1、ssntoaAnnual Report 1998SantosSantos is Australias largest onshore oil and gasproducer.It is a world-scale specialist oil and gas company with assets of over$4 billion andannual production of over 45 million barrels of oil equivalent.The core of Santos business is a majorityworking interest in the C
2、ooper/Eromanga Basins oil and gas fields located in centralAustralia.Santos produces gas,ethane,oil andgas liquids from the Basins and is the operator of production and exploration operations.Santos Ltd ACN 007 550 923Incorporated in Adelaide,South Australia on 18 March 1954.Quoted on the official l
3、ist of the Australian Stock Exchange Ltd and alsothe New Zealand Exchange.Santos American Depository Receipts issued by Morgan Guaranty in the USA are sponsored and arequoted on the NASDAQ system in the USA.South East AsiaUnited StatesContents1998 Report to ShareholdersAims,Values,Strategy,Highlight
4、s.2Results Overview.4Chairmans Overview.5Managing Directors Review.6Review of PerformanceFinancial Performance.12Exploration.14Development.16Reserves.18Santos Australian Gas Business.19Production.20Environment.21Board of Directors.22Business Units Operations.2410 Year Summary.28Production Statistics
5、.29Santos Group Interests.30Glossary.32Corporate Governance.33Directors Statutory Report.38Financial Report.42Stock Exchange and Shareholder Information.76AustraliaExplorationProductionOil pipelineGas pipelineEthane pipelineGas pipelineunderconstructionSouthern OceanPacific OceanIndian OceanPapua Ne
6、wGuineaAustraliaIndonesiaBonaparteGulfSeramBass BasinCooper/Eromanga BasinsAmadeus BasinCarnarvon BasinBrowse BasinTimor SeaSurat Basin&Denison TroughBentuBangkoTimor GapOtway BasinKorinci-BaruWarimSampangMelbourneHobartDarwinBrisbaneSydneyCanberraPerth01000kilometresGippsland BasinMt IsaAlice Sprin
7、gsMcArthur RiverKalgoorlieAdelaideGladstoneAlthough the majority of the Companys assetsare located onshore Australia,businessdevelopment in recent years has expandedSantos portfolio of interests offshore Australiaand in South East Asia and the United States.Santos Australian and South East Asian Int
8、erests11998Company ProfileObjectiveThe Companys objective is to provide its shareholders witha superior investment in the oil and gas industry.2ValuesISafe working placesIEthical behaviourIResponsible environmental practices and managementAimsIProvide consistent growth inshareholder valueISeek best
9、practice standards in allfacets of operationsIPerform at a level above that of its peersIPursue opportunities to grow the businessThe Ocean Ambassador which drilled Ewing Bank 994#1.(Photo courtesy of Diamond Offshore Drilling,Inc)1998StrategySantos aims to generate increasing value for itssharehold
10、ers by:MarketingSupplied first south-west Queensland gas to Mt Isa.ISigned a further contract for East Spar Gas.IAcquisitions/DivestmentsSuccessful divestment of Santos Europe Limited.IAcquired additional interests in south-west Queensland via Ithe acquisition of Gulf Australian Hydrocarbons Limited
11、.Acquisition of a 31%interest in PDL1 in Papua New Guinea which contains Ithe majority of the Hides gas field.(Announced subsequent to 31 December 1998.Acquisition subject to Papua New Guinea Government approval.)DevelopmentStag(Carnarvon Basin),Elang/Kakatua/Kakatua North(Timor Gap)IIand SE Gobe(Pa
12、pua New Guinea)oil field development projectscompleted and brought onto production.Completion of the Ballera Gas Plant Phase 3 development project and the Icommencement of the Phase 4 expansion for increasing sales within Queensland.Eugene Island 335 oil and gas field development project commenced.I
13、An active development program including 25 gas development wells IIundertaken onshore Australia focused on sustaining and increasing gas production to meet increasing customer demand.46 million boe reserves developed in onshore Australian fields to IImeet increasing gas demand and optimise oil produ
14、ction.Development studies to commercialise the Minerva(Offshore Otway Basin),IIBentu(Indonesia),Reindeer(Carnarvon Basin)and John Brookes(Carnarvon Basin)gas fields,the Ewing Bank 994#1(Gulf of Mexico)and Legendre(CarnarvonBasin)oil fields and the Bayu-Undan(Timor Gap)gas/condensate field.1998 Highl
15、ightsExplorationDrilled 81 exploration wells with a 54%success rate.IIIDiscovery of Legendre South(oil),Mutineer(oil)and IJohn Brookes(gas)fields.Extension of the Reindeer gas fieldconfirmed by the Caribou-1 well.Discovery of Ewing Bank 994#1 oil field(Gulf of Mexico).IDiscovery of 14 gas fields in
16、the Cooper/Eromanga Basins IIand one gas field in the Denison Trough.Acquired interests in an additional six Iexploration blocks in the Gulf of Mexico.IMaximising the value ofthe Companys core SouthAustralian oil and gasbusinessIContinuing the growth ofthe Queensland,NorthernTerritory and OffshoreAu
17、stralia businessesIDeveloping the existingbusiness in the UnitedStates and South EastAsia3Aims/Values/Strategy/1998 Highlights4Results OverviewProduction growth from committed new projects.Completion of three major oil development projects.Provision of gas to MIM Holdings Ltd(formerly Mt IsaMines)at
18、 Mt Isa.117 exploration wells to be drilled.1998 operating profit to be similar to or exceed 1997,subject to oil and liquids prices remaining at around current levels.Increase in production of 11.0%.Three major oil development projects brought onto production.Commenced gas delivery to Mt Isa.81 expl
19、oration wells drilled(target revised downwards dueto fall in world oil price).Reduction in operating profit of 14.5%reflecting fall in theaverage oil price realised by Santos of 23.6%in Australiandollar terms.OutcomeOutlook19981997Earnings before interest expense and tax$334.6 m$376.5 mProfit attrib
20、utable to shareholders after tax$176.3 m$206.2 mCash flow from operations$457.6 m$460.7 mExploration and development expenditure$504.5 m$575.2 mEarnings per share29.1 cents35.3 centsDividends per share(fully franked)25.0 cents25.0 centsTotal shareholders equity$1939.2 m$1919.0 mReturn on average sha
21、reholders equity9.1%11.8%Net debt/shareholders equity66.0%58.1%Net interest cover(times)4.45.4Key Financial ResultsNet Profit After Tax(a)1998$million0255075100125150175A$/bbl05101520253035200401997199619951994Average Crude Oil PriceOperating Profit after Tax(a)before abnormalsProduction9495969798MM
22、boe463032343638404244Reserves9495969798MMboe16000200400600800100012001400January 1998December 1998Santos made solid progress in 1998 despite thedifficult external environment.Record production was achieved for the third year in a row.In recent years the Company has investedsubstantial sums in acquis
23、itions,exploration anddevelopment and the returns from these investmentsare reflected in the increasing volume of production.Santos growing production base and domestic gasbusiness mitigated the impact of the fall in oil prices.However,notwithstanding overall production growthof 11.0%,the fall in th
24、e oil price brought about a14.5%reduction in earnings.This is a disappointing outcome but one which hasbeen experienced throughout the oil industry in 1998.Looking forward,the Companys focus will be oninternal cost reductions and reducing capitalexpenditure,while maintaining the investmentnecessary
25、for continuing long-term growth.The Board has confidence in the long-term outlook forthe Company.A final dividend of 13 cents per sharewas declared by the Directors making a total dividendpayment of 25 cents per share for the year.This is thesame level as the 1997 dividend.The final dividend will be
26、 paid on 30 April 1999 tothose shareholders registered in the books of theCompany on 8 April 1999 in respect of fully paidshares held at record date.The dividend continues to be fully franked.The Boards aim is to provide shareholders with asuperior investment in the oil and gas industry.While1998 wa
27、s a disappointing year for investors in the oiland gas sector generally,the total return to Santosshareholders(capital appreciation plus dividends)during the year exceeded the Australian StockExchange Energy Accumulation Index by 11.0%.In addition,tax paying domestic investors have also benefited fr
28、om the full franking of dividends.Over the year the number of Santos shareholdersincreased from 65,459 to 81,300.The Board isdelighted by the interest shown in the Company byso many new shareholders.Responsible environmental management andworkplace safety continue to be priorities for theBoard.The C
29、ompanys environmental policies andperformance are governed by a Board Committee ofwhich I am Chairman.The Companyscomprehensive environmental managementprocesses are detailed on pages 21 and 35 of thisreport.Occupational health and safety is also animportant matter.The provision of a safe working pl
30、ace is an issuewhich is governed closely by the Board.In conclusion,Santos has made substantial progressin 1998.This progress positions the Company wellfor the future.On behalf of the Board,I wish to record ourappreciation and thanks to the Companysmanagement and employees for their contributionthro
31、ughout 1998.I also acknowledge the support ofthe Companys shareholders.J A UhrigChairman15 March 1999J A UhrigChairmanChairmans Overview 199851998Results Overview/Chairmans OverviewSantos achieved record production and sales of 45.6 million barrels of oil equivalent(boe)and 45.1 million boe respecti
32、vely in 1998.Earnings in 1998 were$176.3 million,a reduction of14.5%on the record 1997 earnings.This resulted fromthe fall in the average oil price received of 23.6%inAustralian dollar terms,which more than offset record production.Operating cash flow was$457.6 million,close to therecord achieved in
33、 1997.Low oil prices are providing Santos withopportunities to acquire additional interests onattractive terms.Three such opportunities were realised by theCompany in early 1999.In February,Santosannounced that it had entered into an agreement for the acquisition of a 31%interest in PetroleumDevelop
34、ment Licence 1(PDL1)in Papua New Guinea,subject to Papua New Guinea Government approval.PDL1 contains the majority of the Hides gas field.The Hides field is a world-class resource which isestimated to contain proven and probable reserves inexcess of five trillion cubic feet of gas.This acquisitionis
35、 of strategic importance.Reserves from the Hides gas field are planned to be incorporated intothe proposed Papua New Guinea to Queenslandgas project.The Company also acquired interests in PEP132(40%)and PEP108(50%)onshore in the Otway Basin.Thistransaction was finalised in early 1999 and providesthe
36、 Company with opportunities to increase gas salesin Victoria.In March 1999,Santos acquired an approximate 7.5%economic interest in Retention Lease Vic/RL2,whichcontains part of the Kipper gas field and is located inBass Strait in the Gippsland Basin.Under the termsof the renewal of Retention Lease V
37、ic/RL2,which was granted in December 1998,the participants willbe undertaking a work program to evaluate thecommercial viability of the Kipper field.Production1998 was a record year for Santos production,marked by growing production outside thecompanys traditional core areas.This resulted from the c
38、ompletion of four majordevelopment projects during the year the Stag oilfield in the Carnarvon Basin,the Elang/Kakatua/KakatuaNorth oil fields in the Timor Gap,the SE Gobe oilfield in Papua New Guinea and the infrastructurerequired to provide gas to Mt Isa.Total productionreached 45.6 million barrel
39、s of oil equivalent(boe),an increase of 11.0%from the 1997 level.ExplorationThe Company also maintained an active explorationprogram in 1998,with a total success rate of 54%.Total reserves fell slightly from 1,009 million boe atthe end of 1997 to 966 million boe.This reflects thesale of Santos Europ
40、e and its associated reserves,record production,revisions and the fact that anumber of the discoveries made during the yearrequire further appraisal and development studiesprior to reserve booking.Business Unit DevelopmentSantos aims to generate increasing value for itsshareholders by:IMaximising th
41、e value of its South Australian gas business.IContinuing the growth of itsQueensland/Northern Territory and OffshoreAustralia businesses.IBuilding up its businesses in the US and SouthEast Asia.Additional progress was made during the year increating further value in all of the regions in whichthe Co
42、mpany operates.N R AdlerManaging Director6Managing Directors Review 19981998 was a record year for Santos production,marked by growing production outside theCompanys traditional core areas.South AustraliaThe South Australian Cooper Basin is becoming amature producing area.Notwithstanding this,totalp
43、roduction during the year increased by 3.8%to 24.4 million boe.Total gas sales increased to customers in SouthAustralia,New South Wales and the Australian CapitalTerritory and first gas was supplied to Victoriafollowing the completion of the interconnectingpipeline between New South Wales and Victor
44、ia.The long-term value of the South Australia BusinessUnit was also enhanced by a successful explorationprogram.The Accelerated Exploration Program,whichcommenced in 1996,has added over 430 petajoules(PJ)gross of gas reserves.The South AustralianCooper Basin exploration licences held by Santos PELs
45、5&6 expired in February 1999.However Santosholds,or has applied for,production licences coveringall discoveries made in the area prior to the licenceexpiry.There remains scope for continued explorationand increasing reserves in these production licences.Queensland and Northern TerritorySantos activi
