ENHANCING THE POR TFOLIO In 2004, Santos continued its normal business of actively managing its portfolio through the divestment of non-core assets and the acquisition of assets that fit well with existing Santos assets or can add to the ability  of the Company to meet its strategic goals. As a result of this activity,  Santos realised an after-tax profit of $47.4 million on oil and gas asset sales and will continue to high-grade its portfolio on an ongoing basis.  Santos entered into an agreement with PT Medco during the first half of 2004 to acquire some of Novus Petroleum’s Indonesian and Cooper Basin assets conditional on the success of PT Medco’s takeover offer for Novus, which was ultimately successful. Specifically, Santos announced  in September 2004 that it had executed formal agreements to acquire an additional 4.75% of the South Australian Cooper Basin, 18% of the Brantas PSC and 9% of the Kakap PSC from Medco for US$110 million. On  31 December 2004, Santos paid Medco US$98 million for the majority of the assets, with payment for the remaining 2.75% of Kakap PSC expected to be made in the first quarter of 2005. This acquisition was an important piece in the strategic puzzle to tie up access to follow-up potential from the successful exploration at Jeruk and to provide a production base for  the newly established Indonesian core area. Also during the first half of 2004, Santos divested its remaining 18.4% shareholding in Magellan Petroleum Australia Ltd, raising approximately $10.6 million. Early in the second half of 2004, Santos concluded the sale of its non-core onshore Otway Basin interests to Origin Energy for $25.75 million. This sale  resulted in an after-tax profit  of $18 million that was booked  in 2004. In addition, an exploration  joint venture was formed with ConocoPhillips in the NT/P61 block offshore Darwin, Northern Territory, to drill the Caldita well and provide Santos with access rights to a potential expansion of the Wickham Point LNG facility. This deal further enhances Santos’ infrastructure strategy to leverage its position within vital infrastructure to improve shareholder value while reducing the risk profile of the wildcat exploration program. During the third quarter, Santos expanded its offshore Victorian gas interests to 50% in both the Patricia-Baleen and the Sole gas fields through the acquisition from Trinity Gas Resources of an additional 30% interest in the Patricia-Baleen gas field and associated processing facilities in eastern Victoria and an additional 15% interest in the Sole gas field.  Santos earned its 30% additional equity in the Patricia-Baleen gas field by meeting Trinity’s remaining share of drilling costs on the Baleen 4 well which was drilled successfully as a sidetrack well of Baleen 3. Santos will earn its 15% additional equity in the Sole gas field by meeting certain development costs on behalf of Trinity, if and when the Sole joint venture partners proceed to develop this gas resource. The acquisition of these Victorian gas interests strengthens Santos’ domestic gas and infrastructure strategy that was further enhanced by the OMV purchase announced early in 2005. Importantly, Santos is now the operator of the strategic Orbost gas processing facility. Late in the year, Santos sold its 18.02% share in the Carpentaria Gas Pipeline between Ballera  and Mount Isa in Queensland  to Australian Pipeline Trust for  $59 million, resulting in a  $21 million after-tax profit  that was booked in the 2004 financial year. BRANTAS PSC Annual Report 2004 23