Meeting Annual 2009 1 2 0 0 9 Annual Meeting Agenda I - - PDF document
Meeting Annual 2009 1 2 0 0 9 Annual Meeting Agenda I ntroduction 2 0 0 8 Perform ance Sum m ary Strategic Priorities PNG LNG Project Update Com m ercialisation of Other Gas Oil Operations and Exploration Challenges
1
2
I ntroduction 2 0 0 8 Perform ance Sum m ary Strategic Priorities PNG LNG Project Update Com m ercialisation of Other Gas Oil Operations and Exploration Challenges of Present Oil Price
Environm ent
Sum m ary
3
Record core NPAT of US$ 2 4 0 .0 m illion, 7 0 %
higher than in 2 0 0 7 ( excluding MENA sale profit
NPAT, including significant item s, of US$ 3 1 4
m illion, 1 2 8 % higher than 2 0 0 7
PNG LNG Project continued to progress. Final
I nvestm ent Decision ( FI D) scheduled for end 2 0 0 9 , one of only tw o in the region expected to reach FI D this year
Strong balance sheet w ith ~ US$ 5 0 0 m illion
cash plus undraw n borrow ing facility
4
Board approved an
unchanged final dividend for 2 0 0 8 of four US cents, m aking eight US cents for the year ( 2 2 toea per share)
Com pany introduced fully
underw ritten Dividend Reinvestm ent Plan, as part
m anage the balance sheet
5
Total Recordable I ncidents ( TRI s) 1 9 9 8 – 2 0 0 8
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
6.8 4.0 3.1 2.9 8.3 2.7 8.5 10.6 9.8 10.7 5.8 1.7 4.7 2 .4 2 .3 1 2.05 2.04
I nternational Com panies ( OGP)
12.7 9 .1 9.3 7.8 7.0 7.3 5.2 9.4 8.2 6.3 6.8
6
Jan 0 4 Jul 0 4 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
Oil Search W oodside Santos ASX 1 0 0 W TI oil
Jan 0 9
TSR for five years to end 2 0 0 8 of 3 9 6 % , 7 th out of ASX 1 0 0 Top quartile perform er for 5 consecutive years
7
US$ m 1 0 0 2 0 0 3 0 0 4 0 0 5 0 0 6 0 0 7 0 0 8 0 0 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8
8 5 .7 1 0 7 .3 2 0 0 .2 2 0 7 .5 1 4 0 .8 2 4 0 .0
9 0 0
3 5 0 .8 4 1 6 .3 6 6 4 6 4 4 .5 7 1 8 .6 8 1 4 .3 2 3 9 .1 3 3 0 5 5 4 .3 5 4 4 .8 5 9 8 .2 6 9 8 .0 1 9 1 .3 2 7 6 .7 3 5 7 .7 3 9 9 3 2 6 .8 5 0 7 .4
EBI TDAX Revenue Operating Cash Flow Core Net Profit
8
US$ 4 6 2 m illion in cash at the end of April
( including share of JV cash balances of US$ 6 m illion) , no debt
Cash invested w ith highly rated bank
counterparties
US$ 4 3 5 m illion am ortising revolving facility
established in October 2 0 0 8 w ith a syndicate of 1 6 banks. Achieved im proved pricing and term s despite global financial crisis. Currently undraw n
No oil hedging undertaken in 2 0 0 8 or currently
in place
9
1 0
Continue to add significant shareholder value
through: Com m ercialisation of ~ 5 8 0 m m boe of discovered
resource through the developm ent of PNG LNG Project
Delivery of further grow th through secondary gas
developm ents including additional LNG trains and
Optim ising value and operational synergies betw een
existing oil operations and new LNG developm ent
Measured exploration in PNG and MENA and
continued optim isation of PNG gas portfolio
Platform of solid balance sheet, w ith cash and
undraw n borrow ing facility
1 1
Previous strategic
review s have been instrum ental in adding shareholder value and achieving sustained top quartile perform ance
2 0 0 9 Strategy Update
now taking place w ith three tim e horizons:
1 2
6 – 1 2 m onths: PNG LNG Delivery
Definition of w hat w e can do to ensure delivery Optim al financing Corporate and operating structure
FI D to first gas production
Support construction operations and financing Definition of further grow th options
−
PNG LNG 3 rd train developm ent
−
Other gas aggregation options
−
Exploration
Oil and gas integration options Partner alignm ents Positioning organisation for legacy cashflow
Post first gas
Options for further grow th and return expectations
A NEW OI L SEARCH
1 3
Platform for Major Grow th
1 4
Kopi Kutubu & Agogo Gobe Hides & Angore Juha Port Moresby 7 5 km
