2010 Annual Meeting 23 April 2010 1 2010 Annual Meeting Agenda - - PDF document

1

2010 Annual Meeting

23 April 2010

O I L S E A R C H L I M I T E D

2

2010 Annual Meeting Agenda

2009 Performance Summary 2009 Financial Results PNG LNG Project Gas Expansion Operations Review Outlook

3

2009 Performance Summary

Highlight of 2009 was PNG LNG Project development decision:

Less than two years from FEED to Sanction Transformational impact on Oil Search and PNG ExxonMobil quality operator Foundation for major LNG industry in PNG

Seven fold increase in proven and probable reserves, increasing from 67 mmboe to 567 mmboe, with significant further potential upside NPAT of US$133.7 million, US$99.6m excluding PNG Government back-in and tax adjustments. Satisfactory result given commodity environment, with average oil price down 35% Strong balance sheet with US$1.3 billion cash at year end, total liquidity of US$1.6 billion (including line of credit). Sufficient for both PNG LNG equity contribution plus funding of T3/T4 gas exploration/ appraisal programme

4

Outstanding Safety Performance

Total Recordable Incidents (TRIs) of 1.16 in 2009

TRI / 1 ,0 0 0 ,0 0 0 Hours 2 4 6 8 1 0 1 2 1 4 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 7 Oil Search 2 0 0 6 Australian Com panies ( APPEA) 2 0 0 8 I nternational Com panies ( OGP)

12.7 12.7 9 .1 9. 9.3 7. 7.8 7. 7.0 7. 7.3 5. 5.2 9. 9.4 8. 8.2 6. 6.3 6. 6.8 3. 3.9 3. 3.1 2. 2.9 2. 2.7 2. 2.1 4. 4.0 3. 3.6 4. 4.9 5. 5.7 6. 6.0

2 0 0 9

8. 8.5 10.6 10.6 9. 9.8 10.7 10.7 5. 5.8 1. 1.7 4. 4.7 2 .4 2 .3 1 2. 2.05 05 1. 1.16 16 2. 2.04 04

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Strong Five Year Share Price Performance

Annualised TSR for five years to end 2009 of 29.5%

Jan 0 5 Jul 0 5 Jan 0 6 Jul 0 6 Jan 0 7 Jul 0 7 Jan 0 8 Jul 0 8

Share price ( rebased to OSH)

0 .0 0 1 .0 0 2 .0 0 3 .0 0 4 .0 0 5 .0 0 6 .0 0 7 .0 0 Jan 0 9 Jan 1 0 Jul 0 9

W oodside Santos ASX 1 0 0 W TI oil Oil Search

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Consistent Total Shareholder Returns (TSR)

Source: I RESS

Oil Search ranked No 1 in ASX 100 for TSR over five years to 31 December 2009

ASX 1 0 0 I ndex Median Com pany OSH perform ance

# Ranking based on ASX 100 composition at the beginning of the reference period.

• 5

1 0 2 0 3 0 4 0 1 Year 3 Year 5 Year

% TSR

1 st 3 rd

OSH Ranking # 4 2 nd

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Future Value Growth

Driven by :-

PNG LNG delivery Project optimisation Further LNG train development Reserve growth and exploration success

Comprehensive programmes to deliver value through to PNG LNG first gas

8

2009 Financial Results

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2009 Financial Performance

(US$’m) Revenue Cash Expenses EBITDAX Non-cash items Exploration Expense Interest income/(expense) Pre-tax Profit Tax NPAT Core Profit 814.3 (116.3) 698.1 (127.2) (91.2) 6.1 520.3 (206.9) 313.4 240.0** 2008 2009 512.2 (102.8) 409.4 (105.4) (75.7) (3.3) 239.8 (106.2) 133.7 99.6*

• 3 7 %
• 4 1 %
• 5 9 %
• 5 4 %

Revenue and profit im pacted by 3 5 % decline in realised oil prices to $ 6 5 .4 0 / bbl and 7 % low er oil sales due to underlying field decline rates and sale of MENA producing assets

