7 6 th Annual Meeting 4 May 2 0 0 7 1 Achievem ents in 2 0 0 6 - - PowerPoint PPT Presentation

1

7 6 th Annual Meeting

4 May 2 0 0 7

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

2

Achievem ents in 2 0 0 6

3

Record profit of US$ 4 1 2 .0 m , including

US$ 2 5 8 .4 m net profit from sale of assets to AGL

Core net profit of US$ 2 0 7 .5 m , a 4 %

increase on 2 0 0 5

Shareholders rew arded by final dividend

• f 4 US cents per share, m aking 8 US

cents per share for the year, a 1 4 % increase on 2 0 0 5 dividend

2 0 0 6 Achievem ents

4

Gross PNG production increased by

5 % . Oil Search net production dow n 1 6 % due to AGL asset sale

Record oil price achieved ( over

US$ 6 7 / bbl) resulting from strong dem and for PNG light sw eet crude

Stable cost profile despite continued

industry cost pressures

2 0 0 6 Achievem ents

5

Oil Search Net Production

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 6 2 0 0 7

5 ,0 0 0 1 0 ,0 0 0 1 5 ,0 0 0 2 0 ,0 0 0 2 5 ,0 0 0 3 0 ,0 0 0 3 5 ,0 0 0 4 0 ,0 0 0 stb/ d

Kutubu Moran Gobe Main SE Gobe Hides Nabrajah SEM

+ 2 3 % + 2 3 % + 2 5 % + 2 5 % + 6 % + 6 % + 1 0 % + 1 0 % Post Post AGL AGL sale sale Forecast Forecast

Production in 2 0 0 7 forecast to increase to betw een 1 0 .5

and 1 1 .0 m m boe

6

W orld Class HSES Perform ance

Total Recordable I ncidents ( TRI s) 1 9 9 8 – 2 0 0 6

TRI / 1 ,0 0 0 ,0 0 0 Hours 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 4 6 8 1 0 1 2 1 4 2 0 0 6

APPEA OSH OGP

8.5 10.6 10.7 5.8 1.7 4.7 2.4 2.3 9.4

Oil Search

8.3 6.8 3.1 4.0

I nternational Com panies

12.7 9.1 9.3 8.2 7.8 7.0 7.3 9.8 5.2

Australian Com panies

7

Share Price Perform ance

OSH Relative Share Price Perform ance ( last 3 years)

0 .5 0 1 .0 0 1 .5 0 2 .0 0 2 .5 0 3 .0 0 3 .5 0 4 .0 0 4 .5 0 Share price ( rebased to OSH) 5 .0 0

May-0 4 Nov-0 4 May-0 5 Nov-0 5 May-0 6 Nov-0 6 May-0 7

OSH STO W PL AW E ROC

ASX2 0 0 Energy

W TI

8

Financial Results

9

Net Profit After Tax

US cents US$ ’m 2 0 4 0 6 0 8 0 1 0 0 1 2 0 1 4 0 1 6 0 1 8 0 2 0 0 2 2 0 2 4 0 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 5 1 0 1 5 2 0 2 5 3 0 3 5 4 0

Net Profit EPS*

2 0 0 6

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

Net profit, excluding significant item s, up 4 % on prior

year

* Basic EPS includes significant item s

1 0

* I ncludes profit of US$ 2 5 8 .4 m illion on sale of licence interests to AGL and net im pairm ent losses of $ US5 3 .9 m illion

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

2 0 0 6 Full Year Perform ance

Oil Sales ( m m bbl) Realised oil price ( US$ / bbl) ( US$ ’m ) Revenue Operating Expenses EBI TDAX NPAT ( core) NPAT incl. significant item s 2 0 0 5 9 .1 7 6 7 .2 2 6 4 4 .5 1 0 3 .8 5 4 0 .8 2 0 7 .5 2 0 0 6

3 % 4 %

4 1 2 .0 *

Record core NPAT driven by a 1 6 % increase in

realised oil prices, and despite low er production

2 %

1 1

2 0 0 6 Profit Drivers

2 0 0 2 0 0 8 5 8 5 8 8 2 4 2 4 ( 9) ( 9)

5 0 1 0 0 1 5 0 2 0 0 2 5 0 3 0 0 3 5 0 4 0 0 2 5 O i l P r i c e O i l S a l e s I n t e r e s t A m

• r

t i s a t i

• n

T a x S i g n i f i c a n t I t e m s 2 6 US$ ’m

( 9 7) ( 9 7)