46、ties in Queensland and the NorthernTerritory have expanded greatly in recent years.They now make a significant contribution to the Companys results and have considerable further potential.During the year Santos increased its interests insouth-west Queensland through the acquisition ofGulf Australian
47、 Hydrocarbons Limited.A milestone in Queensland was reached during 1998 with the first gas sales to MIM Holdings Ltd(formerly Mt Isa Mines)at Mt Isa.There were alsoincreased gas sales in the Northern Territory.Santos and its joint venturers are now the major gasproducers in Queensland.The Company al
48、so has significant undeveloped gasreserves in south-west Queensland which have thecommercial advantage of being rich in natural gasliquids.There is potential to add to these reservesand they are well locatednot only for sales inQueensland,but also inNew South Wales,Victoria and SouthAustralia.Develo
49、pment of thesereserves is underway.The Challum field wassuccessfully developedin 1998 and appraisal of the Barrolka fieldcontinued,withproduction anticipated tocommence in 1999.Offshore AustraliaThe Offshore Australia Business Unit developedfurther during the year with increased gas sales andthe com
50、mencement of production from the Stag andElang/Kakatua/Kakatua North oil fields.The Stag oil field commenced production in Mayand marks Santos first significant production in theCarnarvon Basin.Unfortunately field production has fallen short ofexpectations.The operator,Apache Corporation,isproposing
51、 a number of initiatives to improveproduction.The Elang/Kakatua/Kakatua North oil fieldscommenced production in July and during the year reached a peak of 42,475 barrels of oil per day,well ahead of expectations.The East Spar gas/condensate project continued toperform well,with gas sales reaching 80
52、 terajoules(TJ)per day.Key AchievementsFour major developmentprojects were completedand brought ontoproduction.A record level ofproduction was achieved.Gas sales to MIMHoldings Ltd at Mt Isacommenced.An active explorationprogram was undertakenfor an overall successrate of 54%.19987Managing Directors
53、 ReviewA new gas contract was signed to supply the KwinanaAmmonia Project,commencing in mid-1999.This hasnecessitated construction of a second pipeline fromVaranus Island to the Dampier Bunbury pipeline.By early 2000 it is expected that East Spar will besupplying approximately 16%of the existing Wes
54、ternAustralian domestic gas market.The Business Units exploration program during the year focused on Northern Australia and theCarnarvon Basin.Results in Northern Australia weredisappointing,with no discoveries.Results in theCarnarvon Basin,however,were more encouraging.Further details of the discov
55、eries are provided onpage 15.Santos now has interests in three potentialdevelopment projects in the Carnarvon Basin resultingfrom exploration in 1997 and 1998:Legendre(oil),Reindeer(gas)and John Brookes(gas).Developmentstudies on these discoveries progressed.Studies were undertaken on the proposal t
56、o developthe Bayu-Undan gas/condensate field as a liquidsstripping gas re-injection project.Work is also continuing on possible development of the Petrel-Tern and Minerva gas fields and otherhydrocarbon resources in the Business Unitsportfolio.Over the last three years production by the OffshoreAust
57、ralia Business Unit has grown to make ameaningful contribution to the Group.South East AsiaSantos believes that Papua New Guinea provideslong-term potential.During 1998 the Group commenced its firstproduction in Papua New Guinea through its interestin the SE Gobe oil project.Production commenced in
58、April and reached amaximum of 20,565 barrels of oil per day.Santos drilling program in Papua New Guineacommenced in early 1999 with the drilling of Stanley-1in PPL 157.In February 1999 the Company announcedthe Hides acquisition referred to earlier.United StatesSantos USA also provides longer term po
59、tential.During the year the Group sold its United KingdomNorth Sea interests and increased its emphasis inthe United States.In particular,Santos USA is expanding itsexploration portfolio in the shallow water Gulf ofMexico.The Group now has interests in 24 offshoreblocks.During the year two wells wer
60、e drilled whichlead to one oil discovery(Ewing Bank 994#1).Development of the Eugene Island 335#1 oil and gas discovery also proceeded.Over time it is expected that Santos USA willbecome an increasing contributor to Group results.InvestmentsQCT Resources LimitedSantos has a significant interest in Q
61、CT ResourcesLimited(“QRL”).QRL has a 32.37%interest in theCentral Queensland Coal Associates(CQCA)andGregory Joint Ventures and 100%of the SouthBlackwater mines.During the year QRL purchasedan additional 2.79%in the CQCA and Gregory JointVentures from AMP for$97.6 million.The short-term outlook for
62、seaborne traded coal isuncertain.In December 1998 agreement was reachedwith the Japanese Steel Mills to reduce the price of hard coking coals from the CQCA and GregoryJoint Venture mines for the Japanese financial yearcommencing 1 April 1999 by an average of US$9 pertonne,or approximately 18%.Agreem
63、ents for thesupply of coking coal from South Blackwater arebeing negotiated.Significant progress was made in1998 in improving the competitiveness of CQCA andGregory Joint Venture mines by reducing the totalworkforce by approximately 25%and implementingprograms to improve the utilisation of equipment
64、 andcoal deposits.The full benefit of these cost reductionsshould be realised in 1999.In the longer term the company may also benefitfrom a lower Australian dollar/US dollar exchangerate once current currency hedges expire and areduction in rail freight rates.During the year Santos increased its sha
65、reholding inQRL from 34.9%to 36.4%through conversion of aportion of its holding of QRL convertible notes andManaging Directors Reviewcontinued8Santos employees made a significantcontribution to the results achieved in 1998.participation in QRLs Dividend Reinvestment Plan.The remainder of Santos hold
66、ing of QRL convertiblenotes was sold during the year pursuant to an on-market buy-back undertaken by QRL.The salerealised$27.2 million.An external experts opinion has been obtained,confirming that the long-term strategic value of theinvestment in QCT Resources Ltd exceeds theCompanys carrying value
67、at year end 1998.Other InvestmentsSantos has a 12.5%interest in Oil Company ofAustralia and an 18.3%interest in MagellanPetroleum Australia Limited.These companies haveinterests in oil and gas production,mainly inQueensland and the Northern Territory respectively.Human ResourcesThere were a number o
68、f important seniormanagement appointments during the year.Dr John Armstrong,previously head of SantosAmericas and Europe Business Unit,was appointed General Manager of the Offshore AustraliaBusiness Unit.He was succeeded as President of Santos USACorporation by Mr Michael Baugh who joined Santosafte
69、r a long and successful career in the oil and gasindustry,both in the United States and Australia.A third significant appointment was that of Dr Ashok Khurana as General Manager PetroleumDevelopment and Planning.Dr Khurana,acknowledged as a world expert on gas deliverabilityfrom tight reservoirs,joi
70、ns Santos after more than 30years international experience in the industry.More generally,the progress achieved by Santos in1998 reflects the significant contribution made by all employees.Production and Earnings OutlookWith oil prices at 12 year lows,1999 is expected tobe another difficult year.Dur
71、ing the first twomonths of 1999 the price of West TexasIntermediate Crudeaveraged US$12.26 perbarrel,15%below theaverage price ofUS$14.43 in 1998.Theseprices are well below thefive-year average priceof US$18.50.The company is actively seeking to further mitigatethe fall in world oil prices through i
72、ncreasingproduction,conserving capital,curtailing spendingand enhancing productivity.Production and sales volumes increased to recordlevels in 1998 and are likely to be higher again in1999 with the full year effect of recent developmentprojects.In 1998 operating costs per boe producedfell for the th
73、ird year in a row and it is planned toreduce them further in 1999.Spending on exploration and development is beingreduced by approximately$170 million.This reflectsthe completion of a number of major developmentprojects,the Companys substantial level of reserves with an average life of over 20 years
74、 and theimpact of low oil prices.Looking to the longer term,the Companys outlookis positive with a good suite of exploration anddevelopment opportunities.N R AdlerManaging Director15 March 1999Key Appointments during 1998Dr John ArmstrongGeneral Manager,OffshoreAustralia Business UnitMr Michael Baug
75、hPresident,Santos USADr Ashok KhuranaGeneral Manager,Petroleum Developmentand Planning1998Managing Directors Review9In 1998 Santos production reached record levels.10In 1998 Santos began production from four Modec Venture 1 floating production,storage and offloading facility(Elang/Kakatua/Kakatua No
76、rth-Timor Gap)In 1998 Santos achieved an exploration success rate of 54%.11 major development projects.Review of Performance Financial PerformanceThe volume of product sold in 1998 increased by 9.2%to a record 45.1 million boe.Gas sales were 183.6 PJ,an increase of 7.1%,reflecting increased sales in
77、 Queensland,SouthAustralia and Western Australia.Sales of crude oil increased by 15.6%as a result ofthe new oil fields which came onto production duringthe year.There were also increases in sales of LPGand condensate.Average prices received for sales gas remainedstable.However,the prices received fo
78、r crude oil fellby 35.2%in US dollar terms and 23.6%in Australiandollar terms.Prices received for ethane,condensateand LPG also fell.As a result,notwithstanding the strong growth in sales volume,sales revenue fell by 1.2%to$769.4 million.Operating ExpensesAverage operating costs per boe produced fel
79、l to$4.49,the lowest in four years.However,total operatingcosts increased by 9.2%due to increased production.Royalties paid decreased due to lower oil prices.The depreciation and depletion expense increased by9.0%to$225.9 million.Average depreciation anddepletion per boe produced fell from$5.04 to$4
80、.95.There was a writedown in exploration expenditure of$4.9 million(nil in 1997)in respect of interests in the Browse Basin,Bula/Seram in Indonesia and New Zealand.Earnings Before Interest Expense and Tax(EBIT)Earnings before interest expense and tax fell by 11.1%to$334.6 million.Interest on higher
81、borrowingsassociated with the funding of the Companysdevelopment program increased the net interestexpense by$13.1 million to$67.3 million.Operating profit before income tax fell by 17.1%to$267.3 million.Income tax on operating profit fell by$25.1 million to$91.0 million,primarily due to the fallin
82、operating profit before tax.Record sales volumes were achieved in 1998.This growth largely offset the impact of the lower oil price,with the result being a marginal fall in sales revenue.In 1998,gas sales commenced for supply to the Mica Creek Power Station12Operating Profit After TaxA net profit of
83、$176.3 million was achieved in 1998,compared with a result of$206.2 million in 1997.The sale of Santos Europe contributed$7.4 million toearnings reflecting sale proceeds of$137.0 millionand book value of assets at time of sale of$129.6million.No abnormal items were recorded in either 1997 or 1998.Ca
84、sh FlowCash flow from operations was$457.6 million,close tothe record level achieved in 1997.Operating cash flow was 75.6 cents per share.Dividends of$151.4 million(1997$142.5 million)were paid to shareholders.Balance SheetThe level of net debt increased during 1998 to$1,280.0 million(1997$1,114.2 m
85、illion)due to funding of capital expenditure together with theincrease in the Australian dollar equivalent of USdollar dominated debt.The net debt to equity ratio atthe end of the year was 66.0%(1997 58.1%).After providing for the final dividend of 13 cents pershare,shareholders equity at the end of
86、 the year was$1,939.2 million.Treasury Policies and FundingThe Companys borrowing facilities are summarisedin Note 16 to the Financial Statements and thestructure of its share capital is set out in Note 18.The approach to management of foreign exchange,interest rate and commodity price risk exposure
87、s aredetailed in Note 33.“Year 2000”IssueSantos continues to progress its Year 2000preparedness with the overall objective of minimisingthe potential for a material disruption to the Companysbusiness due to the rollover of the century dates.Information technology and process control systems,identifi
88、ed as critical to maintaining the Companysbusiness,have been assessed for Year 2000compliance and,where relevant,corrective actionimplemented.By the end of June 1999,remedialaction for all identified critical process controlsystems and for all but five of the identified criticalinformation technolog
89、y systems is scheduled to havebeen completed and tested as compliant.The fiveinformation technology production reporting systemsare scheduled to be replaced at year end 1999,withthe replacement systems scheduled to be tested forYear 2000 compliance by the end of September 1999.The Company is reviewi
90、ng and,where considerednecessary,will be revising existing contingency plansor,based on a business risk analysis,creatingadditional contingency plans with a view to ensuringappropriateness to Year 2000 issues.Santos is dependent upon a number of third partieshaving Year 2000 compliant systems,includ
91、ingsuppliers,contractors,pipeline operators,majorcustomers and operators of joint ventures in whichthe Company holds an interest.Santos continues toclosely monitor progress with identified key thirdparties and to participate in oil and gas industryforums to promote awareness and to share industrykno
