Oil Search Roadshow Septem ber 2 0 0 8 1 Sum m ary Oil Search - - PowerPoint PPT Presentation

1

Oil Search Roadshow

Septem ber 2 0 0 8

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

2

Sum m ary

Oil Search has delivered sustained top quartile grow th

• ver past five years ( 5 3 % annualised return)

Delivery of PNG LNG Project over next four years,

together w ith progressive developm ent of 2 nd and 3 rd tier gas, has potential to m ultiply Com pany value over this period

PNG LNG – The Prem ier AsiaPac LNG Project:

On track to deliver FI D tow ards end 2 0 0 9 , w ith first LNG in

late 2 0 1 3 / early 2 0 1 4

Thirty+ year legacy project, w ith capacity to triple OSH

• production. Also positively im pacts oil field life, value and

reserves

Current share price discounts assessed PNG LNG value

and reflects no value for further gas developm ents or exploration

3

Profile

Established in Papua New Guinea ( PNG) in 1 9 2 9 Operates all of PNG’s producing oil and gas fields. Current

gross production ~ 4 4 ,0 0 0 boepd, net share ~ 2 3 ,0 0 0 boepd

As operator, responsible for generating 2 2 % of PNG’s export

revenue and 1 6 % of its GDP in 2 0 0 7

PNG Governm ent is largest shareholder at 1 7 .6 % PNG’s largest investor and taxpayer At 1 .1 .0 8 , 7 3 .5 m m boe 2 P reserves plus 9 5 0 m m boe

undeveloped 2 C gas and liquids resource. ~ 6 0 % of gas resource is dedicated to PNG LNG, a w orld scale LNG developm ent operated by ExxonMobil. Significant resources still to be com m ercialised

Range of m aterial exploration interests in PNG and Middle

East/ North Africa

Market capitalisation ~ US$ 5 .5 billion. Listed on ASX ( Share

Code OSH) and POMSOX, plus ADR program m e ( Share Code OI SHY)

4

Oil Search Location Map

5

Consistent strong perform ance

• ver past 5 years

Jul 0 3 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)

Oil Search Santos W oodside ASX 2 0 0 W TI oil

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

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

( A$ / share)

W TI

( US$ / bbl)

( Actual values of the 1 st of the m onth)

Ranked No.5 TSR Perform er am ongst current ASX 1 0 0 for 5 year period to Dec 2 0 0 7 ( 5 3 % annualised return)

1 Aug 0 8

5 .5 6 1 2 3 .2 6

6

W orld Class Safety Perform ance

Total Recordable I ncidents ( TRI s) 1 9 9 8 – 2 0 0 7

APPEA OSH OGP

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 7

Oil Search Australian Com panies

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 2. 2.05 05 12.7 12.7 9 .1 9. 9.3 7. 7.8 7. 7.0 7. 7.3 5. 5.2 6. 6.8 4. 4.0 3. 3.1 2. 2.9 9. 9.4 8. 8.2 8. 8.3

2 0 0 6

I nternational Com panies

6. 6.3 2. 2.7

7

Strategy

2 0 0 7 / 0 8 Strategy Review defined initiatives to drive

continued top quartile returns, by unlocking value w ithin existing asset base

Major strategy objectives

• Ensure Final I nvestm ent decision for PNG LNG Project

Transform s Oil Search into significant LNG producer, 3 0 + year legacy project

Position Com pany to drive 2 nd phase gas developm ents

using existing 2 C, 3 C gas resources and through gas exploration

Optim ise PNG oil field operating perform ance to sustain

production and cashflow s up to and beyond first gas

Pursue m aterial exploration opportunities in PNG and

MENA

8

PNG LNG Project

AsiaPac’s next LNG developm ent

9

Prim ary Focus - PNG LNG

PNG LNG Project represents PNG’s cornerstone gas

developm ent, w ill m ore than double country's GDP

“Affects econom y of PNG and its balance of trade situation

profoundly” ( ACI L Tasm an report, Feb 2 0 0 8 )

W ill underpin Oil Search’s production and profits for 3 0 +

years

W ill com m ercialise ~ 5 5 0 m m boe of Oil Search’s 2 C gas

resources and add ~ 2 0 m m boe to annual net production, tripling current production