* Excludes PNG Governm ent licence back-in adjustm ents and one-off tax credit * * Excludes net profit sale of MENA assets/ JV licence sale profit adjustm ent and im pairm ent losses

1 0

2009 EBIT Drivers

EBIT decline driven by fall in oil prices, PNG field production decline and sale of MENA assets

1 0 0 2 0 0 3 0 0 5 0 0

4 7 9 .6

2 0 0 8 EBI T

2 2 8 .2

2 0 0 9 EBI T

( 2 5 8 .9 ) 1 5 .5 1 3 .5

Cash Opex Exploration Expense

2 1 .8

Am ortisation

( 1 0 .1 )

Other

US$ m

4 0 0 Oil Price Oil Volum es

( 3 3 .2 )

1 1

2009 Cash Flows

* Includes Company share of JV cash balances

O p e n i n g C a s h * O p e r a t i n g I n v e s t i n g F i n a n c i n g C l

• s

i n g C a s h *

5 3 5 5 3 5 2 8 4 2 8 4 8 5 1 8 5 1 1 ,2 8 8 1 ,2 8 8

US$ ’m 2 5 0 5 0 0 7 5 0 1 0 0 0 1 2 5 0 1 5 0 0

( 3 8 2 ) ( 3 8 2 )

Operating cashflow included US$79m of tax paid (inclusive of prior period tax recoveries) Investing cash outflows included US$139m on production, US$324m

• n exploration &

evaluation, including PNG LNG expenditure Financing included US$900m of proceeds from share placement, SPP and underwritten DRP

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US$1.39 billion in cash at end March 2010 Cash invested with highly rated bank counterparties US$348 million available from term revolving facility, nil drawn down US$391 million drawn down from PNG LNG Project finance facility on 31 March (including US$303.5m debt clawback relating to past expenditures) No oil hedging undertaken during 2009 or currently in place

Treasury Update

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PNG LNG Project

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PNG LNG Project

World class Project Aligned joint venture ExxonMobil Operator – excellent track record Supportive Government and communities Provides infrastructure for future growth Transformational for Oil Search and PNG

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PNG LNG Project the road to sanction

2008

Signed JOA, aligning JV partners in March Signed Gas Agreement with Govt in May Commenced FEED in May Commenced marketing discussions late 2008 Developed financing plan

2009

Submitted EIS in January Signed UBSA in May Signed HOAs Commenced early works EIS approved in October Completed FEED, LNG plant capacity increased to 6.6 MTPA

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PNG LNG Project the road to sanction

December 2009

Completed LBSAs Signed 3 SPAs with TEPCO, Osaka Gas and Sinopec Development approval 8 December 2009 EPC contracts awarded 9 December 2009 Financing documents signed 15 December 2009 with ECAs, Commercial Banks and ExxonMobil for $14 billion – world’s largest project financing Government offered and Project accepted all development licences Government paid past costs for equity back-in to new development licences

March 2010

Signed final SPA with CPC – fully contracted LNG vessel charter contracts signed with Mitsui OSK Lines Minor legislation amendments 12 March – Financial Close

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PNG LNG Project

Construction has commenced (roads, bridges, camps, site preparation and training facilities). First LNG sales expected 2014 Investment for initial phase estimated at US$15 billion Mobilisation by key contractors of people and equipment underway Mix of fixed price/variable price contracts Operator ExxonMobil has excellent record of delivering projects on time, on budget

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Proposed PNG LNG Future Activities

2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4

Financial Close

• Continued early w orks
• Detailed design
• Order long leads and

place purchase orders

• Open supply routes
• Contractor m obilisation
• Com m ence Associated Gas

( AG) construction

• Pipe lay ( Kutubu

to Hides)

• Ongoing drilling
• Com plete Hides plant
• Com m ission LNG plant

w ith Kutubu gas

• Ongoing procurem ent

and m obilisation

• Airfield construction
• Drilling m obilisation
• Start offshore pipeline

construction

• Onshore line clearing
• Start LNG equipm ent

installation First Gas from Train 1 , then Train 2

• Com plete AG
• Com m ence
• nshore pipe lay

( Kutubu to Om ati)