92、wledge of Year 2000 issues.However,anassurance that Year 2000 problems will not affectSantos business cannot be given.Santos has factored Year 2000 matters into itsdecisions on new systems investment.In June 1998,the Company reported that the estimated overallcosts associated with Year 2000 issues o
93、ver the fouryear period commencing 1996 was approximately$18 million,inclusive of the capital investment of$11.5 million to replace its legacy commercialsystems.As at 31 December 1998,approximately 75%of these costs had been expended and currentindications are that this estimate will not be exceeded
94、.Further information on the Companys response to theYear 2000 issue appears at page 35 of this AnnualReport and in the releases to the Australian StockExchange Ltd made in June 1998 and March 1999.13Financial PerformanceReview of Performance141998 Exploration A total of 67 wildcat and 14 appraisal w
95、ells weredrilled in 1998 for a cost of$180.7 million.Theprogram achieved an overall success rate of 54%(52%on wildcats,64%on appraisals).At the end ofthe year 28 million boe of proved and probablereserves had been booked.This figure excluded somenotable discoveries,namely John Brookes-1,Mutineer-1 a
96、nd Ewing Bank 994#1.The Caribou-1appraisal of the Reindeer gas field was also excluded.Further appraisal and development studies arerequired on these resources.The annual finding costfor the booked reserves was$6.52/boe.This figureexcludes the potential reserves associated with thediscoveries noted
97、above,but includes the expenditureincurred in undertaking the respective drilling.Notwithstanding the 1998 result the five-year averagefinding cost is$1.75/boe.Exploration StrategySantos has maintained a consistent explorationstrategy over the last few years.Key aspects of thestrategy include:IActiv
98、e exploration in established core areas.IFocused exploration in new areas,concentrating in areas of known hydrocarbons.IAggressive and cost effective application ofmodern technology by skilled and motivatedprofessional staff working to a defined process.IDisciplined technical assessment of chance of
99、success,potential resource size and economicoutcome with a strong emphasis on review and audit.IActive and rigorous management of theCompanys exploration portfolio.Review of Performance ExplorationSantos achieved some significant exploration successes in 1998.1998 Exploration ResultsWells DrilledSuc
100、cessful Wells SuccessGasOilGasOilRate%South Australia32220059Queensland1439159Offshore Australia492231South East Asia040250US1217162Total621938654Testing John Brookes-1 in the Carnarvon Basin1998 Exploration HighlightsIA successful appraisal of the Legendre oil field in the Carnarvon Basin through t
101、he drilling ofLegendre South-1.IAn encouraging oil discovery in the Mutineer-1well in the Carnarvon Basin.The well,drilled as afollow-up to Pitcairn-1,has further confirmed thepotential of Santos-operated permit WA-191-P.IA substantial gas discovery in good qualityreservoirs in the WA-214-P well,Joh
102、n Brookes-1,in the Carnarvon Basin.IA significant extension of the Reindeer gas fieldproven by the Caribou-1 well in Carnarvon Basinpermit WA-209-P.IThe discovery of 11 new gas fields from theAccelerated Exploration Program in SouthAustralia.IThe south-west Queensland gas program inATP 259 which dis
103、covered three new gas fields.IAn encouraging discovery in the Warim PSC in Irian Jaya where Kau-2 encountered a non-commercial oil accumulation.IContinued participation in the Gulf of Mexico leasesales with the award of six more permits as well asother acreage gained through farm-ins.A farm-inwell,E
104、wing Bank 994#1,encountered 185 feet of netoil pay and was suspended as a new field discovery.1999 Exploration ProgramFollowing on from the strong reserve position built up over the last few years,the 1999 explorationprogram is reduced in scope and expenditure.Again,the risk reward characteristics o
105、f the portfolio ofopportunities will be monitored,prioritised andactivities adjusted.The focus is on a balance betweenthose projects that,if successful,can lead to earlycash flows,with some investment in higher risk,more long-term opportunities.Features of the 1999 program include:I28 wells to be dr
106、illed onshore Australia.IThe program in Offshore Australia,which willconcentrate on the Carnarvon Basin.IFurther drilling in Papua New Guinea.IDrilling activity in the Gulf of Mexico in acreageacquired through lease sales and farm-ins.TechnologySantos continues to implement appropriatetechnologies w
107、ith a view to enhancing explorationperformance.3D Seismic3D seismic,a higher effort acquisition andprocessing technique,provides enhanced definitionof the subsurface.Using state-of-the-art software onmodern geoscience work stations,geophysicists arebetter able to locate hydrocarbon bearing structure
108、s,to see more detail in the reservoir distribution andoften differentiate between water and hydrocarbonbearing reservoirs.High Resolution StratigraphySince 1987 Santos has maintained an in-housepalynology laboratory.This has allowed the detailedevaluation of the age and environmental deposition ofth
109、e rocks in the Cooper Basin and in specific areas ofoffshore Australia.With this information,more specificinterpretations as to the whereabouts of furtherreserves can be made.15ExplorationReview of Performance1999 Indicative Exploration ProgramWells$millionOnshore AustraliaCooper/Eromanga1633.8Other
110、127.2Offshore Australia420.0South East Asia515.0US924.0Total46100.0Development ActivityDuring 1998 three major oil development projectswere completed SE Gobe(Papua New Guinea),Stag(Carnarvon Basin)and Elang/Kakatua/Kakatua North(Timor Gap).Production from SE Gobe commenced in April 1998.At the end o
111、f 1998 production had reached 18,855barrels of oil per day and was expected to increase.The Stag oil field operated by Apache Corporation commenced production in May 1998.The field did notachieve full production capacity over the year.Thiswas due to excess gas production from the largerthan anticipa
112、ted overlying gascap associated with thefield and less than anticipated reservoir pressuresupport from the water injection wells.The operator,Apache Corporation,is proposing a number ofinitiatives to improve production.Elang/Kakatua/Kakatua North commenced productionin July 1998.The fields performed
113、 strongly,withproduction at times exceeding expected rates.In addition to these major oil projects otherdevelopment projects were undertaken.Phase 3 of the Ballera Gas Plant development insouth-west Queensland was completed to enable thesupply of gas to MIM Holdings Ltd at Mt Isa.Following this,the
114、Phase 4 expansion commencedwhich will increase Balleras capacity toapproximately 155 terajoules per day.This expansionwas completed in early 1999.It is planned to providegas to WMC(formerly Western Mining Corporation)atMt Isa.In the US,the Eugene Island 335 oil and gasdevelopment in the Gulf of Mexi
115、co was substantiallycompleted for the commencement of production inearly 1999.Total development expenditure in 1998 was$324 million,reflecting majorprojects,development studies and the work program undertaken in existing producing fields.With the completion of major projects,overall 1999 development
116、 expenditure is expected to decrease to slightly above$200 million.Review of Performance Development1998 Development Expenditure$millionSouth Australia99.5Queensland/Northern Territory110.5Offshore Australia73.9South East Asia9.4US13.6Other16.9Total323.816Ballera Gas PlantDevelopmentReview of Perfor
117、manceFurther longer-term growth opportunities werepursued by way of initiation of a number ofdevelopment studies.For Offshore Australia theseincluded the Bayu-Undan gas/condensate field in theTimor Gap,the Reindeer and John Brookes gas fieldsand the Legendre oil field in the Carnarvon Basin andthe M
118、inerva gas field in the Victorian sector of theOtway Basin.In Indonesia,studies continued on theBentu gas field.In the Gulf of Mexico,a detailedreserve and feasibility study was undertaken on theEwing Bank 994#1 oil field which was discoveredduring the year.The 1998 work program also included develo
119、pment to optimise production from existing producing fields.Onshore Australia,an active gas program wasundertaken which involved the drilling of 25 newdevelopment wells and the implementation of 41 development projects.The onshore oil programinvolved the drilling of 17 development wells and thecompl
120、etion of four other projects.Work continued during the year on an appraisal anddevelopment plan for the Barrolka Complex.It isplanned to connect five wells into the productionsystem in 1999 to build on short-term productiontests so far implemented.The longer-term productionperformance of these wells
121、 will be monitored and the results used to assess the effectiveness of wellproductivity improvement initiatives.Low Deliverability Gas CommercialisationThe Cooper Basin has a large resource of gas,inexcess of 10 trillion cubic feet,which will typically notflow to surface without assistance from adva
122、nceddrilling and completion technologies.Much of this is located in the Nappamerri Trough PetroleumProduction Licences in South Australia,granted to theSouth Australian Cooper Basin Joint Venture in 1997,conditional upon expenditure of$100 million over 15 years.During 1998,tight sands were tested in
123、 several wellsboth within and outside the Nappamerri Trough.Fracture stimulations specifically designed for tightsands were carried out in six wells.Laboratory andfield-testing was also carried out on technologies with potential for helping in the commercialisation of tight gas.Results to date indic
124、ate that,in appropriate geologicalsituations,application of enhanced drilling andstimulation technology can help in unlocking asubstantial proportion of this resource to commercialproduction.Work is continuing to further improvethese technologies and to identify the best areas fortheir application w
125、ithin the Nappamerri Trough andelsewhere in the Cooper Basin.TechnologySantos strives to improve the performance of itsproducing interests through the use of cost effectivetechnology.Monobore DrillingMonobores are now the preferred design for wellsdrilled in the Cooper Basin for certain reservoirsit
126、uations.The design achieves a cost saving over a conventional well because a separate,internalproduction tubing is not required.Forty-sixmonobores were drilled in 1998(some forexploration)and the majority of 1999 wells willcomprise monobore configuration.Fracture StimulationFracture stimulation cont
127、inues to be a prime tool forwell productivity improvement.Twenty-four projectswere undertaken in 1998 and results continue to beencouraging.Flow rates on productive wells can beincreased up to four-fold using this technique,and itis also a prime tool for obtaining or improving flowfrom low permeabil
128、ity reservoirs.Horizontal WellsThe most significant new development technology isthe use of horizontal wells.Such wells are drilled todeviate from the vertical,so they can run almosthorizontally across the reservoir sand.This allowsmore contact of the reservoir with the wellbore,significantly enhanc
129、ing productivity.Four horizontalwells were drilled in mature Cooper Basin fields in1998,and have proved highly effective.17ReservesProved and probable reserves at the end of 1998were 966 million boe,a decrease of 43 million boefrom the record reserves in 1997.This figure does notinclude a number of
130、exploration discoveries referredto on page 14.Further appraisal and developmentstudies are required on these resources.The reduction in reserves derives from production of 45.6 million boe,a net divestment of six millionboe and re-evaluation of reserves of 19 million boe.This was partially offset by
131、 a gain of 28 million boefrom booked exploration discoveries,mainly in theCooper Basin.The net divestment results from the sale of SantosEurope Limited(13 million boe reserves),partiallyoffset by the acquisition of Gulf AustralianHydrocarbons south-west Queensland interests.ResourcesThe year-end res
132、erves figures exclude discovered oiland gas accumulations which currently fall outsidethe definition of proved and probable reserves.Thismay result from uncertainty about their extent or theability to be economically recovered.Santos holdsinterests in a number of oil and gas accumulationswhich,pendi
133、ng further appraisal of the resource,fallinto the“Resources”category.Proved and Probable Hydrocarbon Reserves*Sales GasCrude OilCondensateLPGTotal(incl ethane)millionmillion000millionPJbarrelsbarrelstonnesboeEstimated reserves at 31 December 1997 45459688578910091998 Production(185)(9)(3)(286)(46)Ad
134、ditions from 1998 Exploration1252224428Acquisitions/Divestments(13)(5)122(6)Field revisions(73)(4)1(249)(19)Estimated reserves at 31 December 1998439980895520966*A definition of proved and probable reserves is provided in the Glossary on page 32.Review of Performance ReservesSantos has an average re
135、serve life of 24 years for gas and 15 years for oiland liquids.181998 Business Unit ReservesMMboeSouth East Asia22South Australia 346Queenslandand NT382United States10OffshoreAustralia206Total Cooper/Eromanga Basins Gas Reserves(Gross)1994 1995 1996 1997 1998PJ070014002100280035004200490056001988199
136、31992199119901989Reserves added through exploration and revisionReserves in the absence of explorationSantos Australian Gas BusinessSantos and its joint venturers produce most of thegas consumed in New South Wales,Queensland,South Australia,the Australian Capital Territory andthe Northern Territory.