W ill unlock value for OSH and shareholders

New gas developm ents at prem ium prices ( BG & Origin,

Petronas/ Santos, Shell/ Arrow , QGC/ Sunshine Gas)

AGL sale w ill provide m arket a w indow to project value

1 0

Regional LNG m arkets are robust

Notes

• 1. Project Under Construction include: Pluto LNG, Tangguh LNG, Yemen LNG, Qatar Gas 2,3,4, RL3, Angola LNG
• 2. Possible projects include: PNG LNG, Sunrise LGN, Gorgon LNG, Browse, Ichthys, Scarborough, Wheatstone LNG, 4 Gladstone projects, Sulawesi, Abadi, Brunei LNG II,

NLNG VII, Brass LNG, OK LNG, Iran LNG

• 3. Speculative projects include: projects that currently lack any reasonable definition in terms of participants, structure or underlying resources as well as defined supply where

major issues are preventing the project from making substantial progress

Regional m arket

fundam entals rem ain robust Steady expansion from

existing m arkets ( Japan, Korea, Taiw an)

Grow th from em erging

m arkets of I ndia & China and new m arkets

Decline in existing

contracts and concern w ith new project tim ing

Supply and Dem and

im balance after 2 0 1 2 Projects under construction

do not m atch capacity

Extensive set of projects in

queue from 2 0 1 3 onw ards Pacific Basin LNG Supply and Dem and to 2 0 2 0 m m pta

Onstream Under Construction Possible Speculative Pacific LNG Demand

50 100 150 200 250 300 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

“LNG supply unlikely to keep up with demand with high prices set to continue in the medium term” “Some of these possible projects are tenuous e.g., LNG from Iran, and actual supply will be lower than shown”

1 1

LNG Projects Under Construction and Proposed

Large num ber of possible

projects under consideration

Not m any possible

projects w ill be able to cover the dem and gap in 2 0 1 3

W estern Australia: strong

cost pressures and com petition for resources

Potential first

production post 2 0 1 4 / 1 5

Australian CSG projects: 4 + projects com peting

for 2 0 1 4 w indow , new technology w ith several hurdles to be overcom e

I ncreasing foreign

focus

PNG LNG is an attractive option relative to others

1 2

LNG Pricing

Strong pricing drivers:

Supply/ dem and fundam entals Pull from Europe Delays in other projects Environm ental advantages Pricing and challenges w ith

com peting energy sources

Recent contract pricing around

• il price parity:

Recent contracts:

Sept 0 7 : Petrochina, 2 -3 m tpa, 1 5

• 2 0 years ex Brow se

Sept 0 7 : Petrochina, 1 m tpa, 2 0

years ex Gorgon

Nov 0 7 : CPC, 2 -3 m tpa, 1 5 - 2 0

years ex Brow se

April 0 8 : Petrochina, 3 m tpa, 2 5

years from 2 0 1 1 ex QatarGas

April 0 8 : CNOOC, 2 m tpa, 2 5 years

from 2 0 0 9 ex QatarGas I I

5 1 0 1 5 2 0

LNG ( US$ / m m btu) 2 0 4 0 6 0 JCC ( $ / bbl) 8 0 1 0 0

Traditional Contracting Crude Oil Parity NW S 2 0 0 7 Contracting

1 3

W orld Class and W orld Scale LNG Project

2 C resources of 9 .3 tcf 6 .3 m m tpa, 2 train LNG project Clean, liquids-rich gas No technology issues or concerns W ell positioned for the Asia m arket Rapidly advancing in optim al tim efram e to satisfy regional

dem and in 2 0 1 3 / 2 0 1 4 period

Joint Venture is strongly aligned w ith supportive Governm ent Strong Operator

ExxonMobil is the Project operator – excellent record of project delivery

• n tim e and on budget, assisted by com prehensive pre-FEED process

Oil Search providing PNG experience Strong Project team

Real Expansion Capacity

New infrastructure w ill stim ulate additional gas developm ent Substantial existing 2 C and 3 C resources

PNG LNG: The Prem ier AsiaPac LNG Project

1 4

PNG LNG Project

I ntegrated developm ent of Hides,

Angore and Juha gas fields plus associated gas from the Kutubu, Agogo, Gobe and Moran oil fields