4 5 0

2 0 4 2 0 4

T a r i f f s E & E O t h e r

( 1 0) ( 1 0) 8 8 1 5 1 5 Core Core 2 0 8 2 0 8 4 1 2 4 1 2

1 2

Cash Operating Expenses

2 0 0 5 2 0 0 6

US$ ’m US$ ’m

5 7 .6 1 2 .4 6 .5 Other Prod’n Opex Net Corp Costs 9 .6 1 1 .9 FX Losses 1 .1 0 .9 1 3 .5 0 .3 1 0 3 .8 Field Costs

• Oil: PNG
• Oil: MENA
• Hides

7 4 .6 3 .1 4 .0

• Oil
• Hides

1 7 .1 0 .2 Total 1 0 9 .7

2 0 0 6 2 0 0 5 PNG Oil Field Costs per Barrel

1 2 3 4 5 6 7 US$ Kum ul Kum ul $ 0 .4 5 $ 0 .4 5

Other Field Other Field Costs $ 1 .1 3 Costs $ 1 .1 3

Core Core Field Field Costs Costs $ 3 .8 6 $ 3 .8 6 Tariffs Tariffs $ 1 .5 5 $ 1 .5 5 Core Core Field Field Costs Costs $ 4 .1 8 $ 4 .1 8 Tariffs Tariffs $ 0 .8 2 $ 0 .8 2

Other Field Other Field Costs $ 1 .6 9 Costs $ 1 .6 9

8 % increase in core field

costs per barrel

1 3

Operating Cash Flow s

2 1 2 2 1 2 3 9 9 3 9 9 ( 2 26 ) ( 2 26 ) 4 7 8 4 7 8

US$ ’m 1 2 5 2 5 0 3 7 5 5 0 0 6 2 5 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 7 5 0

9 2 9 2

Operating cashflow

included US$ 1 8 0 m of tax paid, a 2 2 % increase on the prior year

I nvesting inflow s

included AGL sale proceeds of US$ 3 7 1 m ,

• ffset by outflow s of

US$ 1 4 3 m on developm ent and US$ 1 2 2 m on exploration and gas

Financing outflow s

included US$ 1 0 1 m of dividends and US$ 1 2 6 m

• f debt repaym ents

1 4

Treasury Review

US$ 4 7 8 m illion in cash at year end including JV balances , no debt Current cash position of ~ US$ 4 5 0 m illion follow ing paym ent of

2 0 0 6 final dividend

Liquidity of US$ 6 2 0 m illion, including undraw n com m itted bank

lines

No oil hedging currently in place

US$ ’m 1 0 0 2 0 0 3 0 0 4 0 0 5 0 0 2 0 0 6 2 0 0 3 2 0 0 4 2 0 0 5

Cash Debt Gearing

Gearing % 4 0 3 0 2 0 1 0

1 5

2 0 0 7 Capital Outlook

US$ ’m 2 0 0 6 Actual I nvesting : Exploration Developm ent Corporate Financing : Dividends Debt Repaym ent 1 2 2 1 4 4 1 6 1 0 1 1 2 6 2 0 0 7 Outlook

* 2 0 0 6 final dividend only

1 9 0 1 2 6 7 0 4 5

• *

1 6

Strategy for Grow th

Deliver Value

Substantial rem aining potential in PNG oil fields Further developm ent in Yem en & Egypt Cost controls and im proved profitability

Extract Value

Com m ercialise OSH’s 1 billion boe gas and liquids resource

Multi phase developm ents

Strong environm ent for gas sales, prices

Create Value

Acceleration of exploration activity in PNG and Middle East

and North Africa

Mix of low risk m oderate im pact, higher risk high im pact

program m e

Pursue acquisition opportunities

1 7

Strategy for Grow th

Objective is to m ore than double

Com pany value by 2 0 1 0

1 8

VALUE DELI VERY

1 9

PNG Oil Production Highlights

Moran 2 0 0 6 : Production increased by 18% Three new wells came onstream 2 0 0 7 -9 : Development drilling, 1-3 wells SE Mananda 2 0 0 6 : Came onstream in Mar