3 1 0 km 3 2 ” gas onshore pipeline Juha Production facility 2 5 0 m m scfd 9 6 0 m m scfd Hides Gas Conditioning Plant 6 5 km 1 4 ” gas line & 8 ” liquids line 1 1 0 km 8 ” condensate line
~ 4 0 0 km 3 4 ”
subsea gas line LNG Facility Existing 2 7 0 km 2 0 ” crude pipeline
Kum ul
1 5
Project m om entum continues to build tow ards year end FI D
FEED activities on track, targeting com pletion end 3 Q0 9 Markets being confirm ed Governm ent/ Landow ner agreem ents being progressed Financing negotiations and due diligence on schedule Legislation and approvals on track Com petitive bidding for dow nstream build Som e relief in capex item s identified Meeting Milestones Building Mom entum Progress on All Fronts
1 6
PNG LNG seen as quality project, seen to be
m oving ahead w ith high probability of delivery in 2 0 1 3 / 1 4 tim efram e:
Quality, conventional proven resource Excellent operator augm ented by Oil Search
w ith local know ledge
Aligned Joint Venture and supportive
Governm ent
1 7
Key term s of HOA agreed w ith m ajor Asian
buyer for 2 m m tpa
Aw aiting Governm ent approvals Detailed term s being negotiated w ith a num ber
dem and to cover initial production
Confident of confirm ing 6 .3 m m tpa offtake
through HOAs around m id-year
1 8
Source: FACTS GLOBAL ENERGY, Feb 2009
Analysis of Recent Contracts to Japan, Korea, and China ( DES)
* Contractual price will likely be renegotiated.
2 4 6 8 1 0 1 2 1 4 1 6 1 8
10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
JCC ($/bbl)
Gorgon to Japan (HOA)* Oct 05 – Mar 06 NWS-T1-3 (Bilateral Renewals) Mar – May 06 NWS Renewal Price Apr – May 06 Pluto to Japan (Estimated) Aug 07 Average Australia to PetroChina (Estimated) Sep 07 Bontang (Renewals) Mar 08 Shell (QG) to PetroChina Apr 08 RasGas to KOGAS (from 2007) Dec 06 Crude Oil Parity
1 9
Source: FACTS GLOBAL ENERGY, Feb 2009
Dem and soft in the short term , but not im pacting 2 0 1 3 / 1 4
Conservative approach by custom ers, w ith flight to quality
2 0 4 0 6 0 8 0 1 0 0 1 2 0
2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 2 2 0 1 5 2 0 2 0
LNG Uncontracted Dem and ( m tpa)
Other New Markets I ndia China Taiw an Korea Japan
2 0
FEED activities targeting com pletion end 3 Q0 9 Preparatory w ork for early w orks activities
underw ay, subject to continued progress on m arkets and BSA
Upstream contracting bids due early 3 Q0 9 Dow nstream EPC bids due late 3 Q0 9 .
Com petition betw een Chiyoda ( APCI ) and Bechtel ( Phillips Cascade)
Signs of dow nw ard pressure on costs,
particularly steel and equipm ent
I nflationary cycle broken, w ith costs m ore
predictable
2 1
Benefits Sharing Agreem ent ( BSA) is an
and landow ners on how certain benefits are distributed: Equity ow nership Developm ent levies Royalties
Magnitude of benefits prescribed by Oil and Gas
Act and Gas Agreem ent
Other discussions include:
Local Business Developm ent and spin off
Training and skills developm ent Past prom ises by Governm ent
2 2
BSA discussion a m ajor exercise in Project
developm ent dem ocracy
Forum in Kokopo, w ith landow ner
representatives from all Project im pact areas, from Juha to Portion 1 5 2 in Port Moresby plus State and Provincial Governm ents
Unprecedented gathering w ith over 1 ,0 0 0
attendees
Strong support for closure, BSA has never not
been achieved
Getting ahead of critical path W ill be follow ed by local, site specific
discussions
2 3
Detailed negotiations of financing Term Sheet now taking
place w ith Export Credit Agencies ( ECAs) follow ing positive site visits and good feedback from due diligence process
Core financing proposal has broad support, including
7 0 % project finance, 3 0 % equity contributions
Standard project finance facility w ith parent com pany
guarantee that falls aw ay at com pletion
OSH has no ratings-related funding driver or requirem ent
from lenders to raise funding to support guarantee