Upstream infrastructure including

production w ells, processing facilities and pipeline netw ork linking to the export pipeline

Gas export pipeline from PNG

Highlands to LNG plant near Port Moresby

Liquefaction plant, export loading

and support facilities located in Portion 1 5 2 , 2 0 km from Port Moresby

See schem atic above for detail

1 5

PNG LNG Project Fields

Kutubu Juha Main Angore Gobe Main Hides Moran Agogo

1 6

PNG LNG Project Milestones reached in 1 H0 8

Com m ercial alignm ent achieved, w ith Joint Operating

Agreem ent ( JOA) executed in March 2 0 0 8 am ongst the Project Ow ners

I nitial funding interests pre-Governm ent back-in agreed ( OSH

3 4 % )

Unitisation and redeterm ination procedures agreed Actionable finance plan agreed

Marketing Representative Agreem ent signed for joint m arketing

• f 6 .3 m m tpa, led by ExxonMobil, Project rolled-out to buyers at

GasTech in Bangkok in March 2 0 0 8

Gas Agreem ent signed May 2 0 0 8

Outlines fiscal term s and legal obligations under w hich Project w ill

• perate over its life

The term s include 3 0 % tax rate and Additional Profits Tax ( APT)

w hich applies once a certain threshold level of return has been achieved

Sets term s and m echanism for State equity participation in the

Project

Front End Engineering and Design ( FEED) com m enced in May

2 0 0 8

1 7

Project Status

High quality project team assem bled – ExxonMobil

personnel plus secondees from partners including OSH

FEED activities proceeding on schedule. Target

com pletion in 3 Q0 9 ( 1 3 m onths) :

EOS ( KBR/ W orleyParsons JV) conducting upstream FEED

com prising:

− Prelim inary engineering design for gas field developm ents − Gas conditioning and com pression facilities − Pipeline and infrastructure

Dow nstream FEED ( LNG plant, storage, m arine facilities)

being conducted in tw o phases:

− Non-com petitive phase - support from KBR − Second, com petitive EPC bid phase involving APCI ( Air Products

and Chem icals, I nc) and COP ( ConocoPhillips) process licensed contractors

Oil Search-m anaged associated gas FEED study

com m enced w ith W orleyParsons

Many Project enhancem ents, optim isations being

considered

1 8

Project Status

Marketing:

Negotiations com m enced betw een Project and selected

• fftakers

Project is strongly positioned, com petitive advantages

recognised by custom ers

Targeting end 0 8 / early 0 9 for HOAs, SPAs prior to FI D

Governm ent com m itted and supportive

Leadership and co-ordination defined Discussions betw een Governm ent and Landow ners

com m enced on Benefits Sharing Agreem ent

Environm ental, licensing and perm itting activities underw ay State Nom inee agreed

JV considering proposal for early w orks program m e

subject to m arketing, Benefits Sharing Agreem ent and perm itting progress

1 9

PNG LNG Capex Estim ates

First phase capex ( 2 0 0 8 – 2 0 1 4 )

expected to be betw een US$ 1 0 – 1 1 bn ( real m id-2 0 0 7 $ s)

Historically, ExxonMobil has

delivered projects on tim e and on budget

Subsequent capex is several

years out ( additional Hides drilling, Angore and Juha developm ent and potential LPG extraction if required) . Juha tim ing depends on Hides and Angore outcom es and perform ance

Further updates to capex

estim ates from EPC bids ( 3 Q 0 9 )

Further optim isation w ill occur

during dual FEED

Source: ExxonMobil Analyst Briefing 5 th March, 2 0 0 8 .

