OIL SEARCH LIMITED 2008 Half Year Results 19 August 2008 1
2008 Half Year Results Agenda Performance Summary Peter Botten Financial Overview Stephen Gardiner Operations Review Phil Caldwell PNG LNG Project Phil Bainbridge Growth Opportunities Peter Botten and Outlook 2
Performance Summary 3
2008 First Half Performance Summary NPAT, excluding MENA sale profit, of US133.3 million, nearly three times higher than in 2007 first half Record oil prices unhedged, average realised price of US115 per barrel, 63% above pcp Sound…
Results Other Factors Sale of MENA assets recognised in P&L effective from 1 May. Profit on sale of US132 million not subject to tax Non-cash charges higher due to full period depreciation of two drill rigs and first-time take-up…
Continuing Cost Pressures 1H07 1H08 PNG oil field cost increase USm USm driven by: Rising labour costs, reflecting Field Costs global industry pressures - Oil: PNG 28.4 32.9 Stronger A and Kina (14% & 12% increases respectively)…
Operating Cash Flows USm Operating cashflow 750 included US78m of tax paid (with 2nd PNG tax 625 instalment of US136m 348 (231) paid in late July) 500 (61) Investing outflows 375 included US85m on production/ 250 development…
Treasury Update US400 million in cash at end June incl. JV balances; no debt. Approximately US205 million to be received in third quarter upon settlement of MENA asset sale Refinancing of 5 year US oil facility in final stages:…
FY08 Capital Outlook Update Exploration expenditure for full year 2008 expected to be US150 - 160 million, inclusive of acquisition of Shakal interest in Kurdistan Gas commercialisation and new business expenditure of US80…
Operations Review 14
Production Summary NET Production (mmboe) 6.0 MENA Hides GTE 5.0 SE Mananda SE Gobe 4.0 Gobe Main Moran Kutubu 3.0 2.0 1.0 0 1H 06 2H 06 1H 07 2H 07 1H 08 15
Field-by-field performance Kutubu Reservoirs performing well Production in 2Q08 boosted by UDT 8, the first development well drilled with new Rig 103, after delays in rig commissioning and drilling operations UDT 9 subsequently…
PNG Drilling Update Rig 103: Spudded UDT-8 end Dec 07. Some operational problems which delayed well completion Significant improvement on UDT-9 development well Rigged up and commissioned leapfrog unit and spudded UDT-10 well Rig…
FY 2008 Outlook Following MENA sale, production outlook for FY2008 of 8.5 9.0 mmboe PNG production subject to results of: Drilling campaign at Usano (4 wells) and Moran (2 wells), workover campaign (6 in Kutubu) Field uptime…
2009 PNG Drilling Programme Currently evaluating optimal programme Rig 103 and 104 will be focused on delivering production wells Evaluating potential use of another rig for appraisal/ exploration / New Gas work Hydraulic…
PNG Exploration Cobra results Thicker Hedinia Sand penetrated than predicted pre-drill Potential oil zone interpreted to be present Initial well pressures and samples inconclusive due to probable formation damage Drilling sidetrack…
Cobra 1A Hedinia Sands Cobra sub-thrust structure and schematic Hedinia Sand penetrations in sidetracks Significant sand thickness variation in upper potentially oil-bearing interval Interpreted dip at well penetrations showing…
MENA Exploration TUNISIA IRAQ LIBYA YEMEN First well expected to spud in Shakal PSC in Iraq in 3Q08 Seismically defined large 100+mmbbl structure adjacent to existing discoveries Offshore Libya Block 18 drilling expected…
Gas Commercialisation 24
PNG LNG - Premier AsiaPac LNG Project World Class and World Scale LNG Project 2C resources of 9.5 tcf 6.3mtpa, 2 train LNG project Clean gas with liquids No technology issues or concerns Well positioned for the Asia market Joint…
PNG LNG - Optimal Timing to meet market requirements Regional market Pacific Basin LNG Supply and Demand to 2020 fundamentals remain MMTPA robust 300 Steady expansion from LNG supply unlikely to keep up with demand with high…