Prelim inary com m itm ents and final term s from ECAs for
project finance expected late 3 Q0 9 , follow ing definition
Continued strong interest from banks for participation
follow ing road show s in March/ April
Cornerstone of financing expected to be ECAs,
w ith balance com ing from banks and potentially partner co-lending and bond m arkets
2 4
2 0 1 0 2 0 1 2 2 0 1 4 2 0 1 1 2 0 1 3 2 Q 0 9 3 Q 0 9 4 Q 0 9 1 Q 0 9
Com m ence Early W orks* BSA Receive EPC bids Finalise Capex Receive offers
Com m ence construction First LNG sales Final I nvestm ent Decision Sign HOAs
* Contingent on HOA & BSA
2 5
PNG LNG progressing very w ell. Schedule
unchanged, targeting Final I nvestm ent Decision late 2 0 0 9 , LNG sales 2 0 1 3 / 1 4
Seen as one of tw o projects in region m oving to
FI D this year
Entering favourable and m ore predictable cost
environm ent
Financiers strongly supportive and w orking to
tim etable
Strong support from the PNG Governm ent
and Landow ners for Project
2 6
2 7
OSH Operated Licence OSH Interest Licence Petroleum Development Licence Petroleum Retention Licence Licence Application Oil Field Gas Field Oil & Gas Field Prospect Oil Pipeline Proposed Gas Pipeline
Mananda Attic
Kum ul Term inal PRL0 1 PPL2 34 PRL0 8 PPL2 40 PRL0 3 PRL1 1 PRL1 2 PPL2 39 PDL1 PPL2 33 PPL1 90 PPL2 19 PRL1 0 PRL0 2 PDL2 PDL5 PDL6 PDL4 PDL3 PRL0 9 PPL2 44Angore Juha Hides Moran Agogo Kutubu Gobe Main
Flinders Barikew a Deep Huria Hedinia FW Lead 7 W asum a Gobe Deep Hides FW Pasca B
Barikew a Uram u P’nyang Kim u Juha North SE Gobe Pandora
1 4 2 °E 9 °S 7 °S 1 4 5 °E5 0 km
2 8
Key focus is to position Oil Search for
additional long term gas-based grow th
Further LNG developm ents com m and the
highest value and are highest priority: Additional PNG LNG train: Based on Hides, Juha and
nearby gas eg P’nyang
Alternative additional LNG train: Aggregate gas
from Forelands/ Offshore
3 rd train LNG econom ics are very strong, can
leverage off PNG LNG infrastructure
Other gas com m ercialisation opportunities also
being pursued
2 9
2 0 0 9 / 2 0 1 0 focus on de-risking gas prospects
through seism ic prior to exploration/ appraisal drilling
Gas portfolio m anagem ent underw ay ( farm -
dow n to NOEX, Gedd purchase, PPL 2 6 0 farm - in) w ith num ber of opportunities being considered
Progress petrochem ical studies w ith I tochu
and MGC
Progress Dom Gas studies w ith Governm ent
3 0
3 1
Hides
OSH Operated Licence OSH Interest Licence Petroleum Development Licence Petroleum Retention Licence Licence Application Oil Field Gas Field Oil & Gas Field Oil Pipeline
1 4 2 °E 9 °S 7 °S 1 4 5 °E5 0 km
Kum ul Term inalMoran Agogo Kutubu Gobe Main SE Gobe SE Mananda
3 2
Since Oil Search took over operatorship of PNG oil fields
in 2 0 0 3 , fields have produced ~ 5 0 m m bbl in excess of previous operator’s expectations and field life extended
Aim is to optim ise PNG oil cash generation over the next
5 years to support PNG LNG Project funding requirem ents
Existing oilfields are m ature ( base decline rate of 1 5 -
2 0 % ) but w ith appropriate investm ent, expect to continue to m itigate base decline curve
PNG production is highly profitable – net oilfield costs,
excluding tariffs, are under US$ 1 0 / bbl – resilient to low er oil prices
Need to balance w ork program m es and hence production
3 3
Oil Rate ( bopd)
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 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 2 0 0 8 2 0 0 4 – 2 0 0 8
Devt capex = $ 7 .9 1 / bbl, Opex = $ 9 .8 2 / bbl
Pre-OSH Decline
3 4
Production outlook for 2 0 0 9 of 8 .0 – 8 .3 m m boe PNG production subject to results of: Drilling cam paign at Kutubu ( 4 w ells) , Moran
( 2 w ells) and w orkover cam paign in Kutubu and in Moran
Field uptim e availability and ongoing
reservoir m anagem ent
I ncreased focus on m anaging facilities sites,
