For the year ended 31 December 2007

	Millions of dollars	2007	2006
1	Total revenue1	19,342	18,665
2	Total expenses2	(18,667)	(18,010)
3	Replacement cost earnings before interest and tax	675	655
4	Net finance costs	(39)	(46)
	Income tax expense	(192)	(179)
	Replacement cost profit (RCOP)	444	430
5	Inventory gain after tax	202	36
	Historical cost net profit after tax	646	466
	Interim dividend per share	47c	32c
6	Final dividend per share	33c	48c
	Basic earnings per share
	– Replacement cost	164c	159c
	– Historical cost	239c	173c

1	Excludes interest revenue.
2	Excludes interest expense and inventory gains/(losses).

DISCUSSION AND ANALYSIS

1

TOTAL REVENUE 4% Total revenue increased primarily due to: •  higher marketing transport fuels sales volumes; and •  higher product prices driven by crude oil prices.

2

TOTAL EXPENSES – REPLACEMENT COST BASIS 4% Total expenses increased primarily due to higher cost of sales, which reflected: •    higher crude prices; •    higher refinery production and sales volumes; and •    inflationary impact on operating costs.

3

REPLACEMENT COST EBIT 3% Caltex’s underlying performance continued to improve, driven by higher sales volumes and higher production offset by lower refiner margins, the impact of the stronger A$ on refiner margins and higher operating costs.

CALTEX REFINER MARGIN (CRM) $786m 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. Despite higher production volumes (2007: 10.9 billion litres of petrol, diesel and jet; 2006: 10.2 billion litres), total CRM was A$142 million lower in 2007 than in 2006. The US dollar CRM was 9% lower in 2007 than in 2006 at US$9.26/bbl, compared with US$10.13/bbl in 2006. In addition, the stronger Australian dollar resulted in the Australian dollar CRM being 17% lower at A$11.12/bbl in 2007, compared with A$13.42/bbl in 2006, and escalating product prices resulted in a higher pricing lag. Higher production volumes were not able to offset the effect of the US$/bbl CRM decline and the stronger Australian dollar. TRANSPORT FUELS MARKETING MARGIN $354m 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 6% higher than in 2006, driven by higher transport fuel sales of 13.8 billion litres in 2007, compared with 13.4 billion litres in the same period in 2006. The strongest growth was in diesel sales with Caltex volumes up by 11.5% from the prior year. LUBRICANTS AND SPECIALTIES MARGIN $115m Lubricants and specialties products include finished lubricants, base oils, liquified petroleum gas, petrochemicals, bitumen, wax and marine fuels. Lubes and specialty margins increased 7%, compared with 2006, as unprofitable business was rationalised. NON-FUEL INCOME $152m 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 was higher in 2007 with a 7.2% growth in weekly same shop sales and a strong contribution from the card business through StarCard and StarCash. OPERATING EXPENSES ($750m) Operating expenses represent refining and supply, marketing and corporate operating expenditure. Higher refinery operating costs and increased service station remediation provisions contributed to the higher costs. On a cent per litre basis, operating costs rose 3.96%, in line with inflation. OTHER $18m Other margin includes: •  refining margin other than CRM (export sales, clean fuels grant and favourable imports and local purchases); and •  exchange gain on payables. TOTAL RCOP EBIT $675m

1	The breakdown of RCOP shown here represents management reporting view of the breakdown and as such individual components may not reconcile to statutory accounts.

4

NET FINANCE COSTS 15% The decrease in net finance costs reflects a lower average net debt for 2007 (23% below 2006). The net debt at 31 December 2007 was $582 million compared with $539 million at 31 December 2006. Debt increased towards the end of the year as the company built inventory in preparation for major refinery maintenance in the first quarter of 2008.

5

INVENTORY GAIN AFTER TAX 461% Regional crude oil (Tapis) prices rose significantly throughout 2007 (US$100.85/bbl in December 2007, compared with US$59.54/bbl in December 2006). This increase resulted in net inventory gains of $290 million ($202 million after tax), compared with net inventory gains of $52 million ($36 million after tax) in 2006.

6

FINAL DIVIDEND The Board declared a final dividend of $89.1 million or 33 cents per share fully franked. This makes the total dividend declared for 2007 80 cents per share fully franked after 47 cents per share paid on 28 September 2007 (2006 total dividends: 80 cents per share). The record date is 7 March 2008, with the dividend payable on 28 March 2008.

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