Managing Director’s Review OUR 50 YEARS OF EXPERIENCE: AN INVESTMENT IN THE FUTURE  ‘Santos has an impressive and exciting  development outlook over the next  few years.’ Fifty years ago, the founding fathers of Santos, led by the  late John Bonython, took the Company's first brave steps in the search for oil and gas. It was a risky move but, with the limited information available, they identified the far north-east of South Australia as having great potential. This judgment would later be justified and the Cooper Basin would become a prime Australian source of energy for decades to come. Santos' founders were the entrepreneurs of their day – among them Sir Douglas Mawson and Reg Sprigg – people with the drive and commitment required  to create an entirely new industry. It was hard work in  a hostile environment but they persevered and delivered the discoveries that have sustained the energy needs of Adelaide, Sydney and beyond for the  past 35 years. working environment is a vastly different place. People matter.  Values are the essential building blocks for any successful company. If the basic building blocks are not in place then  it doesn't matter whether you have a vision for change, a business will not go in the direction you want without them. In that context, the progress  we have made under the restructuring program is most pleasing and there is an ongoing role for all of us to play in Santos' continuous improvement program. attractive area in which to expand Santos' exploration effort internationally and to establish a new core area. We were looking for excellent drilling targets and found one with Jeruk.  Further, we took a strategic approach towards gaining access to the area, acquiring the surrounding exploration acreage to ensure that we manage the evaluation of the entire play trend, giving Santos maximum drilling flexibility and keeping upfront costs down. With 2004 marking the  50th anniversary of Santos’ incorporation, we have been reminded of how much the world of commerce, technology and regulation has changed since those pioneering days of the 1950s and 1960s.  Today, we have knowledge and technology injected into the exploration equation that the early prospectors could not  even dream about. But it is  vital that we retain their entrepreneurial spirit. Our aim is to foster a working environment in which we encourage and support people and build the confidence required to make  bold but informed decisions throughout our business. Complicated corporate entities trade oil around the world  at the touch of a button. With sophisticated seismic technology and three-dimensional computer images we can more clearly ‘see’ the structures that might hold the oil and gas for which we search.  But some things never change and it is interesting as we reach this milestone period to reflect on the Santos story – not in an indulgent way as we celebrate our progress and achievements, but rather as a means of learning from the past as we look forward to the challenges ahead. There is another attribute  of our forefathers that is still very relevant today, even though our  We were in Indonesia by design, identifying East Java as an The Jeruk oil discovery in Indonesia, our most exciting drilling success for many years,  is the result of deliberately targeting this area as part of the growth strategy put in place  in 2001. This includes striving to  operate our business in the  safest possible manner. I applaud the great commitment and performance of everyone who rose to the challenges posed by the fire at the Moomba liquids recovery plant on New Year's Day 2004. The effort by everyone involved to repair and return  the plant to full production was first class and a credit to their cooperation and professionalism. Jeruk is a significant discovery and has important strategic implications for Santos. It confirms that our exploration strategy is delivering and has  the Company well positioned to capture the upside value available from this discovery.  The success of our strategy in East Java helps us balance the risk in our exploration program and, with the Jeruk discovery pointing the way to other potential targets, we can add some attractive lower risk prospects to our portfolio. Jeruk stands out from the  crowd for a number of reasons.  At 18,700 feet, it was the deepest well (in terms of measured depth) drilled in Indonesia last year: a deep, high pressure well that few companies would have attempted. Jeruk  Annual Report 2004 4 A culture change program is currently underway in Santos which is all about making sure that we work together in a way that enhances our team spirit  and ability to be successful. JERUK STANDS OUT VALUES ARE IMPORTANT RETAINING AN ENTREPRENEURIAL SPIRIT