OIL SEARCH LIMITED Investor Field Trip 5 7 November 2008 1
PNG Field Trip 5 - 7 November 2008 OSH Participants Peter Botten Managing Director Gerea Aopi Exec Gen Mgr PNG Phil Bainbridge Exec Gen Mgr, PNG LNG Project Nigel Hartley Exec Gen Mgr, LNG Financing Bob Marcellus - Executive…
Field Trip Overview HIDES Ambua Lodge MORO APF RIDGE CAMP KUTUBU CPF MOROPOM MOROCNS PORT MORESBY LNG 3
OIL SEARCH LIMITED PNG LNG Project November 2008 4
PNG LNG - Summary Substantial progress since commencement of FEED in May 2008 Despite global economic conditions, buyer interest in PNG LNG remains strong Feedback from lenders indicates significant funds available for well…
PNG LNG - Advantages Conventional LNG project Existing proven and probable resource base of 9.3 tcf no new drilling required. Certified resource provides: 14 years of 1P at plateau 20 years of 2P at plateau Clean gas with liquids,…
PNG LNG Project Fields Angore Juha Main Hides Moran Agogo Kutubu Gobe Main 8
Production Facilities Integrated development of Hides, Angore and Juha gas fields plus associated gas from the Kutubu, Agogo, Moran and Gobe oil fields Hides Gas Conditioning Plant (HGCP) designed to condition 960 MMSCFD of gas…
Downstream: LNG Facility and Loading Terminal LNG facility located on State Portion 152 near Port Moresby 2 x 3.15 mmtpa LNG trains LNG storage tanks at the facility LNG loading terminal (trestle structure) off the coast for…
Project Status - Marketing Marketing Representative Agreement signed for joint marketing of 6.3 mmtpa, led by ExxonMobil Project rolled-out to buyers at GasTech in Bangkok in March 2008 Strong initial response Negotiations underway…
PNG LNG - Optimal Timing to meet market requirements Regional market Pacific Basin LNG Supply and Demand to 2020 fundamentals remain MMTPA robust 300 Notwithstanding LNG supply unlikely to keep up with demand with high economic…
LNG Pricing Strong pricing drivers: LNG (US/mmbtu) 20 Supply/demand fundamentals Pull from Europe Delays in other projects Crude Oil Parity Environmental advantages 15 Pricing and challenges with competing energy sources Recent…
Project Status - Technical EOS (KBR/ WorleyParsons JV) conducting upstream FEED comprising: Preliminary engineering design for gas field developments Gas conditioning and compression facilities Pipeline and infrastructure Downstream…
Potential Early Works The early works plan has three primary objectives: Increase certainty of achieving Target First Gas date Provide opportunity for earlier LNG plant commissioning Test community relationships without significant…
PNG LNG Capex Estimates Unchanged EM Project Execution First phase capex (2008 2014) Performance expected to be between US10 11 bn (real mid-2007 s) 125 Actual vs. Funded (%) Historically, ExxonMobil has Cost Schedule…
Ongoing Strong Government Support Gas Agreement signed May 2008 Outlines fiscal terms and legal obligations under which Project will operate over its life The terms include 30% tax rate and Additional Profits Tax (APT) which…
Project Status Benefits Sharing Agreement (BSA) The BSA outlines how Project benefits will be shared between landowners, provincial and local level governments: Equity (Project Area Landowners) Royalty (Project Area Landowners)…
In Country Issues Social Mapping and Landowner Identification: Identifies Project Area Landowners 6 out of 8 complete and submitted to Government Social Impact Assessment: Completed and being reviewed Broad based support for the…
Project Status Financing (Project) Total capex US10 11bn real, circa US12.5 bn nominal. Capex expected to be funded 70:30 debt:equity Each participant is responsible for providing its equity component Seeking joint limited recourse…
Project Status Financing (Oil Search) OSH participating in joint project finance facility. OSH effective share US3.2 billion (nominal, including fees, capitalised interest through construction, funding of the debt service reserve…
Gas Growth Opportunities 23
Summary PNG LNG Project sets the stage for additional gas-based growth opportunities Further LNG developments command the highest value. Three areas of focus for developing additional LNG trains: Project Gas (eg 3C from Hides,…
How much gas is there Gross 2C Gross 3C Net to Net to OSH 2C OSH 3C PNG LNG Project -Total 9.3 15.0 2.8 4.5 Other OSH PNG gas - Highlands (Pnyang, Juha N) 2.3 4.7 - Forelands & Offshore 2.4 3.7 - Total 4.7 8.4 1.6 3.0 Other non-OSH…
