DELIVERING ON THE STRA TEGY Due to the long cycle times inherent in the oil and gas business, it had been recognised that 2004 would be a year in which production was marginally below the previous year, with subsequent increases in 2005  and beyond driven by new development projects.  in each of the four previous years. On a grossed up basis, this represents a yield of over 5%. year of safety improvement  with an 11% reduction in the 2004 total recordable case frequency rate. Mr Frank Conroy retired from  the Board of Directors during December 2004. A member of the Board for five years, Mr Conroy brought extensive business and corporate experience to the  Board and I thank him for his outstanding contribution. In response to increasing interest and enquiry from shareholders, the Dividend Reinvestment Plan has been reintroduced and applied to the final dividend  paid during March 2005. Santos continued its proactive approach to capital management with the redemption and buyback of the outstanding Preference Shares and the issue of FUELS (Franked Unsecured Equity Listed Securities). This initiative was driven by the alignment of Australian accounting standards with international requirements, and closed oversubscribed, raising $600 million in new equity. In February 2005 we appointed two new Board members, Mr Kenneth Dean from Shell, and  Mr Christopher Recny from the international management consultancy firm, L.E.K. These individuals further strengthen  the composition of the Board, bringing strong international  oil and gas expertise and outstanding management experience. In this light, it is pleasing to report that the Minerva gas and Bayu-Undan liquids projects commenced production during the year as planned, while first oil from Mutineer-Exeter and several other key growth projects are progressing to plan. Indonesia matured into a core area during 2004, through a strategy of prudent acquisition, portfolio management and exploration. In particular, the Jeruk discovery has the potential to add significant value, with further evaluation activities underway. The total shareholder return for the year, including share price appreciation and dividends paid, was 28% – an excellent result. Finally, I’d like to acknowledge the extraordinary effort made by everyone at Santos to keep the Company moving forward during this challenging year. I am confident that the significant achievements made during 2004 provide Santos with a solid platform from which to achieve future growth with increased value for our shareholders. In addition to our focus  on shareholder value, Santos  takes its corporate social responsibilities seriously and  is committed to sustainability  as a core value in all operations. The Company’s first Sustainability Review was released during  the year. Santos continues to be recognised for the high quality  of its corporate governance, receiving a measure of five out  of five for corporate governance for the third successive year  in an independent report prepared by leading accounting and management firm, Horwath,  and the University of Newcastle. The safety of our employees and contractors is the highest priority for the Board and I’m pleased that Santos has delivered another This strong financial performance, combined with the confidence that Santos will continue to grow earnings in the future, enabled the Board to increase the final dividend on ordinary shares by 20% from 15 cents to 18 cents per share, fully franked. For the full year, dividends increased  by 10% to 33 cents per share, compared with 30 cents per share A large proportion of the costs and foregone revenues associated with the repair of the damaged plant and the reduced oil and  gas production volumes are  being recovered under  insurance policies. Natural gas supplies were quickly restored, in part by recovering processed gas from underground storage reservoirs. Liquids processing facilities were progressively reinstated allowing further increases to gas production and sales volumes, with the  ramp-up to full liquids production achieved by August as planned. Group sales revenue increased by 2.5% to a record $1,501 million, earnings before interest and tax improved by 23% to $574 million and net profit after tax rose by 16% to $380 million. Even with the large effort expended on the Moomba incident, Santos was able to deliver strong results for 2004, reflecting higher average prices across most products. Importantly, Santos was able  to work effectively with its key stakeholders, including customers, joint venturers and government departments, to minimise the commercial impacts. While the year saw many positives in terms of development and exploration success, it did not get off to a good start with the incident on New Year’s Day  at the Moomba processing facility in central Australia.  I am pleased to report that  in 2004 Santos continued  to deliver on its strategy to transform the Company into a truly international exploration and production business with world-class operations. Dear Shareholder, Stephen Gerlach Chairman 21 March 2005 Annual Report 2004 2 Chairman’s Review