• 06. Daily production at 4,000

bopd by year end 2 0 0 7 -2 0 0 9 : Continue field management Kutubu 2 0 0 6 : Natural decline led to 19% decrease in production. Kutubu’s 300 millionth barrel delivered in Aug 06 2 0 0 7 - 2 0 0 9 : Development drilling- Usano 3-7 wells, Kutubu 2-8 wells, Agogo 1-4 wells Gobe/ SE Gobe 2 0 0 6 : Production increased by 2% . SEG12 came online 2 0 0 7 -9 : workovers and development drilling, 1-2 wells

2 0

PNG Oil Production Outlook

Expect to continue to invest in PNG fields, targeting to m aintain gross

production around 5 0 ,0 0 0 bopd through to 2 0 0 9

Requires investm ent of approx US$ 1 0 0 m pa net to OSH

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 Oil Production ( stb/ d)

I ncrem ental Developm ent Aspiration

OSH Assum es Field Operatorship Decline before Oil Search

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

Forecast Base Production Historical Production

2 1

Yem en - Nabrajah

Nabrajah gross production currently

averaging 7 ,8 0 0 bopd

Nab 1 3 appraisal w ell underw ay. Potential for future basem ent w ells

being evaluated, pending results from interpretation of 3 D seism ic and G&G studies.

2 ,0 0 0 4 ,0 0 0 6 ,0 0 0 8 ,0 0 0

bopd

Nab-14 (Qishn) Nab-12 (Qishn) Nab-5 (Naifa) Nab-1 to Nab-7 (Qishn)

J a n

• 7

A p r

• 7

J u l

• 7

O c t

• 7

J a n

• 8

A p r

• 8

J u l

• 8

O c t

• 8

J a n

• 9

A p r

• 9

J u l

• 9

O c t

• 9

J a n

• 1

A p r

• 1

J u l

• 1

O c t

• 1

PRODUCTION FORECAST

2 2

W adi Dara Exploration Kareem , Yusr, Kheir & Shukheir Developm ent Um m El Yusr Exploration

Egypt – Area A

Area ‘A’ - com prises 2

developm ent leases ( 5 sm all

• il fields) and four exploration

leases

Focus on increasing

production, to assist funding exploration:

5 developm ent drill

candidates identified, first tw o w ells com pleted

Exploration focused on deeper

targets below and adjacent to existing fields – first tw o exploration w ells successful in secondary objective and being tied in

2 0 0 8 Budget Production Forecast

1 ,00 0 2 ,00 0 3 ,00 0 4 ,00 0 5 ,00 0 6 ,00 0 Jan-0 7

Gross Production bopd

5 00 1 000 1 500 2 000 2 500 3 000

Oil Search Share bopd Existing Production Developm ent W ells W / O , R / C & P u m p O p t i m i s a t i

• n

Baseline Plus 5 0 0

Jul-0 7 Jan-0 8 Jul-0 8 Jan-0 9 Jul-0 9 Jan-1 0 Jul-1 0

2 3

VALUE EXTRACTI ON

2 4

Gas Com m ercialisation

I n late 2 0 0 6 , undertook m ajor review of PNG Gas

Project and other com m ercialisation options

Change in focus to LNG & petrochem icals, w hich have

access to high w orld gas and liquids pricing

Scale of investm ent, value and returns higher than

PNGGP

Significant expansion of infrastructure and potential

involvem ent of expanded field portfolio

LNG/ petrochem icals w ill provide m ajor boost to PNG

econom y, w ith significant in-country developm ent rather than pipeline export

2 5

Existing gas fields, gas exploration and appraisal

• pportunities

Angore Barikew a Uram u Pandora Juha P’nyang Kim u I ehi Mogulu Korobosea

2 6

LNG for PNG

Major grow th in global LNG m arket and strong

increase in gas prices over past 2 years m akes LNG in PNG attractive

Unprecedented interest from range of LNG

developers

PNG has all the requirem ents for LNG

developm ent: Discovered reserve base plus upside Existing infrastructure base Excellent location to exploit strong Asian m arkets Com petitively priced labour Stable fiscal regim e

2 7

LNG for PNG

Com petition to develop first plant Several developm ent approaches being

review ed and m atured

Total value chain approach – upstream ,

pipeline, plant, m arketing/ shipping

ExxonMobil m odel Merchant plant approach – specialist

developer purchases gas from fields

Com bination of both, w ith m ultiple trains

2 8

Full Foldbelt 6 .3 Mtpa ExxonMobil LNG Option

OSH has signed Cost Sharing

Agreem ent w ith XOM and

• ther JV partners to review

LNG project based on Hides, Juha and Angore fields

Kutubu/ Gobe/ Moran/ Agogo

fields considering participation

Gross cost of studies –

US$ 6 0 m . OSH share 3 2 % / 3 7 % if PDL 2 joins

• Est. capital cost of a 6 .3

m tpa train ( US$ bn) :