• Com plete offshore

pipe lay

• Start Hides plant

installation

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Gas Growth

2 0

PNG Gas Growth

Key strategic priority for Oil Search is to grow gas business in PNG LNG remains optimum commercialisation route for additional gas PNG LNG will provide infrastructure and capacity to facilitate expansion and provide excellent cost structure:

Use of capacity in pipeline, jetty, tanks and services Trained local work force

Government is supportive of future gas growth Pace of gas growth will be determined by:

Resource aggregation/exploration Joint Venture alignment Market access

2 1

PNG Gas Growth Activities

Two largely independent core gas development streams:

PNG LNG dedicated fields

• Material core reserves
• Proven (1P) 300 mmboe (OSH share) – all sold
• Proven & probable (2P) 500 mmboe (OSH share)
• Focus on moving 2P into 1P contractible category through

field development optimisation and further appraisal

• Strong partner alignment

Other fields and exploration

• Existing proven & probable resources (2C) of 281 mmboe

(OSH share), still to be commercialised

• Programme to appraise these discoveries and explore for

new gas underway

• Developing material portfolio ex PNG LNG

Objective is to prove up sufficient proven contractible reserves to underwrite Trains 3 and 4

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Requirements for LNG train growth in PNG

OSH Operated Licence OSH Interest Licence Petroleum Development Licence Petroleum Retention Licence Licence Application Oil Field Gas Field Oil & Gas Field Oil Pipeline Proposed Gas Pipeline

5 0 km

Angore Juha Hides Moran Agogo Kutubu Gobe Main

PNG LNG Project Gas Resources

Mananda Attic Flinders Barikew a Deep Huria Hedinia FW Lead 7 Korka Gobe Deep Hides FW Pasca B

Exploration Gas Resources

Pandora Barikew a Uram u P’nyang Kim u Juha North SE Gobe

Non PNG LNG Gas Resources

3 rd Train Threshold 5 1 0 1 5 2 0 2 5 tcf PNG LNG 3 C Upside PNG LNG Base Volum e 2 C 3 C

Other Highlands JV Partner Resources

4 th Train Threshold 2 C 3 C

Forelands & Offshore Resources

Exploration

2 3

Circle areas proportional to reserves potential. Outer circle unrisked potential, inner circle risked potential Red = Gas Orange = Condensate Green = Oil

Proposed 2010/11 PNG Gas Exploration

9 °S 6 °S 1 4 5 °E

5 0 km

Kum ul Term inal

1 4 2 °E

Flinders Barikew a Deep Korka Huria ( PDL 8 ) Mananda FW Mananda Attic CBM test

2 4

Operations Review

2 5

PNG Oil Production (gross)

1 0 ,0 0 0 2 0 ,0 0 0 3 0 ,0 0 0 4 0 ,0 0 0 5 0 ,0 0 0 6 0 ,0 0 0 7 0 ,0 0 0 8 0 ,0 0 0

2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1 2 1 1 2 1 2 2 1 3 2 1 4

Oil Production ( Bopd)

P1 0 P5 0 P9 0

Pre-OSH Decline

Added over 5 5 m m stb com pared to Chevron

2 6

2009 Production Performance

Excellent safety performance 2009 production of 8.12

mmboe

Strong underlying performance in all fields Two new rigs (103 and 104)

• perating throughout year with

significant performance improvements

Total cash costs (inc corporate costs, FX) of US$12.99/boe, down 7% from 2008

Achieved despite 4% reduction in saleable oil volumes and inflationary environment in PNG

Production im pact of recent drilling at Usano

2 ,00 0 4 ,00 0 6 ,00 0 8 ,00 0 1 0 ,0 0 0 1 2 ,0 0 0

1 9 9 2 1 9 9 4 1 9 9 6 1 9 9 8 2 2 2 2 4 2 6 2 9

Oil Rate ( bopd)

Usano Main Block Usano East Block UDT 7 UDT 1 1 UDT 8,9 UDT 1 0,1 2

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Oil development drilling continues to add value

