1 Total revenue

17%

Total revenue increased primarily due to:

• higher product prices driven by higher crude prices and higher refiner margins on transport fuels; and
• marketing sales volumes and margins are higher than 2005 on transport fuels.

2 Total expenses – replacement cost basis

18%

Total expenses increased primarily due to higher cost of sales, which reflected higher crude prices:

•  higher operating expenses due to:
– increased depreciation due to completion of the Clean Fuels Project;
– increased infrastructure maintenance-related costs; and
– higher environmental remediation expenses.

3 Replacement
cost EBIT

12%

The improvement in Caltex’s underlying performance resulted primarily from:

• higher refiner margins on transport fuels; and
• higher marketing margins and sales volumes on transport fuels.

This improvement was partially offset by:

• higher operating expenses;
• losses on imports and exports and other refinery losses due to the delay in the ability to produce products that comply with the Clean Fuels standards (Clean Fuels Project now completed).

Breakdown of replacement cost EBIT is detailed below1:

Caltex Refiner Margin (CRM)

$928m

CRM represents the difference between the cost of importing a standard Caltex basket of products to eastern Australia and the cost of importing the crude oil required to make that product basket. The CRM calculation basically represents: average Singapore refiner margin + product quality premium + crude discount / (premium) + product freight – crude freight – yield loss.

CRM was higher in 2006 at US$10.13/bbl, compared with US$8.40/bbl for 2005. Additionally, lower planned refinery shutdown activity, resulted in sales from production increasing from 10.4 billion litres in 2005 to 11.0 billion litres in 2006.

Transport fuels marketing margin

$334m

Transport fuels comprise petrol, diesel and jet. The transport fuels marketing margin is based on the average net margin over Import Parity Price in Australia.

• The average transport fuels marketing margin was 5% higher than in 2005.
• Additionally, transport fuels sales volume increased 1% driven by increased demand for diesel and petrol partly offset by the decline in jet.

Lubricants and specialties margin

$107m

Lubricants and specialties products include finished lubricants, base oils, liquified petroleum gas, petrochemicals, bitumen, wax and marine fuels.

• Finished Lubes margins lower than 2005 due to the rapid increases in cost of product in 1H06.

Partly offset by:

• specialties volumes grew overall by 5% mainly due to increased sales of marine fuels.

Non-fuel income

$147m

Non-fuel income includes convenience store income, franchise income, royalties, property, plant and equipment rentals, StarCard income and share of profits from non-controlled equity distributors.

• Non-fuel income increased by 16% compared with the same period last year due to increased card income, royalties and strong Calstores results.

Operating expenses

($698m)

Operating expenses in this caption include refining and supply, marketing, corporate and other operating expenditure.

• Higher operating expenses due to increased depreciation (completion of the Clean Fuels Project) and a change in maintenance practices to undertake more work on a rolling basis than in shutdown periods; and

• higher environmental remediation expenses.

Other

($163m)

Other includes foreign exchange impacts, pipeline and charter revenue. In addition, losses on exports and imports and other refinery losses occurred due to the delay in the ability to produce products that comply with the new Clean Fuels standards.

Total RCOP EBIT

$655m

4 Net finance costs

96%

The increase in net finance costs reflects a higher average net debt for 2006 which was 42% higher than for 2005 due to higher crude oil prices during the year. The net debt at 31 December 2006 was $539 million compared with $429 million at 31 December 2005.

5 Inventory
gain after tax

77%

Regional crude oil (Tapis) prices rose significantly in 1H06 (US$70.86/bbl June 2006), however, they averaged US$59.54/bbl in December 2006 compared with US$57.24/bbl in December 2005. This increase resulted in net inventory gains of $52 million ($36 million after tax) compared with net inventory gains of $228 million ($160 million after tax) in 2005.

6 Final dividend

The Board declared a final fully franked dividend of $129.6 million, or 48 cents per share compared with 31 cents per share declared for the final 2005 dividend. The record date is 9 March 2007, with the dividend payable on 30 March 2007.