137、The Company also suppliesgas to Victoria and Western Australia.Gas is generally sold under long-term take-or-paycontracts,with prices indexed to consumer prices.The graph below shows Santos Australian gas sales.Sales volumes in 1998 reached a record 175.6 PJ.Gas sales are increasing in each of the S
138、tates inwhich the Company operates.In Western Australia the first gas sales from EastSpar started in late 1996 and sales continue to growas further contracts commence.In Queensland,gas sales to Brisbane from theCooper Basin commenced in 1997 and in 1998 firstsales to Mt Isa began.In early 1999 the C
139、ompany announced its intention to acquire a 25%interest in the Hides Gas Field inPapua New Guinea,subject to Papua New GuineaGovernment approval.This potential acquisition is ofstrategic importance to the Group as the field is aworld-class gas resource which is estimated to containproven and probabl
140、e reserves in excess of five trillioncubic feet of gas.Reserves from this field are plannedto be incorporated into the proposed Papua NewGuinea to Queensland gas project,should this project proceed.Santos recently began supplying small quantities ofgas to Victoria.Gas from the South AustralianCooper
141、 Basin is being supplied by AGL through theinterconnection recently completed between NewSouth Wales and Victoria.Gas produced by Santos is now consumed in allmainland States.Santos also has large reserves which are all wellplaced for future contracts.Santos Australian Gas Sales19941995199619971998P
142、J1001101201301401501601701801993Santos Interest in Uncontracted Gas Reserves(a)PJ as at Dec 1998(b)Total GasSantosUncontractedSantosReserves inShareGas inShare ofSantosof GasSantosUncontractedAcreageReservesAcreageGasSouth Australia277016501160700SW Queensland239014001400840Surat/Bowen22512515090Ama
143、deus600365315200East Spar49522012055Total6480376031451885(a)Includes ethane.(b)Australian producing areas.19Reserves/Santos Australian Gas BusinessReview of PerformanceOil pipelineGas pipelineEthane pipelineGas pipeline underContracted gas2P gas reserveconstructionlocationsTownsvilleKalgoorlieCarnar
144、vonMt NewmanMcArthurRiverPt HedlandMt.IsaDampierTennantCreekBalleraMoombaAdelaideHobartCanberraSydneyPerthMelbourneDarwinBrisbaneGladstoneAliceSpringsEastSparCarnarvonBasinOtway Basin02000kilometresHidesGasFieldPapua NewGuineaAustraliaReview of Performance ProductionSantos production grew by 11.0%in
145、 1998 reflecting the commencement ofproduction from new areas of interest,in the Carnarvon Basin,Timor Gap,Papua New Guinea and the supply of gas to Mt Isa.Production increased by 4.5 million boe to a record45.6 million boe in 1998.This reflected completion of a number of majorprojects during the ye
146、ar,which are described on page16 of this report.A full years production from each ofthese projects will contribute to a further increase inproduction in 1999.Just over half of this increase was associated with oiland liquids production(2.3 million boe increase).Theremainder(2.2 million boe)reflected
147、 increased salesgas and ethane production.Production increased inall Business Units except for Santos USA.(A tabledetailing Group production is located on page 29).Santos production has increased from 36.3 millionboe per annum in 1993 to 45.6 million boe during1998.Santos Production Growth1994199519
148、9619971998MMboe3032343638404244461993Group Production19981997Sales Gas and Ethane(PJ)184.9172.2Crude Oil(million barrels)8.56.9Condensate(million barrels)3.12.5LPG(000 tonnes)285.7263.6Total(million boe)45.641.1Project:Oil field development.Location:Papua New GuineaSantos interest:6.975%Production:C
149、ommenced April 1998Project:Oil field development.Floating production,storage and offloading facility.Location:Timor GapSantos interest:21.43%Production:Commenced July 1998Project:Oil field development.Floating storage and offloadingfacility.Location:Carnarvon BasinSantos interest:54.17%Production:Co
150、mmenced May 1998Stag Development ProjectElang/Kakatua/Kakatua NorthDevelopment ProjectSE Gobe Development Project20Major Oil Projects ProfileReview of Performance EnvironmentThe Santos Australian Environmental Management System provides acomprehensive system of environmental management.This section
151、of thereport describes the Santos Australian Environmental Management System,which has been progressively developed over the past decade and a half.Coongie LakesBefore seismic survey3 months after seismic surveyThese photographs provide visual documentation of the environmental management process as
152、 applied to the 1997 Western ProspectsSeismic Survey at Coongie Lakes.12 months after seismic survey21Production/EnvironmentReview of PerformanceEnvironmental management at Santos is conducted inaccordance with a formal environmental managementsystem,based originally on the British Standard forEnvir
153、onmental Management(BS 7750),and then on theInternational Standards ISO 14000 series.The System hasbeen progressively refined since its inception in 1991 andis currently being utilised by the Companys BusinessUnits to not only meet the specific legislative andregulatory requirements in which operati
154、ons occur,butalso to go beyond mere compliance wherever appropriate.The foundation of the Santos Australian EnvironmentalManagement System(SAEMS)is the Companysenvironmental policy.The key element of the policy isthat Santos is committed to conducting all its onshoreand offshore exploration and prod
155、uction activities in anenvironmentally responsible manner.The policy alsostates that Santos has established and will maintainenvironmental standards consistent with developmentsin technology,industry codes of practice and all relevantstatutory requirements.To test the Companys compliance with its st
156、atedenvironmental objectives,Santos conducts regularenvironmental audits which are undertaken by its ownenvironmental staff,as well as by specialist externalenvironmental advisers.State and Territory regulatoryauthorities also conduct environmental audits andundertake field visits to the Companys op
157、erational sites.Further details are provided on pages 35 and 39.The Companys Environmental Management System hasbeen refined and tailored to suit the specific nature ofthe Company and the environments in which operationsoccur.Individual responsibility for the environment hasbeen promoted by the Sant
158、os Board and the Companyssenior management,with line management clearlycharged with being the primary“champions”ofresponsible environmental behaviour.In order to achieve the Companys environmentalobjectives in the field,particular emphasis has beenplaced on the process of environmental training andi
159、nduction for both the Santos and contractor workforce.The total process of environmental management withinthe Company is overseen by the EnvironmentalCommittee of the Santos Board(chaired by the Chairmanof the Board)which was formed in 1994.The CompanysBusiness Units present a detailed overview of t
160、heirenvironmental management practices and procedures,together with performance,to the Committee.Santos strives to attain a balance between achievingstandards of environmental excellence and maintaining acost efficient and integrated approach to safe,technicallyproficient exploration and production
161、activities in themany areas of the Companys operations.22Board of DirectorsJohn Allan Uhrig AODUniv,Hon.Decon,BSc,FAIMAge 70.Director since 3 December 1991 and Chairmansince 15 February 1994.Chairmanof the Environmental Committeeof the Board and also Chairmanof Santos Finance Ltd.Chairmanof Westpac
162、Banking Corporationand The Australian Minerals andEnergy Environment Foundation.Former Chairman of Rio Tinto Ltdand former Deputy Chairman ofRio Tinto PLC.Until 1985 wasManaging Director of SimpsonHoldings Ltd.Norman Ross Adler AOBCom,MBAAge 54.Managing Director since 7 November 1984,member of the A
163、udit and EnvironmentalCommittees of the Board andalso Chairman of other SantosLtd subsidiary companies.Director of the CommonwealthBank of Australia,QCT ResourcesLtd Group and TelstraCorporation Ltd.Member of theCorporations and Securities Paneland Business Council ofAustralia.Peter Charles Barnett
164、FCPAAge 58.Director since 31 October1995 and member of the AuditCommittee of the Board.Chairman of Norwich UnionFinancial Services Group.DeputyChairman of Smorgon SteelGroup Limited.Director of MayneNickless Ltd,Australian Media&Communications InvestmentsLimited,Ericsson Australia PtyLtd and the Ins
165、titute of PublicAffairs.Former ManagingDirector and Chief ExecutiveOfficer of Pasminco Ltd and Chief Executive Officer of EZIndustries Ltd.Stephen Gerlach LLBAge 53.Director since 5 September 1989.Chairman ofthe Audit Committee andmember of the EnvironmentalCommittee of the Board.Chairman of Amdel L
166、td,Equitorial Mining N.L.and Elders Australia Ltd.Director ofSouthcorp Holdings Ltd,FuturisCorporation Ltd,Beston PacificCorporation Limited and EldersRural Services Ltd.FormerManaging Partner of the Adelaidelegal firm,Finlaysons.John Walter McArdle FCPAAge 52.Executive Director since 5 September 19
167、95 and ExecutiveGeneral Manager Commercial of Santos Ltd.Chairman ofAustralian National RailwaysCommission.Director of QCTResources Ltd Group and SantosLtd subsidiary companies.FormerManaging Director of DelhiPetroleum Pty Ltd.John McArdlePeter Barnett Ian Webber23Board of DirectorsStephen GerlachRo
168、ss Adler Michael OLearyJudith Sloan Michael Anthony OLearyDipMinE,BSc,FAusIMM,FAIMAge 63.Director since 15 October1996 and member of theEnvironmental Committee of theBoard.Deputy Chairman of Bankof Western Australia Ltd.FormerChairman of Hamersley Iron,Argyle Diamonds,Dampier Saltand former Director
169、 of Rio TintoLtd and Rio Tinto PLC.Professor Judith Sloan BA(Hons),MA,MScAge 44.Director since 5 September 1994.Professor ofLabour Studies at the FlindersUniversity of South Australia.Chairman of SGIC Holdings Ltdand Director of Mayne NicklessLtd and SGIO Insurance Limited.Part-time Commissioner,Pro
170、ductivity Commission.Ian Ernest Webber AO BE,ATS,FCIT,FAIMAge 63.Director since 16 February 1993 and member of the Audit Committee of theBoard.Chairman of ASEA BrownBoveri Advisory Board andDirector of Pacific Dunlop Ltd and WMC Ltd.Former ManagingDirector and Deputy Chairman of Chrysler Australia L
171、td andManaging Director of MitsubishiMotors Australia Ltd.FormerChairman of Mayne Nickless Ltd Group.John Uhrig 24Business Units OperationsOperations 1998South AustraliaQueensland and Northern TerritoryStrategyOperational ProfileCooper/Eromanga Basins(South Australia)IExploration and ProductionIAver
172、age interest 59%Port Bonython Liquids ProcessingPlantILPG extraction and liquids processingOtway BasinIExploration acreageThe South Australia Business Unitsstrategy is focused on increasingthe Business Units contribution to Group earnings through gasmarketing and control ofdevelopment and operating