EM Project Execution Perform ance

Actual vs. Funded ( % )

2 5 Average 2 0 0 3 -0 7 2 0 0 7 5 0 7 5 1 0 0 1 2 5

Cost Schedule

2 0

Project I nterest Determ ination

Methodology agreed for Project I nterest determ ination I nitial Project I nterests w ill be established at FI D, taking into account

FEED cost estim ates and LNG sales contract outcom es

Periodic re-determ ination and equalisation processes established Governm ent has the right to back-in ( 2 2 .5 % ) to Hides, Angore and Juha

licences

Resulting State participation in PNG LNG Project post back of ~ 1 9 %

1 .4 % 1 .8 % 3 .6 % 1 7 .7 % 3 4 .0 % 4 1 .5 % Share of FEED costs MRDC / State Nippon AGL Santos Oil Search ExxonMobil JV Partners Oil Search PNG LNG I nterest

2 6 % 2 8 % 3 0 % 3 2 % 3 4 % 3 6 %

FEED I nterest

PNG LNG I nterest OSH expected post Governm ent back-in final project interest

2 1

PNG LNG Financing

Debt:

Joint debt financing approach, led by a Finance Com m ittee co-

• rdinated by ExxonMobil w ith key input from OSH. Soc Gen

financial advisor

Recent road show s elicited strong interest from Export Credit

Agencies, com m ercial banks and rating agencies. Banks’ positive attitude to PNG dem onstrated by OSH’s recent corporate facility

I ncluding capitalised interest through construction, financing fees

and funding of the debt service reserve, seeking project finance for ~ US$ 1 1 .5 billion ( nom inal)

OSH share of project finance ~ US$ 3 .2 billion ( nom inal)

Equity:

OSH’s equity contribution ( nom inal) expected to be ~ US$ 1 .3 billion Funded from existing cash ( ~ US$ 6 0 0 m ) , corporate borrow ing from

refinancing ( US$ 4 5 0 m ) and oil cash flow s betw een 2 0 0 9 – 2 0 1 3 ( operating cash flow in 1 H0 8 w as US$ 3 4 8 m )

W ill utilise hedging, if required, to protect cash flow and optim ise

borrow ings

2 2

LNG Project Schedule

FEED PNG Government Approvals Benefits Sharing Agreement Project Financing Detailed Engineering Design & Procurement Construction / Commissioning 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4

First Cargo LNG *Schedule is Indicative only FID PIM Close Gas Agreement Entry Environmental, Licences etc EPC bids HOA’s

Marketing

SPA’s Possible early works

2 3

Econom ic I m portance of PNG LNG Project

ACI L Tasm an Report 6 February 2 0 0 8

“Affects econom y of PNG and its balance of trade situation profoundly” GDP w ill m ore than double Oil & Gas exports w ill increase 4 fold Up to 7 ,5 0 0 jobs in initial phase, 2 0 % by nationals; 8 5 0 full tim e positions,

developing national w orkforce over tim e

Huge cash flow s to Governm ent – national and provincial - and landow ners

through tax, royalties, levies and equity participation over 3 0 years

Multiplier effects additional

Governm ent recognises im portance. Leadership and Co-

• rdination defined:

Political leadership through Ministerial Econom ic Com m ittee Co-ordination branch approved and being im plem ented

Retention Licence renew al:

Governm ent has announced PRL 1 1 and PRL 1 2 renew al

Com m itm ent to pursue Benefits Sharing Agreem ent:

Targeting 4 Q0 8 / 1 Q0 9

Strong support for the Project at local com m unity level

2 4

I m pact on Oil Search

For Oil Search, the Project w ill provide:

Annual increm ental net production of ~ 2 0 m m boe Booking of ~ 5 5 0 m m boe of Oil Search’s 2 C gas resources

providing positive im pact on depreciation

Past costs pay back by Governm ent on back-in at Final

I nvestm ent Decision

Value additions to the oilfields by:

− I ncrem ental reserves due to extension of oil field life ( Gobe to

2 0 2 4 , Kutubu to 2 0 4 8 ) and revised reservoir opportunities

− Abandonm ent deferral − Additional pipeline tariffs − Cost sharing benefits in oil fields and pipeline export system − Reduction of oil field taxation rate on conversion

Detailed field review has com m enced to analyse field

m anagem ent of gas and oil, optim al developm ent and value synergies

− New Moran developm ent plan

2 5

Benchm ark of OSH Peers by AV/ 2 P Reserves

PNG LNG FI D w ill allow booking of ~ 5 5 0 m m boe of 2 P reserves

Notes

• 1. Comparable global E&P independent listed companies
• 2. Assumes exchange rate of 0.869 AUD/USD
• 3. Share prices as at 20-Aug-2008
• Agg. Value / 2 P Reserves

