SANTOS LIMITED — Proxy Solicitation & Information Statement 2011

ESG releases Scheme Booklet

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Sydney, Australia – 23 September, 2011 – On 18 July 2011, the Board of Eastern Star Gas (ASX:ESG; OTCQX:ESGLY) unanimously recommended a proposal by Santos Ltd (“Santos”) to acquire all the issued ordinary shares of ESG not already held by Santos and TRUenergy Investments Pty Limited (“TRUenergy Investments”) through a Scheme of Arrangement (“the Proposal” or “the Scheme”).

Concurrently with the Scheme announcement, Santos entered into arrangements with TRUenergy Holdings Pty Limited (“TRUenergy Holdings”) pursuant to which Santos will acquire TRUenergy Investments’ 3.8% interest in ESG for cash consideration of $0.90 per ESG Share (“the TRU Acquisition”) and Santos will on-sell to a wholly owned subsidiary of TRUenergy Holdings a 20% interest in the Narrabri Gas Project, and a pro rata interest in other assets owned by ESG.

On 22 September 2011 the Federal Court of Australia approved the convening of a meeting of ESG Shareholders to consider and vote on the Proposal. The Scheme Booklet in relation to the Proposal has been registered with Australian Securities and Investments Commission (“ASIC”) and has been lodged with ASX alongside this announcement.

The Scheme Booklet sets out information relating to the Scheme and the TRU Acquisition and the reasons for the ESG Directors’ unanimous recommendation that ESG Shareholders vote in favour of the Scheme and the TRU Acquisition, in the absence of a Superior Proposal.

Independent Expert’s conclusions and ESG Directors’ recommendation

The Scheme Booklet contains an Independent Expert’s Report prepared by Grant Samuel & Associates Pty Limited, which concludes that “the Scheme is in the best interests of Eastern Star shareholders, in the absence of a superior proposal”. The Independent Expert attributed value to the scrip consideration under the Scheme in the range $0.79-0.89 per ESG Share (based on a market price for Santos Shares in the range $11.50-13.00) which falls within its estimated underlying value of ESG, including a control premium, of $0.77-1.00 per ESG Share.

Based on the Santos Share price on 15 July 2011, the value of the scrip consideration offered to ESG Shareholders under the Scheme was $0.90 per ESG Share. Due to a number of reasons including a downturn in global equities markets and the corresponding fall in the Santos Share price since the Scheme announcement, the implied value of the scrip consideration offered under the Scheme is, at the date of the Scheme Booklet, no longer equal to $0.90 per ESG Share and is less than the consideration which TRUenergy Investments will receive for its ESG Shares.

The Independent Expert has concluded that the disadvantages of the TRU Acquisition to the non associated shareholders (being ESG Shareholders other than Santos and TRUenergy Investments) outweigh the advantages and, accordingly, the TRU Acquisition is neither fair nor reasonable having regard to the interests of the non-associated shareholders.

Your Directors have considered the Independent Expert’s Report but believe the difference in consideration received by ESG Shareholders other than TRUenergy Investments is not material in the context of the overall transaction. In recommending that ESG Shareholders vote in favour of the TRU Acquisition, ESG Directors also considered that:

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Eastern Star Gas Limited ABN 29 094 269 780

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• the TRU Acquisition was an integral part of the negotiated position between ESG and Santos and without it, it is unlikely Santos would have agreed to acquire ESG; and

• the overall arrangement between ESG and Santos should be considered in its entirety.

The ESG Directors therefore unanimously recommend that, in the absence of a Superior Proposal, ESG Shareholders vote in favour of both the Scheme and the TRU Acquisition. Each Director intends to vote all ESG Shares controlled by him in favour of the relevant resolutions, in the absence of a Superior Proposal.

Scheme Meeting and General Meeting

The Scheme requires the approval of ESG Shareholders and will be considered at a meeting of ESG ‑ Shareholders to be held at the Grand Ballroom No 2, Shangri La Hotel, 176 Cumberland Street, The Rocks, Sydney, New South Wales at 10.00 am on 28 October 2011.

The TRU Acquisition will be considered at a General Meeting of ESG Shareholders to be held at the ‑ Grand Ballroom No 2, Shangri La Hotel, 176 Cumberland Street, The Rocks, Sydney, New South Wales at 11.00 am on the same day as the Scheme Meeting (28 October 2011).

ESG Shareholders do not need to attend the meetings in person to vote, as their vote can be made by proxy by completing the proxy form enclosed with the Scheme Booklet. All proxy voting instructions must be returned to ESG’s share registry by 26 October 2011 at 10.00am in accordance with the directions set out in the proxy form.

The Scheme Booklet contains important information about the resolutions to be considered at the meetings, and ESG Shareholders should read the Scheme Booklet carefully and in its entirety.

Key Dates

If, after reading the Scheme Booklet, an ESG Shareholder has any questions about their ESG Shares or any other matter in the Scheme Booklet, they should contact the ESG information line on 1800 704 395 within Australia or +61 2 8256 3393 outside Australia between 9.00 am and 5.00 pm, Monday to Friday.

Please visit ESG's website www.easternstar.com.au regularly between now and the Scheme Meeting for future announcements relating to the Proposal.

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