This result excludes the impact of international oil price movements and provides a picture of how well the company is performing in areas of its operations not affected by this external factor.

Caltex managing director Dave Reeves said the improved RCOP result provided an accurate picture of how well the company was performing in areas not affected by the crude price rise, with stronger refiner margins a stand out against a backdrop of strong domestic, regional and North American economic growth.

The company’s marketing business also benefited from its improved domestic positioning which saw growth in sales volumes of transport fuels and lubricants with a stable average marketing margin on higher volumes.

“Refined product fundamentals, particularly in Asia and the US, remained positive during the period,” Reeves said. “Regional demand is usually weaker during the first quarter, however, this year strong demand from China in combination with below-average product inventories led to higher refining margins.

“The Singapore weighted average refiner margin (for Caltex’s basket of products) was US$7.08 a barrel for the first half of 2004 compared with US$3.83 for the first half of 2003.

“The average Singapore refiner margin for petrol reached record levels in the first quarter of 2004 and was US$9.27 a barrel in the first half of 2004 compared with US$4.52 a barrel in the first half of 2003.

“The higher earnings from the higher average refiner margins were partially offset by a stronger Australian dollar, which averaged 74 US cents in the first half of 2004, compared with 62 US cents for the first half of 2003.”

As a consequence of the new tax consolidation regime, the value of refining and pipeline assets has been reset for tax purposes. This has resulted in a $113.5 million decrease in deferred tax liabilities, with the offset being a non-recurring tax credit to current year earnings. The cash flow benefit will be realised over 20-25 years, which is the effective life of the revalued assets.

When the $113.5 million significant item of tax consolidation and oil-price driven inventory gains of $46.8 million (after tax) are included on an historical cost basis, Caltex made an after tax profit of $340.6 million for the first half of 2004 compared with $76.2 million for the first half of 2003, when inventory losses of $9.9 million (after tax) were recorded and there were no significant items.