Project Opportunities Project Type Resource Plant Capex Project IRR Gas Source Options (tcf) (USbn)* (%)* Large Scale LNG 3.5 2 - 3.5 20+ Forelands, Northern, Offshore & Western Corridor GTL 2.5 2 2.5 15 20 Western Corridor…
Project Opportunities LNG Highest value, highest priority Targeting 3+mmtpa trains Plant capex US600-1,000/tonne capacity Higher value from 3rd train using Project Gas & infrastructure Gas for additional train(s) in PNG must be…
Strategy Pursue 3rd PNG LNG train Hides, Juha and proximate gas Timing driven by EM Aggregate gas for other LNG trains and other large scale projects. Review farm-ins and acquisitions Potentially earlier timing Take a regional…
Oil Search Vision for LNG Expansion 3.5 4.0 tcf additional tcf Forelands & gas volumes required to 25 Offshore Resources underpin construction of Other 3C Exploration each additional train Highlands 20 JV Partner Resources 2C…
Location of Gas Resources: PNG LNG Project Fields Hides Field (tcf) 2C 3C Juha Angore Hides 5.3 9.9 Moran Juha, Kutubu Angore, Agogo Gobe Main Kutubu, Moran, Gobe Main 4.0 5.1 Total 9.3 15.0 Project 2.8 4.5 OSH Share…
Location of Gas Resources: Non Project resources Pnyang Juha North Hides Field (tcf) 2C 3C Juha Angore Highlands: Moran Pnyang Kutubu Juha North 2.3 4.7 Agogo Gobe Main Forelands SE Gobe and Offshore: Kimu Barikewa…
Location of Gas Resources: Exploration Pnyang Juha North Hides 2009 2011 Juha Huria exploration programme Angore Moran will test 9 tcf mean Cecilia resource (gross) Kutubu Agogo Testing key off-shore Gobe Main Hedinia Deep…
Flinders Prospect PPL 244 WI % Oil Search 40 Talisman Energy 35 Interoil 15 Located offshore in Gulf of Papua Late Pliocene Exploration opportunity adjacent to Depth Map the Pasca gas/condensate discovery Depth in m tvdss…
Diversity & Niche Opportunities 1st priority is to add timely LNG trains Other gas opportunities may offer attractive returns, diversification and earlier delivery These range from export oriented projects to domestic micro…
Domestic Gas MOU Aligns Oil Search and PNG Government on gas growth & planning Important step in next wave gas development Allows state-industry gas planning through: Infrastructure Gas Aggregation End uses Contains core…
Milestones 4Q 08 Commencement of Domgas JV study groups 1H 09 Portfolio realignment 2009 2011 Active gas exploration and appraisal programme 2011 Decision on gas commercialisation option/s 2015/16 Commencement of second phase gas…
Production 37
2008 Update 2008 production highlights strong underlying field performance, with minor delays in drilling and workover programmes : Kutubu Underlying field performance has been excellent, has compensated to some extent delays in…
Focus areas for 2009 In-field drilling (next slide) Increased focus on well and flowline performance, and swing well management at Kutubu, Moran (Gobe already doing well) Improve wireline efficiency more zone changes and diagnostic…
Field Development Drilling Activity Moran: 2008 : 1 wells 2009 : 3 wells Agogo: Kutubu: 2009 : 1 well 2009 : 2 wells Usano: 2008 : 4 wells SE Gobe: 2009 : 2 wells 2010 : 1-2 wells 41
Drilling Strategy OSH drilling programme for 2009 2011 now being finalised Two state of the art new rigs, owned by Oil Search: Rig 103 became operational late 2007. Had a number of commissioning and teething problems, now resolved -…
PNG Gross Production Have had significant success in improving field production through development drilling and well/facility optimisations, at low cost per barrel Production forecast reflects: Base production from existing…
Oil Exploration 45
PNG Exploration Exploration programme is being reviewed in light of lower oil prices, rig strategy. Commitment wells vs discretional expenditure Reduction in exploration costs through portfolio optimisation Farm down of some…
PNG Exploration Fold Belt 2010 /11 Distal Foldbelt Oil Play 2009 Iwa oil & gas test 2009 Wasuma oil test Follow-up Sub thrust +/- sub-thrust leads adjacent to Gobe, Hedinia and Hides. Cobra sub-thrust Technical/Seismic…
Cobra 1A PDL4 PPL219 PPL 190 WI % Gobe Oil Search 62.6 Main SE Murray Petroleum 26.5 Gobe Wasuma Cue PNG Ltd 10.9 COBRA Cobra gas/condensate discovery adjacent to SE Gobe oil field PDL3 PDL4 The first footwall anticline…
Iwa PDL6 PDL5 PPL233 PDL 2 WI% Moran Oil Search 60.05 Paua ExxonMobil 14.52 SE Merlin Petroleum 6.78 Mananda PRK 6.75 Agogo PPL219 IWA AGL (PNG) 11.90 Lake PDL2 Kutubu Near field exploration opportunity located Kutubu along…
