After reviewing its reserve profile and bringing its reserve calculations into line with world best practices, Santos was forced to slash its estimated proven and probable reserves, dubbed 2P, by 18 per cent to 724 million barrels of oil.

"I just had to do it," said Santos managing director, Mr John Ellice-Flint. "We've got the first complete picture of our resource base."

Previously proved and probable figures were grouped together. Now proved reserves have been isolated into 1P, which Santos estimates to be at 316 mmboe.

Of the 460 fields reviewed, 2P reserves for 77 fields increased while 255 fields remained the same and 128 fields declined.

The market's reaction to the review was swift with Santos' shares falling 39c to finish at $5.71. However, Santos' shares began a tentative recovery with its share price on Tuesday finishing at $5.77, which was in line to the evaluation by BNP Paribas Equities.

Santos' full year result will be unveiled on 13 February 2001, four days after the South Australian election, which could have a significant bearing on Santos. The Liberal Government refused last year to remove the 15 per cent shareholding cap on Santos, which was introduced in the eighties to thwart a takeover bid by Alan Bond.

While the opposition Labor party has already ruled out removing the cap, a new government may be more receptive to market pleas to open up the company to possible takeover, according to industry watchers.

In wake of the $1.4 billion Oil Search Orogen merger, many in the market have argued that if Santos took over Orogen, it would have helped the company increase its exposure to higher growth prospects as well as cement its position in the PNG oil and gas sector.