173、costs.Production 24.4 mmboeReserves 346 mmboeCooper/Eromanga Basins(South-west Queensland)IExploration and ProductionIAverage interest 61%Surat/Bowen BasinsIExploration and ProductionAmadeus BasinIExploration and ProductionThe strategy of the Queenslandand Northern Territory BusinessUnit is to incre
174、ase its contributionto Group earnings throughcommercialisation and cost-effective development of itssubstantial gas reserves,togetherwith continuing exploration toincrease reserves.Production 14.1 mmboeReserves 382 mmboe25OperationsBusiness UnitsOABUUSABUSEABUOffshore AustraliaSouth East AsiaUnited
175、StatesExploration AcreageITimor Sea,Timor Gap,BonaparteGulf,Browse Basin,CarnarvonBasin,Otway Basin,Bass Basinand Gippsland BasinProductionICrude oil:Stag and Chervil fields(Carnarvon Basin);Elang/Kakatua/Kakatua North field(Timor Gap);Jabiru and Challis fields(Timor Sea)ISales gas and condensate:Ea
176、stSpar field(Carnarvon Basin)The Offshore Australia BusinessUnits strategy is to increase itscontribution to Group earningsthrough exploration anddevelopment.Development isfocused on existing undevelopedreserves and the opportunitieswhich arise through exploration,emphasising opportunities nearinfra
177、structure.Production 5.1 mmboeReserves 206 mmboePapua New GuineaIExploration AcreageIOil production from SE Gobe fieldIndonesiaIExploration Acreage:Warim,Bentu,Bangko,Korinci-Baru,Seram and Sampang PSCsIOperator of Bentu,Korinci-Baruand Sampang PSCsNew ZealandIExploration AcreageThe South East Asia
178、BusinessUnits strategy is focused on the successful commercialdevelopment of existing oil andgas resources and explorationtargeting high value oil and gasprospects.The development anduse of innovative technology is acore component of this strategy.Production 0.5 mmboeReserves 22 mmboeOffshore explor
179、ation andproduction in the Gulf of Mexico.Onshore exploration andproduction focused on theTexas/Louisiana Gulf Coast and theArkoma Basin in Oklahoma.The USA Business Units strategyis focused on the optimisation of existing exploration andproduction interests through activeexploitation initiatives an
180、ddivestiture of non-core assets,expansion of its explorationportfolio and the pursuit ofopportunistic acquisitions.Production 1.5 mmboe*Reserves 10 mmboe*includes 0.5 mmboe attributed to Santos Europe Limited26Business Units OperationsQueenslandSouth AustraliaCabernetMoolion NorthShirazWelcomeLake E
181、astVeronaMoonangaMicaRavenFicusCardamScrubby CreekMoomba050kilometresSantos acreageOil fieldGas fieldOil pipelineGas pipelineEthane pipeline1998 gas fielddiscoveryBalleraJackson050kilometresBarrolka ComplexSouth-west QueenslandSantos acreageOil fieldGas fieldOil pipelineGas pipeline1998 gas fielddis
182、coveryCurriHeraChallum WestIFirst gas sales to MIM Holdings Ltd at Mt Isa.ICompletion of the Chookoo undergroundgas storage facility.INine gas discoveries and one oil discovery(59%success rate).IThree new gas field discoveries in South-west Queensland.IDiscovery of Yandina-2 gas field in theDenison
183、Trough.ICompletion of Ballera Gas Plant Phase 3development.Phase 4 expansioncommenced and was completed in early 1999.ISignificant development activityundertaken,including the connection oftwo major gas fields Karmona andChallum.IAcquisition of Gulf AustralianHydrocarbons Limited from Gulf Australia
184、Resources Limited.IExpansion of Mereenie Gas Plant nearingcompletion.IRecord total sales of natural gas and ethane.IFirst delivery of Cooper Basin gas intoVictoria through the new interconnectionbetween New South Wales and Victoria.I20 gas discoveries(59%success rate)including several stratigraphic
185、trapdiscoveries.I11 new gas field discoveries.IPlanning and technical studiescommenced for the Nappamerri Trough.IRecord number of fracture stimulationprojects and other development activityundertaken to optimise gas production.South Australia Business UnitQueensland and Northern Territory Business
186、Unit1998 Highlights1998 Highlights27OperationsBusiness Units0500kilometresSantos acreageGas pipelineProductionPotentialdevelopmentprojectBrowse BasinTimor GapTimor SeaCarnarvon BasinBonaparteGulfWestern AustraliaDarwinTernJabiruChallisKakatua NorthElang/KakatuaBayu/UndanPetrelStagEast SparLegendreRe
187、indeerCaribouJohn BrookesIThe Stag(Carnarvon Basin)andElang/Kakatua/Kakatua North(Timor Gap)oil fields brought onto production.IContract signed for the supply of East Spargas to Wesfarmers CSBP Limited.Gas tobe transported via a second Varanus Islandpipeline.ITwo gas and two oil discoveries(31%succe
188、ss rate):Legendre South(oil),Mutineer(oil)and John Brookes(gas).Extension of the Reindeer gas fieldconfirmed by the Caribou-1 well.IStudies undertaken for the possible development of the Bayu-Undan(liquids),Petrel/Tern(gas),Legendre(oil),Reindeer(gas),John Brookes(gas)and Minerva(gas)fields.Kau 2Kum
189、ulOffshoreFacility0100kilometresIrouBosaviKutubuHidesTumuliJuhuBarikewaElevalaPnangSE KanauStanleyPPL 202PPL 157PPL 191PPL 189PPL 190PDL 3PPL 206PDL 1PPL 213SE GobeIrian JayaPapua New GuineaSantos acreageOil fieldGas fieldProspectOil pipelineFold BeltSubject to PNG Govt approvalsWasumaW AnesiWarimPS
190、CICommencement of oil production from SE Gobe(Papua New Guinea).IKau-2 appraisal well(Warim PSC)made anon-commercial oil discovery whichdemonstrated the potential of this regionand resulted in several large prospectsbeing upgraded.IMore cost effective methods for acquiringimproved quality seismic da
191、ta in thePapuan foldbelt developed.Acquired fivesurveys using these techniques overdifficult terrain.IMarine seismic survey conducted in theSampang PSC.IAgreement for divestment of interests inSeram PSC and Bula oil field.(Subsequentto 31 December 1998.)200m W.D.Gulf of MexicoEW-994EI 335HoustonMiss
192、issippiLouisianaTexasSantos USA CorpinterestsOCS Sale 169Lease sale area0200kilometresISeven gas and one oil discovery(62%success rate)including the EwingBank 994#1 oil discovery.ISuccessful participation in the Gulf ofMexico lease sale No.169(acquiredinterests in six leases).Farmed-in to twoother p
193、rospects(EW994 and HIA500).IDevelopment commenced on the EugeneIsland 335 oil and gas field.Productioncommenced in early 1999.IEntered into arrangements for theacquisition of additional onshore andoffshore leases with two new localoperators.ISold a number of non-core properties.ISuccessful divestmen
194、t of Santos EuropeLimited.Offshore Australia Business UnitSouth East Asia Business UnitUSA Business Unit1998 Highlights1998 Highlights1998 Highlights2810 Year Summary1989-1998As at 31 December1989199019911992199319941995199619971998Crude oil price(A$/bbl)23.4430.7228.0028.6527.6423.6424.9627.4327.42
195、20.95Profit and Loss($million)Sales revenue560.6709.5655.9689.8680.2640.0671.6729.2778.5769.4Total operating revenue603.0812.9702.0741.5931.6716.6740.1804.0859.51000.8Foreign currency gains/(losses)22.5(1.3)(11.4)(36.8)(7.3)66.3(16.0)25.03.62.0Operating profit before abnormal items123.0254.8223.5245
196、.1289.2295.9241.0331.9322.3267.3Income tax on operating profit52.6112.0106.8104.9104.8116.2101.1136.0116.191.0Operating profit after tax before abnormal items70.4142.8116.7140.2184.4179.7139.9195.9206.2176.3Abnormal items after tax48.418.5(224.9)(27.5)34.910.7(29.3)Operating profit/(loss)after tax a
197、nd abnormal items118.8161.3(108.2)112.7219.3190.4110.6195.9206.2176.3Outside equity interest in operating profit1.75.32.7Profit/(loss)attributable to shareholders117.1156.0(110.9)112.7219.3190.4110.6195.9206.2176.3Balance Sheet($million)Total assets2,931.62,962.52,797.62,821.82,831.22,897.22,915.53,
198、443.44,036.24236.1Net debt1,116.1772.4755.0797.4711.2619.9642.0938.61,114.21280.0Total shareholders equity1,123.81,380.21,215.11,231.71,380.61,532.21,519.31,586.31,919.01939.2ExplorationWells drilled(number)13311980416663669111281Expenditure($million)109.297.579.876.779.691.987.9121.1190.1180.7Reser
199、ves(MMboe)6716466236706756637038601,009966Production(MMboe)35.636.034.234.636.337.236.839.241.145.6Capital Expenditure($million)Field developments54.988.951.933.240.052.253.9105.8179.7158.1Buildings,plant and equipment59.760.969.175.680.630.540.1150.3205.4165.7Share InformationShare issuesExecutive1
200、 for 10DividendDividendDividendDividend1 for 8 EmployeeShare Planrights/Reinvestment Reinvestment Reinvestment ReinvestmentrightsShare DividendPlan/PlanPlanPlan/issue/PlanReinvestment ExecutiveExecutiveEmployeePlan/Share PlanShare PlanShareExecutivePlanShare PlanNumber of issued shares at year end(m
201、illion)404.3450.4473.0498.6517.9539.6539.6539.6607.3607.8Weighted average number of shares(million)*427.5438.0477.5495.7518.8539.2553.3553.4583.7605.6Dividends per share ordinary()19.019.019.021.022.022.023.024.025.025.0 special()5.0Dividends ordinary($million)76.085.588.5102.7112.3117.2123.6129.015
202、1.3151.4 special($million)25.8Ratios and StatisticsEarnings per share*before abnormal items()16.131.423.928.335.533.325.335.435.329.1 after abnormal items()27.435.6(23.2)22.742.335.320.035.435.329.1Return on total operating revenue(%)11.717.616.618.924.325.118.924.424.017.6Return on shareholders equ
203、ity(%)6.610.69.711.413.411.79.212.310.79.1Net debt/equity(%)99.356.062.164.751.540.542.359.258.166.0Net interest cover(times)1.93.24.15.97.08.35.86.25.44.4GeneralNumber of employees1,6551,6831,5701,4681,5261,4921,4711,4611,6151,650Number of shareholders26,49926,25129,70635,49242,06850,59555,68455,48
204、265,45981,286Market capitalisation($million)1,639.31,779.81,399.21,288.51,988.11,868.22,111.22,741.13,826.12653.9*adjusted for bonus element of rights issues.Prior year amounts have,where applicable,been adjusted to place them on a comparable basis with current year amounts.29Production Statistics10
205、 Year Summary/Production StatisticsField UnitsSales Gas&EthaneCrude Oil CondensateLPGPJ000 bbls000 bbls000 tonnes19981997199819971998199719981997South AustraliaCooper/Eromanga107.9105.02422.92505.81664.11374.3217.5196.9Queensland&Northern TerritorySW Queensland37.527.71886.62317.6771.9603.463.857.5S
206、urat/Denison11.211.6170.4191.846.669.04.49.2Amadeus10.610.8496.4569.7-Total59.350.12553.43079.1818.5672.468.266.7Offshore AustraliaTimor Sea-432.7648.5-Timor Gap-968.6-Carnarvon9.76.71469.7170.7575.7423.8-Total9.76.72871.0819.2575.7423.8-South East AsiaSeram-261.2272.3-PNG-248.1-Total-509.3272.3-US4
207、.85.9141.1187.159.062.0-UK3.24.5-37.63.75.1-Total184.9172.28497.76901.13121.02537.6285.7263.6Million Barrels of Oil EquivalentSales Gas&EthaneCrude Oil CondensateLPGTotal1998199719981997199819971998199719981997South AustraliaCooper/Eromanga18.5518.052.422.511.561.281.841.6724.3723.51Queensland&North
208、ern TerritorySW Queensland6.454.761.892.320.720.560.540.499.608.13Surat/Denison1.931.990.170.190.040.070.040.082.182.33Amadeus1.821.860.500.57-2.322.43Total10.208.612.563.080.760.630.580.5714.1012.89Offshore AustraliaTimor Sea-0.430.65-0.430.65Timor Gap-0.97-0.97-Carnarvon1.671.151.470.170.540.40-3.