Wasuma PDL4 PPL219 PPL 219 WI % Gobe Oil Search 91.25 Main WASUMA SE Merlin Petroleum 8.75 Gobe Wasuma Near field exploration opportunity adjacent to the SE Gobe oil field Iagifu sandstone primary objective - PDL3 PDL4 proven…
MENA Exploration Le Kef Tajerouine Bina Bawi Shakal Area 18 Dubai Office Sanaa Office Block 7 Block 3 51
Shakal Kurdistan, Iraq Shakal Shakal PSC WI% compartment Oil Search 15 Shakal Prod. Ltd (op) 36 Petoil 9 Pulkhana Govt (unassigned) 20 Field Govt. 20 10km Near Top Euphrates depth map Shakal 1 is targeting a large…
Bina Bawi Kurdistan, Iraq Bina Bawi Surface Anticline: Bina Bawi PSC WI% Oil Search 6 A&T Petroleum Co (op) 20 Hawler Energy Ltd 18 Govt (unassigned) 36 Govt. 20 Bina Bawi-1 and Bina Bawi-2 wells drilled in 2007 Gas tested at 6…
Caliph - Area 18, Offshore Libya Area 18 WI % Oil Search 30 Petrobras (Operator) 70 Caliph-1 expected to spud 1Q09 Songa Saturn drillship now operating in area Well is targeting: Eocene carbonates, proven oil play Cretaceous…
Tunisia Tajerouine WI % Oil Search 100 Le Kef WI % Oil Search 25 Primoil (op) 25 ETAP (Govt) 50 Tajerouine Obligation in first 4 year period 2D seismic and 1 well Forward Programme Studies & reprocessing in 2008 Geological…
Community Affairs and the Environment 57
Our Communities Operations cover 1,800 km in the Southern Highlands and Gulf Provinces Population 25,000 people Huli, Fasu, Foe, Sau and Gulf ethnic groups, 110 villages, 13 language groups and hundreds of clans 60% of work…
Cultural Diversity 59
Our Core Operations Embody GRI Principles Economic Distribution of benefits Employees Provision of capital Training and education Environmental Water Energy Biodiversity Emissions Transportation Social Labour Health and…
Our Core Operations Embody GRI Principles 1. Eradicate extreme poverty Direct Equity in major projects Landowner Companies integral in Operations Employment preferences Sustainable industries, agriculture, eco-tourism, micro…
Our Core Operations Embody GRI Principles 2. Achieve Universal Primary Education Provision of schools/classroom expansion Teacher training Infrastructure improvement 62 Nipa Puril Technical School
Our Core Operations Embody GRI Principles 3. Promote Gender Equality and Empower Women Employment opportunities Support of village based womens groups Health education Advise on nutrition Support for Women in Mining training…
Our Core Operations Embody GRI Principles 4. Reduce Child Mortality and 5. Improve Maternal Health Provision of community based health services Immunisation programmes Child birth and post natal care Nutrition and cooking advice…
Our Core Operations Embody GRI Principles 6. Combat HIV/Aids, Malaria and Other Diseases Major HIV/Aids management programme supported by ADB, AusAid Malaria eradication programme Immunisation programme 65
Our Core Operations Embody GRI Principles 7. Ensure Environmental Sustainability ISO 14001 accreditation Partnership with WWF on Kikori River Programmes Sustainable community based industries Environmental Education Establish…
Our Core Operations Embody GRI Principles 8. Develop Global Partnership Partnership with other resource companies PNG Government NGOs and Aid Organisations 67
Essential Ingredients Community equity involvement in projects Business development and employment opportunities for communities Improved educational and health outcomes Environmental responsibilities Sustainable ongoing…
Corporate Commitment to Raising the Bar Significant commitment to Community Affairs Business Development Skills Training Environmental Management Health Programmes A Total Coordinated Business Approach 69
Corporate Commitment to Raising the Bar Infrastructure development Water, schools, roads Health services Malaria HIV Aids Employee and community education and skills training A Total Coordinated Business Approach 70
It starts with the Safety of Our People Total Recordable Incidents (TRIs) 1998 2007 14 OSH OGP APPEA 12.7 12 TRI / 1,000,000 Hours 10.6 9.8 10.7 Australian Companies 10 9.1 9.4 9.3 8.3 8.5 8 8.2 7.8 7 7.3 6.8 6.3 6…
The Health of Our People Health and Wellbeing Programme throughout the Company Key programmes: Dedicated health staff Regular health checks for all Organised physical activities Health & nutrition education Workplace…
The Health of Our People and Communities Major commitment to Health Care Employs over 70 health professionals 6 educators 8 medical clinics Treats over 50,000 patients each year About the same as a major regional hospital in…