costs and capital efficiency
Detailed review of operating synergies betw een
3 5
2 4 6 8 1 0 1 2 1 4 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 F
Net Production ( m m boe)
Kutubu Moran Gobe Main SE Gobe SEM Hides GTE MENA
3 6
Continued portfolio and exploration spend
Focus on high value PNG gas and low cost MENA
com m itm ents
PNG: − Farm -dow n to NOEX, Gedd
acquisition, farm -in to PPL2 6 0
− W asum a w ell in PPL2 1 9 ( drilling likely
to extend into 2 0 1 0 )
− 2 D Seism ic in Highlands and offshore MENA: − Shakal w ell in Kurdistan − Caliph w ell in Libya − 1 w ell each in Blocks 3 and 7 , Yem en − W ithdraw al from Bina Baw i
3 7
PRL0 1 PPL2 34 APPL29 3 APPL30 0 PRL0 8 PPL2 40 PRL0 3 PRL1 1 PRL1 2 PPL2 39 PDL1 PPL2 33 PPL1 9 PPL2 1 9 PRL1 0 PRL0 2 PDL2 PDL6 PDL4 PDL3 PRL0 9 PPL2 44 1 4 2 °E 9 °S 7 °S 1 4 5 °E5 0 km
Fold Belt
2009/10 Wasuma oil test with sub-thrust test 2 0 1 0 -1 2 Offshore Program m e 2010 Flinders gas test 2010/11 PPL234 gas test 2011/12 APPL293 gas test Cobra sub-thrust success 2011/12 Distal Foldbelt Oil Play 2010/12 Follow-up Sub thrust leads adjacent to Gobe, Hedinia and Hides. Technical/Seismic work in 2009 OSH Operated Licence OSH Interest Licence Petroleum Development Licence Petroleum Retention Licence Licence Application Oil Field Gas Field Oil & Gas Field Prospect (Oil/Gas) Oil Pipeline Proposed Gas Pipeline
Kum ul Term inal PDL5 3 8
Sana’a Office Dubai Office
Block 3 Block 7 Tajerouine Le Kef Area 1 8 Bina Baw i Shakal
3 9
4 0
I n light of recent oil price falls, Oil Search has
review ed and com m enced im plem enting prudent capital m anagem ent strategies
Focus is to ensure funding is available for areas
First priority is to fund Com pany’s share of PNG LNG
Project
Second priority is to fund exploration/ activities that
progress third LNG train expansion, alternative gas developm ent am bitions
Manage developm ent drilling and w orkover
program m e to ensure cash flow s for PNG LNG, gas expansion
4 1
Presently w orking in especially dynam ic
environm ent, w here fundam entals rem ain unknow n or uncertain
Capital requirem ents im pacted by:
Oil price ( as alw ays) Capital cost requirem ent for PNG LNG ( w ill be know n
in 3 Q0 9 )
Financing term s and costs ( know n in 3 Q0 9 ) Production outcom es ( relatively stable) Am ount of discretionary spend ( controlled) All being actively m anaged
4 2
Starting from a solid base w ith a strong balance sheet Active capital m anagem ent program m e already
underw ay
Controlling discretionary spend in production, exploration
and corporate
Cost control/ cutting m easures I ntroduced underw ritten DRP
Recognise need for flexibility and pro-active
m anagem ent as inputs and param eters change
Many other levers to deliver capital requirem ents of PNG
LNG, including hedging, asset sales, capital raisings etc
Any capital m anagem ent initiative actioned w ill be
selected to ensure m axim isation of shareholder value Oil Search in a strong position to m anage these variables
4 3
4 4
OSH’s key business priority is delivering the PNG LNG Project
1 . Deliver PNG LNG Project 2 . Project Build, Positioning for Grow th
3 . Project Com pletion, Delivering Grow th
2 0 0 9 2 0 1 0 - 2 0 1 3 2 0 1 4 +
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
Oil Production ( bopd)
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
LNG Liquids LNG Gas PNG Developm ent
4 5
Oil Search is in an excellent position for further
grow th PNG LNG m oving forw ard, prem ier Asia Pac
greenfields project, w ith all essential pieces com ing together
Strong balance sheet and liquidity to m eet LNG
Measured exploration and new business activities to
progress LNG train expansions, other secondary gas grow th
Core oil production rem ains robust. Operations
review to identify and deliver oil and gas synergies
4 6