209、681.72Total1.671.152.870.820.540.40-5.082.37South East Asia Seram-0.260.27-0.260.27PNG-0.25-0.25-Total-0.510.27-0.510.27US0.821.010.140.190.060.06-1.021.26UK0.550.77-0.040.000.00-0.550.81Total31.7929.598.506.912.922.372.422.2445.6341.1130Santos Group Interests as at 5 March 1999Licence Area%Interest
210、Licence Area%InterestQueenslandSouth-West QueenslandATP 259P Naccowlah(PLs 23-26,35,36,62,76-79,82,87,105,107&109)55.5000Total 66(PLs 34,37,63,68,75,84,88&110)70.0000Wareena61.2000Innamincka(PLs 58&80)70.0000Aquitaine A(PL 86)52.5000Aquitaine B(PLs 59-61,81,83,85,106,108,111,113&114)55.0000Alkina72.
211、0000Aquitaine C47.800050/40/10(PL 55)60.0000SWQ Unit60.0625ATP 267P(Nockatunga)(PLs 33,50&51)59.0640ATP 269P(Bodalla)5.8060PLs 31,32 and 47(Bodalla)5.2500ATP 577P7.0000ATP 299P(Tintaburra)(PLs 29,38,39,52 and 57)89.0000Southern SuratPL 1(Moonie)100.0000PL 1(2)(C)(Cabawin)100.0000PL 1(2)(Cabawin Farm
212、-out)50.0000PL 2C(Alton)100.0000PL 2(Kooroon)52.5000PL 2C(Alton Farm-out)63.5000ATP 512P66.6700ATP 244P(Block D)20.0000PL 1770.0000PL 17(Bennett Exclusion)100.0000PL 17(Leichardt Exclusion)70.0000ATP 552P-GN35.5264ATP 552P-RM21.9697Roma AreaATP 336P(Roma)(PLs 3-13&93)85.0000PL 5(Mascotte)42.5000PL 5
213、(Drillsearch)21.2500PL 5(Barcoo)85.0000ATP 336P(Waldegrave)(PLs 10-12,28,69&89)46.2500PL 11(Snake Creek East)25.0000ATP 336P(Kalima)76.5000PL 12(Trinidad)92.5000ATP 378P(Burunga)100.0000Bowen BasinATP 337P(Denison Trough)50.0000ATP 553P(Denison Trough)50.0000PLs 41-45,54 and 67(Denison Trough)50.000
214、0Surat BasinPLs 21,22,27 and 64(Balonne)12.5000ATP 470P(Redcap)(PL 71)10.0000ATP 212P(Major)(PLs 30,56&74)15.0000ATP 471P(Weribone)5.9100ATP 471P(Wunger)(PL 15)66.6700ATP 471P(Noona)(PLs 16,48&66)50.0000ATP-471P(Rocky Creek East Expl)41.6700ATP 471P(Myall)69.4500ATP 471P(Onerry)72.5000ATP 471P(Dalke
215、ith)66.6700ATP 471P(Bainbilla)(PL 119)16.6700PL 49(Rocky Creek East Production)50.0000FacilitiesWungoona Processing Facilities50.0000Moonie to Brisbane Pipeline100.0000Jackson Moonie Pipeline82.7500Ballera to Mt Isa Pipeline18.0188VictoriaPEP 108100.0000PEP 132100.0000PEP 11960.0000VIC/RL133.3334VIC
216、/RL27.5000*VIC/RL325.0000VIC/RL710.0000VIC/RL810.0000*approximate figureTasmaniaT/RL1(Yolla)5.0000Northern TerritoryOL 3(Palm Valley)47.9770OLs 4 and 5(Mereenie)65.0000RL2(Dingo)65.6635Mereenie-Brewer Estate Pipeline65.0000South AustraliaCooper Basin Production Area(PPLs 6-20,22-25,27-61,63-75,78-11
217、7,119,120,124,126-128,132-134)59.7500Patchawarra East(PPLs 26,76,77,118,121-123&125)69.3522SA Unit and Downstream59.750031Licence Area%InterestLicence Area%InterestOffshore Northern AustraliaEP 32525.0000EP 39855.0000TL/215.0000TP/7(1-3)43.7110TP/7(4)18.7110TP/1255.0000WA-149-P18.7110WA-206-P100.000
218、0WA-13-L45.0000WA-208-P20.0000WA-214-P20.0000WA-215-P10.0000WA-239-P20.0000WA-242-P20.0000WA-281-P27.5000WA-282-P42.5000WA-283-P27.5000AC/RL2(Oliver)38.0000AC/P1533.3334AC/L1(Jabiru)10.3125AC/L2(Challis)10.3125AC/L3(Cassini)10.3125AC/L430.5887WA-261-P29.5833WA-264-P66.6667WA-258-P45.4545NT/RL1(Petre
219、l)50.4900NT/P5237.5000WA-1-P22.5600WA-8-L(Talisman)27.3684WA-15-L(Stag)54.1666WA-18-P(Tern)70.0000WA-191-P33.3977WA-209-P36.0000WA-6-R(West Petrel)50.4900ZOCA 91-0120.0000ZOCA 91-12(Elang)21.4260Bayu-Undan Gas Field11.8276United States of AmericaAverage workingGulf of Mexicointerest-EB 994(Boomslang
220、)20.0000-EC 15520.0000-EI 5920.0000-EI 14320.0000-EI 33520.0000-HI A50020.0000-MB 99720.0000-MB 99820.0000-MB 99920.0000-MC 357(Deep)12.5000-MC 357(Shallow)13.0000-MC 35813.0000-MP 27320.0000-SS 31920.0000-SS 32020.0000-VR 24720.0000-WC 27220.0000Average workinginterest-WC 27620.0000-WC 52025.0000-W
221、C 57425.0000-WC 57525.0000-WC 58220.0000-WC 63220.0000-WD 11914.8148-WD 15213.0000South Texas-Remmers45.0000-Birdie Porter Green50.0000-Fuhrken25.0000-Thomson-Barrow/OBrien Ranch18.0000-Queen City50.0000-West Rosita25.0000Arkoma Basin26.4000New ZealandPEP 3871230.0000Papua New GuineaPPL 15735.2500PP
222、L 18940.4040PPL 19030.1010PPL 19171.7750PPL 20255.0000PPL 20646.0000PPL 21335.0000PDL 315.5000SE Gobe Field Unit6.9750PL 33.4875IndonesiaSeram2.5000Bula100.0000Korinci-Baru61.1111 Warim20.0000Bangko15.0000Bentu61.1111Sampang45.0000Santos Group Interests32Glossaryappraisal wellAn exploration well dri
223、lled for the purpose of identifying extensions to known fields or discoveries.barrel/bblThe standard unit of measurement for all production and sales.One barrel equals 159 litres or 35 imperial gallons.boeBarrels of oil equivalent.The factors used by Santos to convert volume of different hydrocarbon
224、 production to barrels of oil equivalent are printed below.bopdBarrels of oil per day.the CompanySantos Ltd and its subsidiaries.D,D&ADepreciation,depletion and amortisation of building,plant and equipment,exploration and development expenditure.development wellA well drilled to enable production fr
225、om a known oil or gas reservoir.exploration wellA wildcat or appraisal well drilled to find new reserves of oil or gas.farm-out(farm-in)An agreement which provides for a party to acquire an interest in a permit by either fully or partially funding an agreed program of work to be conducted in the per
226、mit.fracture stimulationA technique used to improve hydrocarbon recovery from reserves with poor permeability or porosity.Fracture stimulation involves the fracturing of the reservoir rock to encourage the flow of hydrocarbons.hydrocarbonsSolid,liquid or gas compounds of the elements hydrogen and ca
227、rbon.LPGLiquefied petroleum gas.MbblsThousand barrels.MIMMIM Holdings Ltd(formerly Mt Isa Mines).MMbblsMillion barrels.MMboeMillion barrels of oil equivalent.monobore wellA well which has a single casing and no internal tubing.petroleum liquidsCrude oil,condensate,or its derivative naphtha,and the l
228、iquefied petroleum gases propane and butane.PJPetajoules.Joules are the metric measurement unit for energy.A petajoule is equal to 1 kilojoulex 1012.The equivalent imperial measure to joules is British Thermal Units(BTU).One kilojoule=.9478 BTU.PSCProduction sharing contract.reservesProved and proba
229、ble reserves as defined by the Australian Stock Exchange Ltd(ASX).Proved reserves are those reserves that,to a high degree of certainty,are recoverable,at commercial rates,under presently anticipated production methods,operating conditions,prices and costs.Probable reserves are those reserves that m
230、ay be reasonably assumed to exist because of geophysical or geological indications and drilling done in regions which contain proven reserves.Reserves reported are based on,and accurately reflect,information compiled by full-time employees of the company who have the requisite qualifications and exp
231、erience prescribed by the ASX Listing Rules.reservoirA rock formation in which hydrocarbons are present.SantosSantos Ltd and its subsidiaries.seismic surveyA survey used to gain an understanding of rock formations beneath the earths surface.TJTerajoules.Joules are the metric measurement unit for ene
232、rgy.A terajoule is equal to 1 joule x 1012.wildcat wellAn exploration well drilled to identify new accumulations of oil or gas.WMCWMC(formerly Western Mining Corporation).boe conversion factorsCrude Oil 1 barrel=1 boeSales Gas 1 petajoule=171.937 boe x 103Condensate/Naphtha 1 barrel=0.935 boeLPG 1 t
233、onne=8.458 boeCorporate GovernanceThe purpose of this statement is to providedetails of the main corporate governancepractices the Company had in place duringthe past financial year.The Board of Santos Limited is committed to goodcorporate governance and to this end has had inplace for a number of y
234、ears formal guidelinesrecording the Boards policy on:Board compositionand appointment of chairman;Board membershipand attendance;the appointment and retirement ofDirectors;independent professional advice;compensation arrangements;external auditors;riskmanagement;and ethical standards.References inth
235、is statement to the“Board guidelines”are to theformal guidelines in force during the past financialyear.The Board guidelines are reviewed by theBoard on an annual basis and as required.Board of Directors and its CommitteesThe Board is responsible for the overall corporategovernance of the Company in
236、cluding its strategicdirection and financial objectives,establishing goalsfor management and monitoring the attainment ofthese goals.To assist in the effective execution of itsresponsibilities,the Board has established a numberof Board Committees including a Nomination andRemuneration Committee,an A
237、udit Committee and anEnvironmental Committee.The Nomination andRemuneration Committee comprises all non-executiveDirectors and each of the Audit and EnvironmentalCommittees comprises a majority of non-executiveDirectors and is chaired by a non-executive Director.The Board guidelines prescribe that t
238、he Board is tomeet at least 10 times a year.All current non-executive Directors,including theChairman,are considered to be independentDirectors,as defined in the 1997 guidelines of thethen Australian Investment Managers Association.Composition of the BoardThe names and details of the experience,qual
239、ifications,age,special responsibilities andshareholdings of each Director of the Company areset out on pages 22 and 23 of this Annual Report.The composition of the Board is determined inaccordance with the Companys Constitution and theBoard guidelines including:the Board is to comprisea minimum of f
240、ive and a maximum of ten Directors(exclusive of the Managing Director);the Boardshould comprise a substantial majority of non-executive Directors(currently the Boardcomprises six non-executive and two executiveDirectors);there should be a separation of the rolesof Chairman and Chief Executive Office
241、r of theCompany;and the Chairman of the Board should bea non-executive Director.Under the Board guidelines,it is the responsibility ofthe Nomination and Remuneration Committee todevise the criteria for,and review membership of,and nominations to,the Board.The primary criteriaadopted in selection of
242、suitable Board candidates istheir capacity to contribute to the ongoingdevelopment of the Company having regard to thelocation and nature of the Companys significantbusiness interests and to the candidates age andexperience by reference to the age and diversity ofexperience of existing Board members
243、.When a Board vacancy exists or where it isconsidered that the Board would benefit from theservices of a new Director with particular skills,theNomination and Remuneration Committee hasresponsibility for proposing candidates forconsideration by the Board and,where appropriate,engages the services of
244、 external consultants.Prior to appointment,each Director is provided witha letter of appointment which,inter alia,encloses acopy of the Board guidelines governing boardoperation,membership and corporate governance,including detailed regulations relating to disclosureof interests and guidelines for d
245、ealing in securities,together with the requisite form for completion incompliance with those regulations.The expectationsof the Board in respect to a proposed appointee tothe Board and the workings of the Board and itscommittees are conveyed in interviews with theChairman and access provided to appr
246、opriateexecutives in relation to details of the business ofthe Company.Corporate GovernanceSantos Ltd and Controlled Entities3334Corporate GovernancecontinuedUnder the Companys Constitution approximatelyone-third of Directors retire by rotation each yearand Directors appointed during the year are re
247、quiredto submit themselves for election by shareholders atthe Companys next Annual General Meeting.The Board guidelines prescribe that,under normalcircumstances,Directors should retire at the firstAnnual General Meeting after reaching the age of 72 years and not seek re-appointment.Independent Profe
248、ssional AdviceThe Board guidelines set out the circumstances andprocedures pursuant to which a Director,infurtherance of his or her duties,may seekindependent professional advice at the Companysexpense.Those procedures require priorconsultation with,and approval by,the Chairmanand assurances as to t
249、he qualifications andreasonableness of the fees of the relevant expertand,under normal circumstances,the provision ofthe experts advice to the Board.RemunerationUnder the Board guidelines,the Nomination andRemuneration Committee is responsible forreviewing the remuneration policies and practices oft
250、he Company including:the compensationarrangements for executive Directors and seniormanagement;the Companys superannuationarrangements;employee share and option plans;and,within the aggregate amount approved byshareholders,the fees for non-executive membersof the Board.Further information on these m