Upstream & Pipeline -

$ 5 .0 bn

LNG Plant - $ 4 .5 bn Total - $ 9 .5 bn Reserves Required ( 2 0 yrs) : 7 .7 TCF Target end 2 0 0 7 / early 2 0 0 8

to enter FEED, end 2 0 0 8 for FI D, 2 0 1 3 for first LNG cargo

~ 3 0 0 km 3 2 -inch subsea gas line to LNG Plant at Cape Possession Valve & Pigging Station 3 1 1 km 3 2 -inch Hides-Kopi pipeline

Kopi Kutubu & Agogo Gobe Hides & Angore Juha Port Moresby

2 5 0 m m scfd ( nom inal) 9 6 0 m m scfd Conditioning Plant 6 6 km 1 4 -inch gas line 8 -inch condensate line

2 9

LNG w ith BG

OSH and BG have been w orking since m id-

2 0 0 6 on evaluating LNG developm ent options. Studies have included: Review of resource base Review of capital costs for 3 .5 m tpa initial train plus

expansion

Review ideal project structure ( ongoing)

BG excellent potential partner w ith

developm ent track record and strong m arketing capabilities

Strategic fit for Asian custom ers Target developm ent for first gas 2 0 1 2

3 0

LNG for Oil Search

Oil Search objectives:

Num ber of credible developm ent options

w ith excellent partners

Striving for early developm ent certainty and

best long term value

Excellent position in all m ajor fields

w ith likely interest around 3 0 % in any developm ent

3 1

Petrochem icals

Maturing opportunity to supply gas to

petrochem icals and fertiliser plant in Port Moresby

Production range 9 0 – 1 3 6 PJ pa Product price w ith linkage to

international energy m arkets

Strong fit to Kutubu field resource base Continuing to progress in parallel w ith

LNG options

3 2

Other com plem entary gas activities

Significant expansion of appraisal and

exploration program m e for gas, aim ed at increasing contractable gas

Juha w ells Kim u Korobosea Barikew a

Potential Juha developm ent – despite

J-5 results, liquids cycling project as precursor to LNG still possible. Subject to resource delineation by J-4 w ell.

3 3

VALUE CREATI ON

3 4

Korobosea Juha Barikewa Mogulu Kutubu, Arakubi Mananda Attic NW Paua Cobra

PNG Exploration

Oil exploration

4 0 -5 0 m m bbl net risked

reserves being tested in 2 0 0 7

Gas - Co-ordinated program m e

to add reserves to support com m ercialisation projects

PNG 2 0 0 7 exploration budget

up to US$ 1 2 0 m net ( firm )

Continued seism ic for gas and

• il exploration/ appraisal, in

Highlands, Forelands and Offshore

Offshore licencing round – bid

subm itted in April 2 0 0 7

Ongoing review of farm -in

• pportunities onshore and
• ffshore

3 5

Kutubu 2

PPL 2 1 9 W I %

Oil Search 9 1 .2 5 Merlin Petroleum 8.75%

Close to I agifu-Hedinia

fields – quick tie-in possible

I nadequately tested by

Kutubu 1 X ( 1 9 8 8 )

Only Toro logged, but

I agifu as secondary target

Currently drilling -

expected to be at TD in m id May 2 0 0 7

Prospect size: 3 0 -5 0

m m bbl ( depends on colum n height and num ber

• f reservoirs)

COS: 2 0 %

Kutubu 2

3 6

PDL2 - Arakubi

PDL2 W I %

Oil Search 7 2 .4 * AGL 13.9 Merlin Petroleum 7.9 PRK 7.9

Located 2 km from

infrastructure, and sits above and NE of Usano, m ay share com m on fluid contacts

Mean reserves ~ 1 8 m m stb Com m enced drilling in 2 0 0 6

– activities suspended due to equipm ent failure

Scheduled to be redrilled

after Juha

Line PN04-411 Depth migration Usano 2x block UDT4 block Arakubi structure

Reserves: 1 8 m m stb COS: 3 5 %

3 7

MENA 2 0 0 7 Rem aining Drilling Program m e

Yem en

• Onshore operated Wells
• 6 Exploration
• Onshore Non-operated Wells
• 3 Exploration
• 4 development
• Total= 13 wells

