Safety Briefing, Westin Hotel Emergency Exits Barnet Room Oil Search 2014 Strategic Review - 23 October 2014 3 Todays Agenda Start Topic Presenter 9.00 Welcome/housekeeping A. Diamant 9.05 Introduction R. Lee 9.10 Review…
Section 1 Latest Speaker Picture Here Introduction Rick Lee Chairman Oil Search 2014 Strategic Review - 23 October 2014 5 Introduction Oil Search (OSH) undergoing a major corporate transformation: Commencement of PNG LNG…
OSHs new dividend policy Oil Search to adopt a proportional dividend policy, commencing with 2014 final dividend Target dividend payout ratio of 35% 50% of core net profit after tax* Payout ratio will be reviewed in event of…
Background Previous strategic reviews established series of key objectives, strategies and initiatives, supporting a vision to deliver top quartile returns: 2002 Strategic Review: Root and branch company assessment Led to…
and total shareholder return (TSR) outperformance relative to ASX 200 Energy/ASX 200 and energy peers Relative TSR to 30 September 2014 640 Median TSR ASX200 592.3 Median TSR ASX200 Energy 540 Median OSH Peer Group OSH TSR 440 %…
Strong safety performance has been key component in delivering superior returns Total Recordable Injury Rate of 1.55 for nine months to 30 September 2014 8 7.3 7.0 APPEA 6.8 7 6.3 OSH 6.0 6 TRI/1,000,000 Hours OGP 5.2 5.2…
Key strategic questions Review addressed the following key strategic questions: Is top-quartile performance the relevant metric for Oil Search to target over next 5 years What is potential value of existing assets and opportunities Is…
Key findings cont. Outlook for energy industry remains attractive, with ongoing growth in Asia-Pacific LNG demand OSH business is robust in lower oil price environment Focus to be maintained on delivering shareholder value,…
Vision To generate top quartile returns for shareholders through excellence in Vision socially responsible oil and gas exploration and production Oil Search is committed to ongoing delivery of top quartile returns to shareholders…
Cash Flow Priorities Available Cashflows After scheduled debt servicing, sustaining capital expenditure and commitments Dividends Payment in accordance with new dividend policy Growth Capital Investment I LNG expansion…
Predictions of softer Brent crude prices have arrived sooner than expected Nominal Brent oil price outlook 140 Wood Mackenzie FGE 130 Brokers Consensus 120 US/bbl 110 100 90 80 2014 2015 2016 2017 2018 2019 2020…
Asian and Middle East LNG demand nearly doubles by 2030 350 Others* Saudi Arabia 300 Bahrain Kuwait 250 UAE Malaysia 200 Indonesia mmt Thailand 150 Singapore China 100 India Taiwan 50 South Korea Japan 0 Source: FGE…
.but how much will come to market Lines indicates when FID date first Operator target FID FID date proposed and WM current view X date - Project cancelled continuing to drift Pluto Expansion Train 3 X Pluto Expansion Train 2 X…
Oil vs Henry Hub indexation - which is better 17 Projected oil- and Henry Hub-linked LNG Prices delivered to Asia 16 15 Range to consider for US/mmBtu HH-linked contracts 14 delivered to Asia 13 12 HH (FGE Scenario)* HH…
PNG LNG competitive versus other recent LNG projects in Australia Australasian LNG plant break-even costs 16 14 12 US/mmBtu 10 8 6 4 2 0 A B C D E F G H I PNG LNG J LNG Projects recently commissioned, or under…
LNG from PNG has competitive advantages Conventional LNG projects with no new technology utilised in development Substantial certified reserves base with high heating value, suitable for Asian reticulation network High liquids,…
Section 4 Oil Searchs capabilities and competencies Matt Kay EGM, Strategy and Commercial Oil Search 2014 Strategic Review - 23 October 2014 35 OSHs competitive advantage in PNG Strategic Review has concluded OSH should focus…
85 years expertise operating in PNG Unrivalled experience operating in PNG government, regulators, landowners, geology, supply chain Positive corporate reputation locally leading corporate citizen, key member of PNG society, second…
PNG basin mastery and production optimisation from mature oil fields Unrivalled understanding of PNGs geologically complex and rugged Highlands region: Superior fold belt geology expertise Leveraged to identify high-value…
Summary 85 years experience in PNG Excellent in-country track record and social licence to operate integral to OSHs historic and future success Unparalleled experience working with PNG Government, landowners, regulators and…
Sustain and optimise existing assets to drive value Strategic Review has confirmed OSHs operating strategy to sustain and optimise value of PNG operating assets through: Debottlenecking of PNG LNG Value enhancement Optimise operated…
Debottlenecking offers potential for substantial incremental value 30% 25% 20% 15% 10% 5% 0% Bontang Bontang Brunei LNG Malaysia Sakhalin NWS (T1- Bontang Bontang Atlantic Bontang Adgas (T1-T2) (T3-T4) Dua T3) (T5) (T6-T7)…
Proven success optimising production from mature oil fields Since taking over oil field operatorship in 2003, OSH has: Drilled 41 development wells with 85% success rate Added +50mmbbls oil (gross) to 2P expected ultimate recoveries…
Summary and Outlook Potential T1 & T2 debottlenecking is highest returning opportunity in OSHs portfolio Will continue to pursue production optimisation opportunities within operated fields Operations extended by 30 years, requiring…