251、attersis included at pages 40 and 41 of this Annual Reportand details of the Companys employee share andoption plans are provided in Note 18 of the FinancialReport.No non-executive Director may participate inany of the Companys share or option plans.Information in respect to indemnity and insurancea
252、rrangements for Directors and senior executivesappears at page 41 of this Annual Report.The current members of the Nomination andRemuneration Committee,all of whom are non-executive Directors,are:Mr J A Uhrig(Chairman),Mr P C Barnett,Mr S Gerlach,Mr M A OLeary,Professor J Sloan and Mr I E Webber.Aud
253、it CommitteeThe Board guidelines require the Board to continuein existence an Audit Committee of the Board.The role of the Audit Committee is documented in aCharter,approved by the Board.In accordance withthis Charter,the Committee comprises three non-executive Directors plus the Managing Directoran
254、d is chaired by a non-executive Director.Theinternal and external auditors,and relevant seniormanagement,attend Audit Committee meetings atthe invitation of the Committee.The current members of the Audit Committee are:Mr S Gerlach(Chairman),Mr P C Barnett,Mr I E Webber and Mr N R Adler.The Committee
255、 is required to meet at least threetimes per year:at the planning stage of the audit,atwhich time the planned scope of the audit and theauditors recommendations on controls areconsidered,and before the issue of the half-yearlyand annual financial statements and the Boardmeetings approving the same,a
256、t which time anysignificant matters arising during the audit areconsidered.The Committee also meets,asdetermined by the Chairman of the Committee andmembers may raise any matters considereddesirable.The role of the Audit Committee includes:examining the accounting policies of the Companyto determine
257、 whether they are appropriate and inaccordance with all applicable reportingrequirements;ensuring that truth and fairness isreflected in the preparation and publication of theCompanys financial reports;meeting regularly withthe auditors to reinforce the independence of theauditors,to determine the a
258、ppropriateness ofinternal and external audit procedures,to review theperformance of the auditors and to provide theauditors with confidential access to the Board;andreferring matters of concern to the Board,asappropriate,and considering risk managementmatters.Minutes and recommendations of the Audit
259、Committee are distributed at the next Board Meeting.Santos Ltd and Controlled EntitiesRisk ManagementThe Board has in place a number of arrangementsand internal controls intended to identify andmanage areas of significant business risk.Theseinclude the maintenance of:Board Committees(including Audit
260、 and Environmental Committees ofthe Board);detailed and regular budgetary,financialand management reporting;establishedorganisational structures,procedures,manuals andpolicies;audits(including internal and externalfinancial,environmental and safety audits);comprehensive insurance programmes;and ther
261、etention of specialised staff and external advisers.IManagement of environmental risk-environmental risk is managed through:comprehensive environmental managementsystems;environmental committees at Boardand management levels;the retention ofspecialist environmental staff and advisers;regular interna
262、l and external environmentalaudits;and imposing environmental care as aline management responsibility.Furtherinformation on these matters appears at pages21 and 39 of this Annual Report.Membership ofthe Environmental Committee of the Boardcomprises three non-executive Directors and theManaging Direc
263、tor.The current members of theCommittee are:Mr J A Uhrig(Chairman),Mr SGerlach,Mr M A OLeary and Mr N R Adler.IManagement of exploration risk-explorationrisk is managed through internal control systemswhich include:formalised risk assessmentprocedures at the business unit level;Corporatereview in bo
264、th prospect and hindsight;Boardapproval of exploration budgets;and regularreporting on progress to the Board.Externalreviews are also undertaken as necessary.IManagement of Year 2000 issue-the Year 2000issue has been managed through:theestablishment in 1997 of a Year 2000 ProjectTeam to co-ordinate
265、Company-wide Year 2000activities;engagement since 1997 of externalexperts to assist and advise the Year 2000 ProjectTeam;preparation by the Year 2000 Project Teamof an Integrated Project Plan adopted by allbusiness units;review of the Year 2000 ProjectTeams progress by an Executive Committee ofsenio
266、r management;quality assuranceassessment by independent consultants;andregular reporting to the Board.Furtherinformation on the Companys response to theYear 2000 issue appears at page 13 of thisAnnual Report and in the releases to theAustralian Stock Exchange Ltd made in June1998 and March 1999.IInv
267、estment appraisal-the Company has clearlydefined procedures for capital expenditure.These include annual budgets,detailed appraisaland review procedures,levels of authority anddue diligence requirements where assets arebeing acquired.IFinancial reporting-a comprehensive budgetingsystem exists with a
268、 five year financial plan andan annual budget approved by the Board.Monthly actual results are reported againstbudget and,where applicable,revised forecastsfor the year are prepared and reported to theBoard.Speculative transactions are prohibited.Further details relating to financial instrumentsand
269、commodity price risk management areincluded in Note 33 of the Financial Report.IFunctional speciality and business unit reporting-all significant areas of Company operations aresubject to regular reporting to the Board.TheBoard receives regular reports on theperformance of each business unit and one
270、xploration,development,finance,liquidsmarketing,safety,government,investor relationsand environmental matters.Senior management attend Board and Committeemeetings,at which they report to Directors withintheir respective areas of responsibility.This assiststhe Board in maintaining its understanding o
271、f theCompanys business and assessing the seniormanagement team.Where appropriate,advisers tothe Company attend meetings of the Board and ofits Committees.Under the Companys Delegation of Authority,theBoard is responsible,inter alia,for the approval ofthe annual corporate budget and for significant:a
272、cquisitions and disposals of assets;expenditure35Corporate Governance36Corporate Governancecontinueddecisions outside of the corporate budget;hedgingof product sales;sales contracts;and financingarrangements.The Audit Committee is responsible for approvingthe programme of internal audit to be conduc
273、tedeach financial year in ensuring compliance withthese internal controls.Ethical StandardsIn pursuance of the promotion of high standards ofcorporate governance,the Board has,withoutadopting a formal code of ethics,established andmaintained various internal standards whichextend beyond requirements
274、 prescribed by lawand include additional disclosure of interests byDirectors and guidelines relating to the dealing insecurities by Directors and managers.Financial ReportFinancial ReportSantos Ltd and Controlled Entities37Directors Statutory Report.38Profit and Loss Statements.42Balance Sheets.43St
275、atements of Cash Flows.44Notes to the Financial Statements.45Note 1 Statement of Accounting Policies.45Note 2Other Revenue.48Note 3Depreciation,Depletion and Amortisation.48Note 4Interest Expense.48Note 5Operating Profit.48Note 6Taxation.49Note 7Dividends.49Note 8Receivables.50Note 9Inventories.50No
276、te 10 Investments.50Note 11 Exploration and Development Expenditure.51Note 12 Land and Buildings,Plant and Equipment.51Note 13 Intangibles.51Note 14 Other Assets.52Note 15 Accounts Payable.52Note 16 Borrowings.52Note 17 Provisions.53Note 18 Share Capital.54Note 19 Reserves.57Note 20 Earnings per Sha
277、re.57Note 21 Investments in Controlled Entities.58Note 22 Associated Company.60Note 23 Interest in Partnership.60Note 24 Interests in Joint Ventures.61Note 25 Notes to Statements of Cash Flows.63Note 26 Related Parties.64Note 27 Executives and Directors Remuneration.66Note 28 Remuneration of Auditor
278、s.67Note 29 Segment Reporting.67Note 30 Commitments for Expenditure.68Note 31 Superannuation Commitments.69Note 32 Contingent Liabilities.70Note 33 Additional Financial Instruments Disclosure.70Note 34 Economic Dependency.73Note 35 Post Balance Date Event.73Directors Declaration.74Independent Audito
279、rs Report.75Contents38Directors Statutory ReportThe Directors present their report together with the financial report of Santos Ltd(“theCompany”)and the consolidated financial report of the consolidated entity,being theCompany and its controlled entities,for the financial year ended 31 December 1998
280、,and theauditors report thereon.Information in this Annual Report referred to by page number in thisreport or contained in a Note to the financial statements referred to in this report is to be readas part of this report.1.Directors,Directors Shareholdings and Directors MeetingsThe names of Director
281、s of the Company in office at the date of this report and details of the relevant interestof each of those Directors in shares in the Company at that date are as set out below.Each of the Directorshas held his or her office at all times since the beginning of the financial year.SurnameOther NamesSha
282、reholdings in Santos LtdBeneficialNon-BeneficialInterestInterestUhrigJohn Allan(Chairman)16,875-AdlerNorman Ross(Managing Director)855,000*-BarnettPeter Charles16,250-GerlachStephen-12,305McArdleJohn Walter(Executive Director)516,732*37,913OLearyMichael Anthony4,725-SloanJudith2,500-WebberIan Ernest
283、26,250-Except where otherwise indicated,all shareholdings are of fully paid ordinary shares.*Includes 610,000 partly paid Executive Share Plan shares.*Includes 320,000 partly paid Executive Share Plan shares.No Director holds shares in any related body corporate,other than in trust for the Company.M
284、r Robert Strauss retired as a Director of the Company on 1 May 1998,having been a Director at all times since the beginning of thefinancial year to that date.At the date of this report,Mr N R Adler and Mr J W McArdle respectively hold 3,000,000 and 1,000,000 options issued pursuant to theSantos Exec
285、utive Share Option Plan,approved by shareholders at the Annual General Meeting of the Company held on 15 May 1997.Details of the qualifications,experience and special responsibilities of each Director are set out on pages 22 and 23 of this AnnualReport.Directors MeetingsThe number of Directors Meeti
286、ngs and meetings of committees of Directors held during the financial yearand the number of meetings attended by each Director are as follows:SurnameOther NamesDirectorsAudit EnvironmentalNomination and MeetingsCommitteeCommitteeRemuneration CommitteeNo.of MeetingsNo.of MeetingsNo.of MeetingsNo.of M
287、eetingsHeld 11Held 4Held 3Held 6No.of MeetingsNo.of MeetingsNo.of MeetingsNo.of MeetingsAttendedAttendedAttendedAttendedUhrigJohn Allan1136AdlerNorman Ross1143BarnettPeter Charles1146GerlachStephen11436McArdleJohn Walter10OLearyMichael Anthony1136SloanJudith116StraussRobert*42WebberIan Ernest1045*Re
288、tired as a Director of the Company on 1 May 1998A special committee for the Santos Executive Share Option Plan(comprising Messrs J A Uhrig and I E Webber)held one meeting which was attended by each of those Directors.As at the date of this report,the Company had an audit committee of the Board of Di
289、rectors.Particulars of the Companys corporate governance practices appear on pages 33 to 36 of this Annual Report.2.Principal ActivitiesThe principal activities of the consolidated entity during the financial year were:petroleum exploration;theproduction,treatment and marketing of natural gas,crude
290、oil,condensate,naphtha and liquid petroleum gas;and the transportation by pipeline of crude oil.No significant change in the nature of these activities hasoccurred during the year.3.Review and Results of OperationsA review of the operations and of the results of those operations of the consolidated
291、entity during thefinancial year are contained in pages 5 to 9,12 to 17,20,26 and 27 of this Annual Report.4.DividendsIn respect of the financial year:(a)the Directors on 15 March,1999 declared a fully franked final dividend of 13 cents per fully paid share bepaid on 30 April,1999 to members register
292、ed in the books of the Company as at close of business on 8 April,1999 and declared that such dividend be a Class C franked dividend to the extent of 100%.Thisfinal dividend amounts to approximately$78.8 million;and(b)a fully franked interim dividend of$72.7 million(12 cents per share)was paid to me