Egypt

• Onshore operated Wells
• 3 Exploration
• 5 Development
• Onshore Non-operated Wells
• 2 Exploration
• Total= 10 wells

I raq ( Kurdistan)

• Onshore Non-operated wells
• 1 Exploration/ Appraisal
• Bina Bawi-2

Exploration: 4 w ells

in Egypt, 6 w ells in Yem en and 1 in I raq have been drilled in current program m e

Total w ells still to

be drilled: 2 4 1 5 Exp

+ 9 Dev

Yem en: 3 Rigs Onshore ( Op) : JOECO Rig-3 Onshore ( Non-op) : Rig-9 0 5 Rig-9 0 8 Egypt: 2 Rigs Onshore ( Op) : ECDC Rig-6 3 Onshore ( Non op) : ECDC Rig-7 I raq: 1 Rig Onshore ( Non-op) : Rig-2 2

YEMEN I RAQ EGYPT

3 8

East Ras Qattara

1 0 km

Egypt - East Ras Qattara

Shahd 1

First w ell in ERQ

program m e

Discovered m inim um 1 5 m

• il pay in Upper & Low er

Bahariya Fm

Tested 1 ,5 1 7 bopd

com bined 2 zones

Shahd-1 scheduled for Q3

2 0 0 7 production

Mean Reserves:

~ 1 0 -1 5 m m bbl

Ghard-1

Ghard 1

Second w ell in an expanded

drilling program m e

Approx 3 0 m net pay Test results: one zone

flow ed 2 ,0 0 0 bopd + 2 .6 m m scf/ d gas

Mean Reserves:

~ 1 5 -2 0 m m bbl

S N

Ghard-1 Discovery

Shahd-1 Shahd South Prospect Fahd ( Shahd SE) Prospect Shahd South Fahd ( Shahd SE)

Shahd 1 Discovery

Rana Prospect

Up to 1 2 sim ilar prospects have been identified in ERQ

3 9

Outlook

4 0

Outlook - Production

Production

PNG developm ent opportunities m ean gross

production can continue at around 5 0 ,0 0 0 bopd for at least three years

Continuous Nabrajah area drilling program m e is

underw ay. 3 D seism ic has identified a num ber of intra-field and near-field opportunities

First contribution from Egypt Area ‘A’ and East

Ras Qattara expected in 2 0 0 7

Production forecast for FY 2 0 0 7 is unchanged at

betw een 1 0 .5 – 1 1 .0 m m boe

4 1

Outlook - Exploration

2 0 0 7 – biggest program m e in Com pany’s

history

MENA program m e has potential to add

to production, short lead tim es

Most of PNG oil targets close to existing

infrastructure

Gas exploration/ appraisal activity a key

part of 2 0 0 7 / 0 8 activities

4 2

Outlook - Gas

Gas

Range of com m ercially attractive

• pportunities available

OSH w ell placed com petitively, w ith

resources at Hides/ Angore/ Juha, Kutubu, Forelands fields, representing a spectrum of risks and rew ards w ith options for control and influence

First m over advantage in LNG extrem ely

im portant

2 0 0 7 gas decisions w ill play im portant part

in Oil Search’s long term future

4 3

Outlook

1 0 ,0 0 0 1 5 ,0 0 0 2 0 ,0 0 0 2 5 ,0 0 0 3 0 ,0 0 0 3 5 ,0 0 0 4 0 ,0 0 0 Net Oil Production ( stb/ d)

PNG Production PNG Developm ent MENA Production

• 5 ,0 0 0

Jan-0 6 Jul-06 Jan-0 7 Jul-07 Jan-0 8 Jul-08 Jan-0 9 Jul-09 Jan-1 0 Jul-1 0 Jan-1 1 Jul-11 Jan-1 2 Jul-1 2 Jan-1 3 Jul-1 3

ACTUAL FORECAST

Exploration activity and gas developm ents have potential to add substantially to production

4 4

Sum m ary

Oil Search rem ains on strong grow th trajectory

Existing oil production – assets perform ing w ell,

costs under control, extended production plateau

Large discovered gas resource w ill be

com m ercialised. 3 0 % interest in LNG project unique in a com pany of our size

Upside potential from exploration

Have a proven skilled w orkforce able to build

the oil and gas business Rigs being purchased for PNG, fully contracted for

MENA

US$ 4 5 0 m illion in the bank

Provides m uscle for developm ent and acquisition

• pportunities

4 5

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