Strong platform for high value growth PNG LNG Project has delivered: Major infrastructure Government and landowner support Tier 1 LNG customers Financier confidence OSH played significant role in project execution and in ongoing…
20 tcf of discovered gas in PNG of which only 9 tcf is under development 1 Papua New Guinea Hides tcf Kutubu Port Moresby 9 tcf 6 6 Undeveloped (best tcf tcf…
Gas resource evaluation ongoing Hides F1 Deep Key resource evaluation activities are ongoing. Will provide greater certainty through 2015 on Evaluation of Hides Antelope 4 development plans: development wells Antelope 5 Antelope 6*…
Maximising value of expansion trains PNG can learn from other global LNG developments and expansions Co-located brownfield projects will reduce investment, accelerate schedule and maximise project economics for all stakeholders:…
Summary Undeveloped gas in existing portfolio can support at least two additional LNG trains in PNG. With modest exploration/appraisal success during 2015, third additional train possible Integrating future projects will add value…
Exploration remains fundamental to OSH growth Renewed focus on resource replacement, given step change in production and resource conversion with PNG LNG Project start-up Exploration programmes to target 150% resource replacement (5…
Proven exploration performance OSH has track record of success in PNG and MENA across range of geological environments Exploration look-back analysis 2003-2013: Net expenditure of nearly US1.5bn Drilled 59 wells Discovered 440 mmboe…
PNG exploration running room Internal and external 5,000 assessments indicate only half Hides is largest field found to date Future field sizes likely smaller but still of PNGs full resource potential 4,500 Recoverable Volume…
OSH well positioned to explore PNGs full potential Oil Search has strong acreage position Papua New Guinea Hides Kutubu Continue to expand position Port Moresby in best play fairways: Recent entries into PPL 269, 402 & 464…
International exploration International focus: Tunis Erbil Tajerouine Appraising high potential OSH KRI Sulaymaniyah Taza operated Taza oil discovery TUNISIA IRAQ Measured pursuit of material, high returning liquids-prone…
Summary Significant exploration upside remains in PNG, with only half of PNGs estimated full potential of 10 bnboe discovered so far Oil Search holds positions in best play fairways Aim to support PNG gas growth through drilling high…
PNG Sustainability Strategic Review highlights majority of OSH value growth over next 5-7 years will come from assets in PNG Social responsibility, sustainable development and enduring government and community relationships…
Ensure PNG LNG benefits commitments are delivered Delivery of PNG LNG benefits commitments, as agreed in Umbrella Benefits Sharing Agreement, critical for project stability, to avoid social unrest and operational disruptions Improved…
Strategic sustainable development and social responsibility OSH has made significant contribution to health outcomes for staff and communities over past 10 years: Major provider of healthcare across operating areas in PNG Insert…
Summary OSHs present and future value tied to preserving a stable operating environment in PNG Social responsibility and sustainable development remain embedded in our core values OSH has a comprehensive series of social programmes…
Organisational structure to deliver Strategic Review has highlighted importance of PNG to OSHs future value growth Number of organisational changes will take place, to manage programmes needed to deliver this growth Several senior…
Financial and capital management In light of commencement of cash flows from PNG LNG Project, OSHs financial and capital management policies were major component of Strategic Review Key objective is to ensure all future growth…
Balance sheet and cashflows to be optimised to secure cost effective financing Balance sheet to be conservatively managed to ensure all future growth opportunities can be prudently funded while accommodating dividend distributions in…
Investment, based on three LNG train development 2015 2019 Investment allocation PNG Gas Development PNG Appraisal MENA Appraisal PNG Exploration MENA Exploration PNG LNG (T1 + T2) PNG Oil Other Investment spend being…
Section 11 Latest Speaker Picture Here Summary and Conclusions Peter Botten Managing Director Oil Search 2014 Strategic Review - 23 October 2014 89 Key strategic questions answered Is top-quartile performance the relevant…
Key strategic questions answered What is potential value of existing assets Substantial remaining value within existing portfolio in PNG, where we have unparalleled operating experience and expertise Potential for T1 & 2…
Key strategic questions answered What is optimal capital management plan Wish to share material increase in profitability with shareholders OSH to adopt proportional dividend policy, commencing with 2014 final dividend: Target…
OSH has potential to provide material production growth as well as dividends Possible production growth profile Indicative dividend profile 50 30 45 25 40 35 20 30 mmboe 25 15 20 10 15 10 5 5 - 0 2014 2015 2016 2017…
Summary Board has endorsed strategic objectives and OSHs vision: Generate top quartile returns for shareholders through excellence in socially responsible oil and gas exploration and production Review has confirmed OSH has…
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