NOTES TO THE FINANCIAL STA TEMENTS for the year ended 31 December 2004 Consolidated Santos Ltd 2004 2003 2004 2003 24. Notes to Statements of Cash Flows $million $million $million $million Reconciliation of profit from ordinary activities after income tax to net cash  provided by operating activities Profit from ordinary activities after income tax 379.9 327.0 643.1 182.9 Add/(deduct) non-cash items: Depreciation, depletion and amortisation 539.7 531.6 210.9 195.8 Write-down of controlled entities – – – 40.8 Write-down of exploration and development expenditure 22.1 59.7 4.6 6.1 Write-down of investment in listed shares – 4.4 – 4.4 (Decrease)/increase in income taxes payable (18.1) (24.5) 12.4 (7.4) Net increase/(decrease) in deferred tax asset and deferred tax liability 23.0 14.8 5.1 (8.3) Tax benefit upon entering into Australian tax consolidation regime (20.0) (55.0) (20.0) (47.6) Capitalised interest (32.1) (22.6) – – Foreign currency fluctuations (38.4) 13.3 (2.3) (1.1) Net profit on sale of non-current assets (52.4) (55.1) (297.7) (45.8) Net (profit)/loss on sale of controlled entities – (4.5) – 1.0 Net cash provided by operating activities before change in assets or liabilities 803.7 789.1 556.1 320.8 Add/(deduct) change in operating assets or liabilities net of acquisitions of  businesses: Decrease/(increase) in receivables (157.9) 100.1 (117.4) 19.6 Decrease/(increase) in inventories (1.7) 11.7 (5.6) 9.0 Decrease/(increase) in other assets (6.7) 2.4 0.7 2.3 (Decrease)/increase in payables (32.0) (2.4) (23.3) 21.0 (Decrease)/increase in provisions (0.4) (3.6) (17.8) (3.6) Net cash provided by operating activities 605.0 897.3 392.7 369.1 25. Related Parties Santos Ltd and its controlled entities engage in a variety of related party tran sactions in the ordinary course of business. These transactions are conducted on normal terms and conditions. Details of related party transactions and amounts are set out in: In addition: The transactions referred to in paragraphs (a) and (b) occurred on terms no m ore favourable than would have been adopted if dealing at arm’s length, do not have the potential to adversely affect decisions about th allocation of scarce resources and are trivial in nature. (a) The spouse of a director of a Santos Group company is an employee of  a subsidiary of that company and each of those persons is also a director of that subsidiary company. (b) Mr J W McArdle, who retired as a Director on 14 July 2001, entered into a consultancy agreement with the Company pursuant to which he will provide consultancy services to the Santos Group. The amount pai pursuant to this agreement during the financial year was $30,000 (2003: $70,000). Note 2 as to interest received from controlled entities; Note 4 as to interest paid to controlled entities; Note 7 as to tax related balances and other amounts owing by controlled entities; Notes 14 and 15 as to amounts owing to controlled entities; Note 15 as to guarantees by Santos Ltd of the financing facilities of contr olled entities; Note 16 as to non-executive Directors’ retirement benefits; Notes 12 and 22 as to investments in controlled entities; Note 26 as to disclosures relating to Specified Directors and Specified Ex ecutives. Annual Report 2004 74