Since 2003, gross PNG proven (1P) oil reserves have increased by 51 mmbbl and proven and probable (2P) reserves by 37 mmbbl Development drilling has added 2P reserves at average cost of US$11.72/bbl Further opportunities exist to add reserves within field areas

PNG Oil Fields – Gross Ultim ate Recoverable Reserves ( pre-LNG)

1 P 2 P 4 4 0 4 6 0 4 8 0 5 0 0 5 2 0 5 4 0 5 6 0 Millions of Barrels 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9

2 8

ADT 2 – Opens up new play

ADT 2 Well Results: Proved new forelimb play in Agogo Digimu in fault compartment 1 is on production, flowing

• il at 1,500-2,000

bopd 3 zones in fault compartments 2 and 3 have flowed water and traces of oil 3 sands in 2 deepest zones yet to be tested A second well in Agogo forelimb is being assessed Similar plays along trend are being mapped

7” ST3 ST1

2400 2600 2800 3200

O v e r t u r n e d F

• r

e l i m b Hangingwall

mTVD

Alene

Flowed oil 5” ST2

3000

Yet to be tested

Digimu Toro A

SW NE

Hedinia Sand Toro B/ C

Flowed water and traces of oil

2 9

Reserves & Resources 31 December 2009

Six-fold increase in proven (1P) reserves, from 50 mmboe at end 2008 to 344 mmboe:

PNG LNG Project reserve booking of 301 mmboe 2009 production of 8.1 mmboe Oil reserve additions at Kutubu, Gobe and SE Gobe of 2.4 mmboe

Seven-fold increase in proven & probable (2P) reserves, from 67 mmboe to 567 mmboe:

PNG LNG Project reserve booking of 505 mmboe 2009 production of 8.1 mmboe Oil reserve additions at Kutubu, Gobe and SE Gobe of 2.8 mmboe

2C resources, comprising gas and associated liquids, of 281 mmboe at end 2009, compared to 886 mmboe at end 2008:

Adjustment of 79 mmboe, due to Government back-in, to PNG LNG, initial equity determination and field reserve changes PNG LNG Project reserves booking of 505 mmboe Decrease of 21 mmboe for revisions to certain fields’ 2C estimates and Government back-in

Total 2P and 2C reserves and resources of 848 mmboe

3 0

2010 Operations Outlook

Gas value driving revised operating framework: Field reliability management Gas conservation with minor oil production impact Value-adding PNG production activities will continue in 2010, including 1 – 2 wells at Moran, appraisal of Agogo ADT 2 deep play and workover campaign in Kutubu, Moran, SE Gobe Ongoing focus on costs and capital efficiency following 2009 Operations Review Aligning and maximising use of infrastructure to support LNG Project Production outlook for 2010 of 7.2 – 7.4 mmboe, with incremental activity expected to flatten decline curve in 2011 - 2013

3 1

Exploration Outlook

PNG:

Exploration for gas – key to driving LNG expansion

Korka – 1.3 tcf mean, drilling ahead in PPL 260 Huria – seismic underway – PDL 8 / PRL 11

Additional oil focused exploration in 2010:

Wasuma – discovered hydrocarbons in footwall. Discovery sub- commercial but confirms footwall play Mananda Attic - 30 mmbbl mean in PPL 219, plus gas play to be drilled 4Q 2010

MENA:

Focus on finding material oil and maximising asset value:

Evaluate commerciality of Shakal (Iraq), appraisal of Tubb’a & Al Meashar (Yemen) discoveries Oil– focused drilling ongoing within Blocks 3 and 7 in Yemen, targeting 3D defined structures Seismic in Kurdistan (K42 world class exploration province) and Tunisia to define drillable large structures

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PNG 2010 Exploration Summary

1 4 2 °E 9 °S 6 °S 1 4 5 °E

5 0 km

Kum ul Term inal

Com m itm ent Discretionary Future Com m itm ent W ell Types

Prospect/ Lead ( POS% )

Mean Oil Gross ( m m stb) Mean Gas Gross ( tcf)

