytesbury accelerated depreciation 3 250 Higher DD&A Other Tax consolidations 200 2002 2003 30 4
Cash Flow Growth Is Strong Half yearly operating cash flow ($ million) 600 500 400 300 200 100 1'94 1'95 1'96 1'97 1'98 1'99 1'00 1'01 1'02 1'03 12% CAGR 31 Business Improvement Program Significantly exceeded 2003 target of $130m savings Key Initiatives: Production Optimisation Drilling & Completions Gas Development Optimisation Supply & Contracting Compression Optimisation Fuels & Losses Shared Business Services Maintenance Improvement Operations Support Services Government Charges A$m 56.7 42.9 39.8 22.0 8.5 5.9 4.4 3.9 2.2 2.0 188.3 A$m 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 Market commitment Achievement Mar Jun Sep Dec Mar Jun Sept Dec 02 03 Capex Target Opex Target Capex Actual Opex Actual 32 5
Drilling Continues To Improve 1800 Offshore A$/ft 200 Onshore A$/ft 250 USA US$/ft 1600 1400 1200 190 180 225 200 1000 800 170 160 175 600 400 200 150 140 150 125 0 1998 2001 2002 2003 130 1998 2001 2002 2003 100 Esenjay 01 Carnarvon Otway Cooper Basin Onshore US Santos 02 Santos 03 33 Capital Efficiency Improves 100% 80% 60% Other Projects 40% Cooper Oil 20% Cooper Gas 0% 2001 2002 2003 2004 % of total capital spend 34 6
Capital & Production Outlook Capital (A$million) Production (mmboe) 1200 120 1000 100 7% growth 800 600 Captured Opportunities 80 60 Captured Opportunities 400 40 200 Approved Development 20 Approved Development 0 2003 2004 2005 2006 2007 2008 0 2003 2004 2005 2006 2007 2008 2009 2010 35 Affordability Of Development Debt to total capital 1200 1000 800 600 400 200 0-200 1998 1999 2000 2001 2002 2003 50% 40% 30% 20% 10% Debt capacity Gearing 36 7
2004-2006 Targets Production growth 6% to 8% Production grows Reserve replacement ratio >140% Reserves grow EBITDA* growth ps 10% ROCE* 10% Margin grows Netback (06) A$22* Replacement cost shrinks Reserve replacement cost US$5.50 * At an average price of A$39 37 8
Reference Slides 38 Prices & Exchange Rates Full Year 2003 2002 % Change Realised Oil Prices (USD/bbl) 29.01 25.12 +15.5 AUD / USD Exchange Rate 0.6654 0.5615 +18.5 (after hedging) Realised Oil Price (AUD/bbl) 43.59 44.74-2.3 USA Gas Price (USD/mcf) 5.59 3.33 +67.9 Australian Gas Prices (AUD/gj) 2.94 2.79 +5.4 39 1
Production Volumes (mmboe) Gas Liquids 60 55 50 45 40 35 30 25 20 15 10 Gas Liquids 57.3 17.6 39.7 (1.6) Australian Gas 0.2 USA Gas (1.2) Crude Oil (0.5) Naphtha & LPG 54.2 15.9 38.3 2002 2003 Gas Liquids 40 Cost of Sales Full Year 2003 2002 % Change Production Costs 264 270-2.2 Pipeline Tariffs 33 31 Royalties 93 95 PRRT 39 14 Total Operating Costs 429 410 +4.6 Gas Purchases 5 5 Inventory Movement 12 (9) D,D&A 528 465 +13.6 Cost of Sales 974 871 +11.8 41 2
Profit Full Year 2003 2002 % Change Gross Profit 491 608 Profit on Sale of Non-Current Assets 60 6 Other Revenue 24 45 SG&A Expenses (45) (41) Borrowing Costs (35) (47) Income Tax (106) (176) Net Profit after Tax before Write Downs 389 395 +1.5 Write downs (after tax) (62) (73) Net Profit after Tax 327 322 +1.6 42 Cost Definition US Peer Oil Companies* Sales Revenue Santos Group Reporting Sales Revenue Operating Costs net back cost of sales * Source: J S Herold 36 th Annual Reserve Replacement Cost Analysis ** Includes selling and corporate administration expenses *** Plus exploration expense for successful efforts companies 43 3
Little Dry Hole Cost Remains Capitalised Exploration & Development in non producing areas (A$ million) Dry hole cost 56 Browse, Houtman, Perth, Duntroon, Otway Basins, US Early stage commercialisation 204 Hides gas, Evans Shoal Late stage commercialisation 161 Kipper, Sole, Golden Beach, Oyong, Maleo Pre sanction 32 Casino Total 453 44 Capital Expenditure 2003 2002 Exploration Australia 58.3 63.7 Overseas 78.0 69.5 Delineation Australia 48.3 64.1 Overseas 22.0 26.2 Development (1) Australia 503.8 474.5 Overseas 39.9 62.7 Total Exploration, Delineation & Development Expenditure 750.3 760.7 (1) Includes construction and fixed assets expenditure 45 4
2004 Sensitivities US$1 change in the unhedged oil price per barrel leads to change of A$15 million in profit after tax One cent movement in the exchange rate will cause a profit after tax movement of A$5 million A 1% change in interest rates will cause a profit after tax movement of A$7 million 46 5