Community Health Programmes Major Areas Local Health Service. Support and capacity building Primary and public health programmes Malaria control HIV Aids management and education Immunisations Maternal health 74
Malaria Control Hides Gas Field Area Program Programme commenced in 1996 WHO Malariologist adviser Chloroquine resistance studies Microscopist Surveillance system Vector control program Indoor residual house spraying Malaria…
Malaria Control Programme Diagnosis and treatment at Health Centres Improving access to treatment Re-packaged drugs Dose for weight Heath provider training Education Have wiped out indigenous malaria in parts of Southern…
HIV - AIDS First case detected in PNG in 1987, currently 100 new cases are reported each day Between 20,000 60,000 Papua New Guineans are estimated to be living with HIV 70% are estimated to be living in the rural areas Twice as…
Oil Search HIV Programme Targeting HIV Prevention and Control in Rural Development Enclaves Partnership with Government and Churches Funded by: Asian Development Bank, AusAID & NZ AID Focus Areas Improve access to treatment…
Local Economic Development Use of local landowner companies to provide significant proportion of company goods & services annual contract value A68 million pa. Programme to support local entrepreneurial training Support for…
Education Enhancement Education sponsorship programme (A450,000 pa) tertiary studies, positive selection bias for female applicants and those studying health, education & trade subjects. More than 100 students sponsored a year…
Environmental Management Key goal to minimise impact on environment Systems aligned with ISO 14001 & Equator Principles Company is working towards ISO 14001 accreditation Major Programmes include: Fauna/Flora research partnership…
Importance of Relationships Oil Searchs policies of minimal forest destruction, placing rigs by helicopter and banning all hunting by employees showed how an extractive industry could be positively helpful to the environment. As…
OIL SEARCH LIMITED Helping build PNGs future 83
Financial and Summary 84
Revenue update at 30 September 2008 Total Revenue YTD 9mths 9mths 700 To Sept To Sept 07 08 600 Oil & Gas 206.9 3Q production 7,308 6,431 (mmboe) 500 Oil Sales volume 6,336 5,288 400 178.8 3Q (mmbbl) Oil Price 71.27…
Capital update at 30 September 2008 Capital Spend Capital Expenditure 30/9/07 30/9/08 11.5 300 Rigs Exploration & Evaluation (incl. gas) 48.7 Rigs PNG 114.7 140.0 MENA 53.3 59.6 200 199.6 Development and Exp Production…
Financial Outlook for 2008 Oil Search remains on target to reach production guidance Second half field costs in PNG expected to be higher than the first half, as advised at half year, due to increased work programmes Second half…
Update on Capital Outlook for 2008/09 Cash at end September US550m, no debt outstanding Corporate (oil based) facility successfully refinanced in October, despite global financial crisis. New facility provides larger funding…
Five Year Share Price Performance 7.00 Share price (rebased to OSH) 6.00 5.00 Oil Search 4.00 3.00 Woodside WTI oil 2.00 Santos ASX 200 1.00 0.00 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08…
Strong growth outlook Value NPV Over Time (Unrisked) Substantial unrealised value exists within Oil Searchs existing asset portfolio (particularly PNG gas) Fourth Train Current share price Cash discounts assessed PNG LNG Third…
AGL Asset Sale: OSH Value Implications AGL has sold its interests in PDL 2, Core Assets PL 2 and PDL 4 for US800m. OSH AGL Comments Strong industry endorsement of Producing 53.8 10.4 As at 30/6/08. PNG LNG and oil assets Oil mmbbl…
Impact of PNG LNG Project Annual incremental net production of 20 mmboe Booking of 550 mmboe of Oil Searchs 2C gas resources providing positive impact on depreciation Past costs pay back by Government on back-in at Final Investment…
Production outlook with PNG LNG Project 70,000 LNG Liquids 60,000 Oil Production (Bopd) 50,000 40,000 LNG Gas 30,000 20,000 PNG Development 10,000 0 8 0 2 4 0 1 1 1 0 0…
Likely Catalysts in 2009 1Q 2009 PNG LNG Offtake HOAs late 08/ early 09 Benefits Sharing Agreement Spud Caliph well in Libya 2Q 2009 Decision to commence early works Finalise EPC bids 2H 2009 FID on PNG LNG Financial…
Summary PNG LNG Project will be the primary driver of value over next few years. Project value is heavily discounted in current OSH share price Commercialising remaining gas will provide secondary value driver Core oil business…
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