OIL SEARCH LIMITED 77th Annual Meeting 2 May 2008 1
Performance in 2007 STRONG UNDERLYING OPERATING PERFORMANCE Total production of 9.78 mmboe, just 4% lower than in 2006 despite PNG oil field maturity Realised oil price of US77.78/bbl, 16% above 2006 Record revenue of US718.8…
Performance in 2007 Net profit after tax (before significant items) of US140.8 million, down 32% on 2006 Impacted by higher exploration expense, higher non- cash items and higher effective tax rate First NPAT fall in 5 years…
World Class Safety Performance Total Recordable Incidents (TRIs) 1998 2007 14 OSH OGP APPEA 12.7 12 TRI / 1,000,000 Hours 10.6 10.7 9.8 Australian Companies 10 9.1 9.4 9.3 8.3 8.5 8 8.2 7.8 7.0 7.3 6.8 6.3 6 5.8…
Share Price out-performance Aug 2006 : APC withdraws from April 07: Signs Cost Sharing Australian leg of PNGGP Pipeline Agreement for LNG project 500 July 2005: Announcement of Share Price (rebased to OSH) AGL GSA and PNGGP…
6 CAGR 10% 20% 30% 40% 50% 60% 70% 0% Fortescue Metals Paladin Energy Source: IRESS WorleyParsons Caltex Australia Oil Search 53% United Group Oxiana Leighton Holdings ASX Limited David…
2007 Core Profit Drivers USm 97 300 14 (37) (11) (7) 200 (33) 27 100 207 (117) 141 0 6 x on 7 e x e es . . FX ct xp Ta 0 ev 0 pr pe c 0 ti pa ri 0 al…
Treasury Review US344 million in cash at year end, no debt Current cash position of US407 million US100 million tranche of corporate facility expired at year-end. Remaining undrawn bank lines of US31 million Work underway to…
2007/2008 Strategic Review CONCLUSION: Delivering PNG LNG is the Existing portfolio can Highest Priority deliver superior TSR Substantial unrealised value exists within Oil Searchs current asset portfolio, capable of generating…
Key Conclusions of Review Gas Commercialisation the key to growth Delivery of PNG LNG is highest priority Significant value can be derived from commercialising remaining gas resources Optimise cash generation from oil fields PNG…
PNG LNG Project A Company Transformer 12
What is LNG LNG (Liquefied Natural Gas) is natural gas cooled to a liquid state. LNG takes up 1/600th of the volume compared to gas in its gaseous form, so can be more easily transported long distances LNG is produced by cooling gas…
PNG LNG Project The PNG LNG Project comprises: Upstream infrastructure including production wells, processing facilities and pipeline network linking to the export pipeline Gas export pipeline from PNG Highlands to LNG plant…
PNG LNG Project Status Milestones reached: Commercial alignment (JOA) amongst the Project Owners Joint Operating Agreement executed in March Initial funding interests pre-Government back-in (Oil Search 34%) Unitisation and…
Delivering PNG LNG Following FEED entry, focus shifts to achieving Sanction in late 2009 by: Securing market off-take Securing debt and state equity funding Executing agreements on benefit sharing, environmental plans Oil Search…
PNG LNG Financing Debt: Joint debt financing approach, led by a Finance Committee co- ordinated by ExxonMobil. Soc Gen appointed financial advisor. OSH share of project finance around US3 billion, nominal, including fees,…
Schedule Gas Agreement execution - imminent FEED entry following Gas Agreement Financing Information Memorandum 4Q 08 Buyer support (HOAs / SPAs) 2008/09 EPC bids 2Q 09 Benefits Sharing Agreement 1H09 Environmental approvals 4Q…
Economic Importance of PNG LNG ACIL Tasman Report 6 February 2008 Affects economy of PNG and its balance of trade situation profoundly GDP will more than double Oil & gas exports increase 4 fold Up to 7,500 jobs in initial phase,…
PNG Oil Operations 20
Oil Operations Aim is to optimise PNG oil cash generation over the next 5 years to support PNG LNG Project funding requirements Need to balance work programmes, production outcomes and efficiency measures while maintaining safety…
PNG Gross Oil Production 80,000 Oil Search Added over P50 Hides P50 2008 P50 takeover 45mmstb Base GTE Programme Contingent 70,000 operatorship compared Resources- to Chevron LOF 60,000 Oil Rate (bopd) 50,000 40,000…
PNG Net Production (Life Of Field) 10,000 9,000 8,000 7,000 NET Production 6,000 (Mstb) 5,000 4,000 Hides GTE 3,000 SEM SE Gobe 2,000 Gobe Main 1,000 Moran Kutubu 0 2008* 2009 2010 2011 2012 Activities 9…
Cost Control Need to reduce capex through drilling performance improvements, drilling cost reductions, new technologies and optimised rig strategy Initiatives: Rigorous cost control of contracts, materials and logistics…
Cost Control Organisational Review: Remove duplication and minimise support costs Improve accountability and speed of decision making Promote ongoing localisation Contractor Management: Continue to rationalise contractor base to…
Additional Growth Opportunities 26
Additional Growth Opportunities PNG LNG Project delivery is Oil Searchs core growth driver and will be material, world class organic source of growth for a number of years PNG LNG Project also sets the stage for additional…
Gas Resources PNG has substantial Juha Hides discovered gas resources Pnyang Angore Gas for PNG LNG Project Elevala Hides, Juha, Angore, Kutubu, Moran, Gobe Presently 9.5 tcf certified 2P Approx 3 tcf Oil Search share Douglas…
Gas Growth Strategy Build on existing gas portfolio for additional major growth controlled by Oil Search: 5 hubs identified along development corridor Eastern Forelands Western Corridor (Stage 1 and Stage 2) Northern Hub Offshore…
Gas Growth Opportunities Highest value use for gas is from PNG LNG Project expansion and/or developing other LNG plants: Significant field, pipeline and plant synergies can potentially be obtained However, domestic gas…
Exploration and Organic New Business 31
Strategy Portfolio optimisation across all exploration assets Sale of MENA assets to Kuwait Energy recently announced for US200 million & WC Allows OSH to re-focus on MENA assets that have material potential impact on Farm down of…
PNG Exploration Build on existing gas portfolio (already outlined) Oil exploration High grade remaining prospects in close proximity to infrastructure Consider deeper Jurassic plays Farm down high equity oil exploration Frontier…
MENA Exploration Remaining portfolio provides material opportunities eg Libya Area 18, Yemen Blocks 3 & 7, Kurdistan Pre-drill POS can be reduced to 20% through technology or quality of acreage Continue to seek material…
Outlook 35
Outlook PNG LNG Execution of Gas Agreement imminent FEED-ready. Commencement of FEED activities expected soon In next 18 months: Secure market off-take Secure debt and state equity funding Reach agreements on benefits sharing FID…
Outlook Gas Growth Beyond PNG LNG Work has commenced Dovetail with PNG LNG cash generation Realign gas licence portfolio for materiality, risk and early development Infrastructure planning and alignment with government Emphasis…
Outlook - Production Production Oil fields continue to generate strong cash flows, to be utilised for PNG LNG Project Life of Field studies have identified ongoing opportunities to continue to mitigate the decline curve for next 3…
Outlook - Exploration 2008 exploration programme reduced but focus on more material opportunities. Expected spend approx US120 million Greater focus on portfolio management and trading in both PNG and MENA Increased internal…
Summary Latent value in existing portfolio of assets is sufficient to deliver superior value to shareholders over the next 5 years Opportunities are well defined Challenges can be managed Company is well positioned to deliver…
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