The Structural Change in the Oil and Gas Industry UBS Superannuation Conference, Melbourne Whats Next for Australia 5th March 2015 Oil Search Limited ARBN 055 079 868
What is Driving Oil Prices Crude Oil Front - Month Price Global Oil Supply / Demand Outlook (/bbl) (mn b/d) Source: Bloomberg, Morgan Stanley Commodity Research Source: IEA Oil Market Report, Dec 2014 Global Oil Demand is weak…
OPEC not cutting production - creating structural change OPEC Crude Production vs call on OPEC Source: IHS Energy OPEC is no longer the swing producer: Historically OPEC has balanced the oil market, by cutting production in…
US crude production is set to overtake Saudi crude output in the next 12months Saudi Crude Production vs US Crude Production (mm b/d) 11 10 9 8 7 6 5 4 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016…
Oil price outlook revised down Brent Oil Price Forecasts to 2020 120 (US/bbl Real) 110 100 90 80 70 60 50 40 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Broker Consensus (July 2014) FACTS Woodmac Deutsche Goldman…
A Brent price of 40/bl or below could put material volumes of existing global supply at risk Volume of production that becomes cash negative as oil prices fall Source: Wood Mackenzie, Q1 2015 Oil Search Structural Change in Oil…
Share prices under pressure 140.0% OSH peer group relative FY 2014 share price performance vs Brent 120.0% 100.0% Index =100 (Jan'14) 80.0% 60.0% 40.0% OSH Brent 20.0% May July March April January…
Dividends and buybacks threatened below 80/bl Brent price required to maintain current debt levels in 2015 Source: Wood Mackenzie Company responses to lower oil prices / revenues: Actively revising 2015 budgets and capital…
Capital spending reduced and projects postponed 60% Year on year change in upstream capital budget (%) 40% 20% 0% -20% -40% -60% -80% -100% Marathon EOG Woodside Continental Canadian Oil Sands…
Project costs to decline as activity reduces Upstream Capital Cost Index (UCCI) Nominal Upstream capital costs are expected to decline globally by approximately 12% on average between 2014 and 2016 offshore and 7% onshore Falling…
Impact on LNG Prices and Markets Medium to Long term LNG Volumes for Asian Delivery vs Benchmark Prices Grassroots LNG projects will stall. Costs are simply too high Dr. Fesharaki, Feb 2015 Source: FACTS Global Energy…
New LNG Suppliers. Canada Mediterranean Russia Announced 160 mmtpa Planned 15 mmtpa Announced 63.9 mmtpa PNG Planned 10 mmtpa US Under Construction 20 mmtpa Announced 290 mmtpa* Mozambique Australasia Announced 20…
Future LNG projects from PNG are highly competitive versus global alternatives Global LNG plant break-even costs 18 (US/mmbtu) 16 14 12 10 8 6 4 2 0 Source: Oil Search and Wood Mackenzie, Q1 2015, Project names…
.but how much will come to market Lines indicates when FID date first Operator target FID proposed and WM current view X date - Project cancelled FID date continuing to drift Pluto Expansion Train 3 X Pluto Expansion Train 2 X…
PNG LNG is competitive versus LNG projects from Australia Australian LNG plant break-even costs (US/mmbtu) 16 14 12 10 8 6 4 2 0 A B C D E F G H I PNG LNG J LNG Projects recently commissioned, or under construction,…
Many projects possible and speculative projects been muted Global LNG Capacity and Utilisation versus Demand (mn t/yr) Source: Wood Mackenzie, Q4 2014 Oil Search Structural Change in Oil and Gas 17
XOM: Global Gas Supply demand Source: ExxonMobil, The Outlook for Energy, Dec 2014 Oil Search Structural Change in Oil and Gas 18
Gas resource evaluation ongoing in NW Highlands and Gulf Key resource evaluation activities currently Hides F1 Deep underway: Evaluation of Hides Antelope 4 Structural remapping and reservoir modelling based development wells Antelope…
Reasons for success-Some detail Availability of commissioning gas from oil fields in Aug-13, prior to first deliveries from the Hides field in Apr-14, enabling early start-up and rapid production ramp-up at LNG plant Stick built (vs…
OSH Reassessed Strategic Review Review conclusions: 2015 Spending Cuts OSH in strong position to manage lower oil price environment Proposed LNG growth projects remain attractive based on current assumptions PNG Oil and Gas 20%…
Summary Oil and Gas industry is undergoing a major structural change, driven by low oil prices Industry response has been to cut capital spending and defer projects Impact extends to LNG supply and cost environment OSH 2014 Strategic…
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