LNG Projects Under Construction and Proposed Large number of Sakhalin 2 possible projects under consideration Not many possible Iran LNG *3 RL 3 Qatar Gas projects will be able 2,3,4 to cover the demand Yemen LNG gap in 2013…
LNG Pricing Strong pricing drivers: LNG (/mmbtu) 20 Supply/demand fundamentals Pull from Europe Delays in other projects Environmental advantages 15 Crude Oil Parity Pricing and challenges with competing energy sources Pricing…
PNG LNG Project 3 Marketing 3 Strongly positioned. Competitive advantages recognised 3 Positive engagement 3 Project: 3 FEED and schedule on track for EM and Oil Search responsibilities 3 Positive scope optimisation 3 Commercial:…
Project Update EOS (KBR/ WorleyParsons JV) conducting upstream FEED comprising: Preliminary engineering design for gas field developments Gas conditioning and compression facilities Pipeline and infrastructure Downstream FEED (LNG…
Commercial Update For Oil Search, the Project will provide: Annual incremental net production of 18 mmboe Booking of over 500 mmboe of Oil Searchs 2P gas resources providing positive impact on depreciation Past costs pay back by…
Commercial Update Potential for additional value: Initial equity determination at Project sanction Acceleration/schedule mitigation options: Early works The Project will provide additional opportunities: De-bottlenecking of…
Government Update Leadership and Co-ordination defined: Political leadership through Ministerial Economic Committee Co-ordination branch approved and being implemented Retention Licence renewal: Government has announced PRL 11 and…
Growth Opportunities and Outlook 35
Gas Growth Opportunities Delivering PNG LNG Project is the priority: Delivers infrastructure for additional gas growth Additional LNG developments command the highest value: Sufficient 2C resources for additional train already exist…
Key Gas Fields in PNG Hides / Angore Fields (OSH 27.5%/52.5%) Hides 5.3 tcf of 2C resource, 3C upside to 10 tcf Angore 1.2 tcf Kutubu Complex Fields (OSH - 60.0%) 1.5 tcf plus liquids, largely developed Key strategic resource and…
Proposed Exploration Programme Northern Hub 2009 2011 exploration Western Corridor programme will test over Huria Stage II 9 tcf mean resource Cecilia Iwa (gross), with average Central POS of 15% Foldbelt Hedinia Deep…
Gas Growth Opportunities Additional LNG trains or plants Capacity for an additional 3.2mtpa LNG train or equivalent available at low cost from existing discoveries Gas could come from various sources eg Hides, Pnyang, Angore,…
Gas Growth Opportunities cont. Other gas commercialisation opportunities can also offer attractive returns, diversification and timely delivery. These range from export oriented projects to domestic micro projects including:…
AGL Asset Sale a Win:Win for OSH shareholders AGL is selling its interest in PDL 2 (11.9%) and PDL 4 (66.7%) Highest bidder expected to be known by mid September OSH and other licence partners (ExxonMobil, JPP, MRDC) have…
Gas set to dominate portfolio over time Substantial unrealised value exists within Oil Searchs current asset Existing portfolio can deliver portfolio, capable of generating superior shareholder returns over superior TSR next five…
Operational Outlook Production outlook for 2008 of 8.5 9.0 mmboe, post MENA sale Exploration spend considerably lower in 2H08 than in 1H08. FY spend expected to be US150 - 160 million. FY08 development spend of US170 million and…
Gas Outlook PNG LNG Project on track to make Final Investment Decision in late 2009, first production expected late 2013/2014. Will deliver key infrastructure to PNG. 30 year+ legacy project Reserves upside in Hides and…
Summary PNG LNG Project and commercialising remaining gas will drive Company value. Rising NPV over time, as cash flows get closer and Project de-risks Core PNG oil business remains robust, with stable production and cost outlook,…
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