Regional crude oil prices fell during the period (averaging US$29.47 a barrel in December 2002 and US$26.36 a barrel in June 2003). However, due to the pattern of crude price volatility throughout the period this resulted in a net inventory loss of $14.2 million compared with an inventory gain of $105.9 million in the first half of 2002

However, the news was not all bad as the company's RCOP (replacement cost of sales operating profit), which is normalised to exclude oil price movements, was up 35.1% at $86.1m, debt was reduced to $855m from $1,036m and gearing was down to 43%.

Shareholders will also benefit as Caltex was able to resume the payment of dividends with a 4 cent offering per share.

"The RCOP reflects how the company is performing in key areas we can influence such as refining operations, costs and volumes, in addition to the margins available from the market. It is one of the primary measures we look at in considering the issue of the dividend," said Caltex chairman Dick Warburton.

The company said it will now focus on building financial strength through further debt reduction, improved gearing and higher earnings through revenue.

It said the outlook for crude oil prices for the rest of the year will be driven by supply side considerations, the rate at which Iraq can resume crude oil exports and how quickly economic activity in the world's largest economies return to higher levels of growth.

Caltex and Woolworths also announced they had agreed plans for a 50/50 joint venture that will expand Caltex branding delivering fuels to approximately 300 more outlets while gaining the benefits of Woolworths' buying for the joint venture and Caltex convenience stores.

The joint venture will build its network up to 450 service stations located adjacent or near to Woolworths' stores. Caltex will manage these sites. Woolworths' petrol pricing policy will apply to the joint venture sites and Woolworths will continue its redemption discount fuel offer to its customers. The joint venture is proposed to start operations prior to Christmas 2003 following regulatory and third party approvals. It will be EBIT positive from day one.