293、mbers in November1998.A fully franked final dividend of$78.7 million on the 1997 results(13 cents per share)was paid in April 1998.Indication of this dividend payment was disclosed in the 1997 Annual Report.5.State of AffairsIn the opinion of the Directors,there were no significant changes in the st
294、ate of affairs of the consolidatedentity that occurred during the financial year other than those referred to on pages 3 and 4 of this AnnualReport,including the sale of Santos Europe Ltd.6.Environmental RegulationThe consolidated entitys Australian operations are subject to various environmental re
295、gulations underCommonwealth,State and Territory legislation,including under applicable petroleum legislation and in respectto:its South Australian operations,some 34 State and Commonwealth Acts and licences(nos.EPA 2569,1259,888 and 2164)issued under the Environmental Protection Act,1993;its Queensl
296、and operations,some 27 Stateand Commonwealth Acts and licence no.150029 issued under the Environmental Protection Act,1994;itsNorthern Territory operations,some 15 Territory and Commonwealth Acts;its offshore operations,some 29State,Territory and Commonwealth Acts;and its Victorian operations,some 2
297、2 State and CommonwealthActs.Applicable legislation and requisite environmental licences are specified in the entitys relevantEnvironmental Compliance Manuals,which Manuals form part of the consolidated entitys overallEnvironmental Management System.Compliance performance is monitored on a regular b
298、asis and in variousforms,including environmental audits conducted by regulatory authorities and by the Company,eitherthrough internal or external resources.During the financial year:no fines were imposed;no prosecutionswere instituted;and,except as mentioned below,no notice of non-compliance with th
299、e above referencedregulations was received from a regulatory body.Pursuant to the Environmental Protection Act 1994(Queensland),a notice to conduct or commission an environmental investigation was received by theCompany in respect of an oil spill from the Cooroo to Jackson oil pipeline.The Companys
300、report of suchinvestigation was accepted and all outstanding issues resolved at an on-site meeting held in November 1998.7.Events Subsequent to Balance DateIn the opinion of the Directors there has not arisen in the interval between the end of the financial year andthe date of this report any matter
301、 or circumstance that has significantly affected or may significantly affect theoperations of the consolidated entity,the results of those operations,or the state of affairs of theconsolidated entity in future financial years except that:-(a)on 1 February,1999 the Company announced the acquisition,s
302、ubject to Papua New Guinea Governmentalapprovals,of a 31%interest in Petroleum Development Licence No.1 which contains the majority of theHides gas field;and(b)Petroleum Exploration Licence Nos.5 and 6 in South Australia expired,in accordance with their terms,atthe end of February 1999.Directors Sta
303、tutory ReportSantos Ltd and Controlled Entities39408.Likely DevelopmentsCertain likely developments in the operations of the consolidated entity and the expected results of thoseoperations in future financial years are referred to at pages 6 to 9,15 to 17 and 19 of this Annual Report.Further informa
304、tion about likely developments in the operations of the consolidated entity and the expectedresults of those operations in future financial years has not been included in this report because disclosure ofthe information would be likely to result in unreasonable prejudice to the consolidated entity.9
305、.Directors and Senior Executives EmolumentsThe Boards Nomination and Remuneration Committee is responsible for reviewing the remuneration policiesand practices of the Company,including the compensation arrangements for executive Directors and seniormanagement,the Companys superannuation arrangements
306、 and,within the aggregate amount approved byshareholders,the fees for non-executive members of the Board.This role also includes responsibility for theCompanys employee share and option plans.Executive and senior management performance review andsuccession planning are matters referred to and consid
307、ered by the Committee.The Nomination and Remuneration Committee has access to independent advice and comparative studies onthe appropriateness of remuneration arrangements.Non-executive Directors-As indicated above,within the aggregate amount approved by shareholders,thefees of the Chairman and non-
308、executive Directors are set at levels which represent the responsibilities of andthe time commitments provided by those Directors in discharging their duties.Regard is also had to the levelof fees payable to non-executive Directors of comparable companies.Non-executive Directors are also entitled to
309、 receive a retirement payment upon ceasing to hold office as aDirector.The retirement payment(inclusive of superannuation guarantee charge entitlements)is madepursuant to an agreement entered into with each Director in terms approved by shareholders at the 1989Annual General Meeting.Details of the n
310、ature and amount of each element of the emolument for the financial year of each non-executive Director of the Company are:Non-ExecutiveDirectors Fees(1)SuperannuationNon-Cash BenefitsRetirementTotalDirectorContributions(2)Benefits Paid$UhrigJohn Allan173,0006,26350,492229,755BarnettPeter Charles60,
311、5003,93364,433GerlachStephen68,5004,45272,952OLearyMichael Anthony60,5003,93364,433SloanJudith55,0003,57558,575StraussRobert18,421258,288276,709WebberIan Ernest60,5003,93364,433(1)Includes Board fees and Committee fees(2)Contributions made in accordance with the Companys Superannuation Guarantee Cha
312、rge obligationsSenior Executives-Remuneration levels are competitively set to attract,retain and motivate appropriatelyqualified and experienced senior executives capable of discharging their respective responsibilities.Remuneration packages of senior executives include performance based components
313、in the form of equityparticipation through the Santos Executive Share Option Plan.Options issued under the Plan are linked tothe longer term performance of the Company and are only exercisable following the satisfaction ofperformance hurdles that are designed to maximise shareholder wealth.Directors
314、 Statutory ReportcontinuedDetails of the nature and amount of each element of the emolument for the financial year of each of the fiveofficers of the Company and the consolidated entity receiving the highest emolument are:SurnameOther namesPositionBaseBonusesOtherTotalNumber ofRemuneration(1)Benefit
315、s(2)shares over which options granted by Company$AdlerNorman RossManaging Director984,753300,000299,3831,584,1362,500,000McArdleJohn WalterDirector&Executive492,377157,885650,262650,000General Manager,CommercialArmstrongJohn DennisGeneral Manager,402,107113,668515,775175,000Offshore AustraliaBusines
316、s UnitMcArdleRodney EricGeneral Manager,254,40089,672344,072125,000Queensland&NTBusiness UnitRobertsMichael GeorgeGroup General212,83315,000112,657340,490150,000Counsel&Company Secretary(1)Base Remuneration includes base salary,packaged benefits and FBT(where applicable)(2)Other Benefits are non bas
317、e remuneration benefits including Company contributions to superannuation and the cost to theCompany of cars(including applicable FBT).Note:The five officers disclosed above are those executive officers within the consolidated entity responsible for the strategicdirection and operational management
318、of major business units receiving the highest emoluments.The total emoluments disclosed above do not include a value attributed to the options granted during theyear(any benefit arising on grant of the options not being quantifiable).No further options have beengranted since the end of the financial
319、 year.Further information in relation to options granted by the Companyto executives during the financial year is contained in Note 18 to the financial statements.10.IndemnificationArticle 177 of the Companys Articles of Association provides that the Company indemnifies each person whois or who has
320、been an“officer”(as defined in section 241(4)of the Corporations Law)of the Company againstany liability to another person(other than the Company or a related body corporate)arising from theirposition as such officer,unless the liability arises out of conduct involving a lack of good faith.The Compa
321、nyhas insured against amounts which it is liable to pay pursuant to Article 177 or which it otherwise agrees topay by way of indemnity.Article 177 also provides for an indemnity in favour of an officer or auditor(KPMG)in relation to costs incurred in defending proceedings in which judgement is given
322、 in their favour or in whichthey are acquitted or the Court grants relief.In conformity with Article 177,the Company is party to Deeds of Indemnity in favour of each of the Directorsreferred to in this report,who held office during the year,and certain General Managers of the consolidatedentity,bein
323、g indemnities to the full extent permitted by law.There is no monetary limit to the extent of theindemnity under those Deeds and no liability has arisen thereunder during or since the financial year otherthan in respect of the legal costs referred to below.During and since the financial year up to t
324、he date of this report,legal costs of$231,244 have been paid by theCompany in defending certain proceedings in relation to termination of employment brought by a formeremployee against:the Company;the Managing Director,Mr N R Adler;another employee of the consolidatedentity,Dr J D Armstrong;and a fo
325、rmer employee of the consolidated entity.These costs,which insofar as theyrelate to the three personal defendants have been paid pursuant to the terms of the above Deeds of Indemnity,have not been apportioned among the Company nor the three indemnified personal defendants and thereforeit is not poss
326、ible to determine the amount paid on behalf of each of them.11.RoundingAustralian Securities and Investments Commission Class Order 98/100,dated 10 July 1998,applies to theCompany and accordingly amounts have been rounded off in accordance with that Class Order,unlessotherwise indicated.This report
327、is made on 15 March,1999 in accordance with a resolution of the Directors.J A Uhrig,DirectorN R Adler,Director15 March,1999Directors Statutory ReportSantos Ltd and Controlled Entities4142ConsolidatedSantos Ltd1998199719981997Note$million$million$million$millionSales revenue769.4778.5364.0376.0Other
328、revenue(2)96.484.6313.2119.0Proceeds from sale of controlled entity(25)137.0Operating revenue1,002.8863.1677.2495.0Operating expenses(298.8)(270.4)(145.3)(117.4)Book value of controlled entity sold(25)(129.6)Depreciation,depletion and amortisation(3)(239.8)(216.2)(93.7)(94.6)Interest expense(4)(67.3
329、)(54.2)(42.7)(42.1)Operating profit before income tax(5)267.3322.3395.5240.9Income tax attributable to operating profit(6)(91.0)(116.1)(44.8)(53.3)Operating profit after income tax attributable to the shareholders of Santos Ltd176.3206.2350.7187.6Retained profits at the beginning of the year338.6283
330、.7209.5173.2Amount transferred from reserves(19)14.914.9Total available for appropriation529.8489.9575.1360.8Dividends provided for or paid(7)(151.5)(151.3)(151.5)(151.3)Retained profits at the end of the year378.3338.6423.6209.5The profit and loss statements are to be read in conjunction with the n
331、otes to the financial statements.Profit and Loss Statementsfor the year ended 31 December 199843Balance Sheetsat 31 December 1998ConsolidatedSantos Ltd1998199719981997Note$million$million$million$millionCurrent assetsCash117.8109.834.630.6Receivables(8)122.0119.6171.2212.3Inventories(9)72.574.836.63
332、8.3Total current assets312.3304.2242.4281.2Non-current assetsInvestments(10)386.8389.71,930.11,910.6Exploration and development expenditure(11)2,243.42,139.9788.2705.7Land and buildings,plant and equipment(12)1,179.81,084.4544.4513.4Intangibles(13)53.662.6Other(14)60.255.410.011.3Total non-current a
333、ssets3,923.83,732.03,272.73,141.0Total assets4,236.14,036.23,515.13,422.2Current liabilitiesAccounts payable(15)151.1183.51,096.11,215.6Borrowings(16)0.43.70.1Provisions(17)121.3144.8117.9129.6Total current liabilities272.8332.01,214.01,345.3Non-current liabilitiesBorrowings(16)1,397.41,220.30.1Provisions(17)626.7564.9316.8293.8Total non-current liabilities2,024.11,785.2316.8293.9Total liabilities
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