Seism ic Com m itm ent Discretionary

Perm it 2 D( distance) / 3 D( area)

Flinders ( 1 2 .5 % ) 1 .0 tcf+ Korka ( 1 5 % ) 1 .3 tcf + Mananda Attic ( 4 5 % ) 3 0 m m stb Mananda FW ( 1 0 % ) 1 .2 tcf + PPL 2 3 4 3 ,0 0 0 + km 2 PDL 8 / PRL 1 1 8 0 km PPL 2 3 3 5 5 km PDL 2 7 0 km

3 3

MENA 2010 Exploration Summary

Com m itm ent Discretionary Future Com m itm ent W ell Types

Prospect/ Lead ( POS% )

Mean Oil Gross ( m m stb) Mean Gas Gross ( bscf)

Seism ic Com m itm ent Discretionary

Perm it 2 D( distance) / 3D( area)

Sana’a Office Dubai Office

Tajerouine Le Kef K4 2 Shakal Block 7 Block 3

• Taj. + Le Kef 6 0 0 km

K4 2 2 0 0 km Shakal 5 0 km Jebel Milh ( 1 7 % ) 2 8 m m stb Block 3 & 7 4 0 0 km Al Meashar ( 2 0 % ) 2 0 m m stb Block 3 / 7 w ell, late 2 0 1 0

3 4

Outlook

3 5

Outlook

Oil Search’s core business in excellent shape to drive further value growth over next 3 years PNG LNG Project construction underway

ExxonMobil quality operator for delivery Contractors mobilising Buyers secured, with pricing locked in Finance secured, excellent package Significant impact on PNG already being felt

PNG LNG is country and Company transformational

3 6

Active programmes to deliver in 2010/2011

PNG LNG field and development optimisation

Seismic acquisition over Angore, Huria Future drilling

Onshore accelerated appraisal and exploration

Seismic over Barikewa, Drilling of Korka, Mananda Attic, Huria, Barikewa Deep CBM test in 2010

Gulf of Papua

3D seismic Drill Flinders Appraise Pandora

Selected acquisitions (PRL 1, PPL 244 and others) Partner alignment (PNG LNG and others) Oil Search has the financial strength to fund all activities

3 7

2010 Guidance Summary

Production:

7.2 – 7.4 mmboe. Incremental activity in 2011 – 2013 expected to flatten decline curve

Opex:

US$16-18/boe Increase due to FX, PNG inflation, increased spend to improve reliability & extend life and relatively fixed cost base on lower

• production. In addition, accelerated focus on workovers to maximise
• il recovery prior to gas blow down

Likely to stabilise/decline in 2011

D,D & A:

US$6-8/boe Decrease due to recognition of LNG reserves

Capex:

Exploration – US$210m (80% in PNG, 20% in MENA) Production/Other – US$85m (inc corporate & other gas) PNG LNG – US$1,000 - 1,350m (inc capitalised interest & upfront fees)

3 8

Production Outlook

PNG LNG adds ~18 mmboe pa to OSH at plateau in 2015 onwards. 30 year Project life T3 could add an additional ~9 mmboe pa, with T4 of similar magnitude

Net Production ( boepd)

1 0 ,0 0 0 2 0 ,0 0 0 3 0 ,0 0 0 4 0 ,0 0 0 5 0 ,0 0 0 6 0 ,0 0 0

2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5

LNG Gas LNG Gas PNG Developm ent PNG Developm ent

7 0 ,0 0 0 8 0 ,0 0 0

Potential T3 LNG Gas Potential T3 LNG Gas LNG Condensate LNG Condensate

9 0 ,0 0 0

Potential T3 LNG Condensate Potential T3 LNG Condensate

3 9

Summary

PNG LNG Project sanctioned and construction underway Appraisal and exploration activity programme to prove up gas for T3/T4 commenced Core oil production remains solid. Focus on life extension, reliability and gas conservation

A new value equation

Measured oil and gas exploration in PNG and MENA Activities underwritten by strong balance sheet and liquidity to meet LNG obligations, T3/T4

4 0

O I L S E A R C H L I M I T E D