US$ / boe T u l l

• w

L u n d i n W

• d

s i d e R O C O i l A W E M a u r e l e t P r

• m

A d d a x D a n a S a n t

• s

J K X C a i r n V e n t u r e S

• c
• B

e a c h P e t r

• l

e u m P A R e s

• u

r c e s Q G C D N O P r e m i e r O i l S e a r c h ( + 5 5 m m b

• e

) N e x u s E n e r g y Median = US$ 1 3 .8 boe

15.0 14.1 14.1 13.8 13.4 12.7 12.2 11.8 10.9 10.5 9.4 8.9 7.9 6.1 54.7 20.4 20.0 18.1 15.1 15.0

5 1 0 1 5 2 0 2 5 6 0

I nternational Australian

2 6

Grow th Opportunities

2 7

Gas Grow th Opportunities

PNG LNG Project sets the stage for additional gas-based

grow th opportunities, beyond PNG LNG Project debottlenecking ( 1 0 + 1 5 % above nam eplate capacity)

Additional LNG developm ents com m and the highest

value:

Sufficient 2 C resources for additional train already exist in PNG

fields

Other gas developm ent options also available w ith robust

econom ics

Oil Search seeking to:

I ncrease contractible gas ( exploration, appraisal, acquisition) Aggregate gas for highest value developm ent option

Key partnerships w ith State – MOU signed in July New opportunities need to be considered in a fram ew ork

• f being m aterial for a US$ 5 bn+ com pany

2 8

Gas Resource Base

~ 1 / 3 rd of PNG gas resources are held in the Hides field PNG LNG Project accounts for approxim ately half of PNG’s discovered gas

resource

OSH has ~ 1 .6 tcf net of discovered gas plus associated liquids not dedicated to

PNG LNG

Technical Gas ~ 17,000 bcf Technical Gas ~ 17,000 bcf

Stanley 0.1% Barikewa 4% Pasca 1% Angore 7% Juha 6% P`nyang 10% Pandora A 7% Kutubu Area 8.3% Hides (Technical Reserve) Kimu 4.8% Elevala 3% Douglas 3% Elk 3% Ketu 2.3% Uramu 2% Gobe Area 2% Moran 1% Kuru 1% Koko 0.1% Bwata 0.3% SE Mananda 0.1% Iehi 1% Pandora B 2%

PNG LNG Project

30%

PNG discovered gas reserves by field (Source: Wood Mackenzie Path Finder)

2 9

Oil Search Vision for LNG Expansion

• 3 .5 – 4 .0 tcf additional gas

volum es required to underpin construction of additional train

• PNG LNG fields com prise

Hides, Juha Main, Angore, Kutubu, Agogo, Moran and Gobe Main

• Other Highlands JV partner

resources ( OSH best estim ates) include P’nyang and Juha North

• Forelands & Offshore

resources include Barikew a, SE Gobe, Pandora & Uram u

• Considerable exploration
• upside. 3 year program m e

targeting > 1 3 tcf gross resource

Exploration

3rd Train Threshold

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

Other Highlands JV Partner Resources 4th Train Threshold Forelands & Offshore Resources

3 0

Location of Gas Resources: PNG LNG Project Fields

Sufficient 3 C upside in

existing PNG LNG Project fields to underw rite a third 3 .1 5 m m tpa train

Appraisal drilling

planned for 2 0 1 0 / 1 1

• n Hides

Angore Juha Hides Moran Agogo Kutubu Gobe Main

1 5 .0 9 .3 Total 5 .1 4 .0 Juha, Angore, Kutubu, Moran, Gobe Main 9 .9 5 .3 Hides

3 C 2 C Field

3 1

Location of Gas Resources: Other field resources

8 .5 4 .8 Total 4 .7 3 .7 2 .3 2 .4 Juha North Forelands and Offshore: Kim u, Barikew a, SE Gobe, Uram u, Pandora Highlands: P’nyang

3 C 2 C Field

Barikew a Uram u Pandora P’nyang Kim u

Based on OSH best estim ates Appraisal drilling at

Barikew a in 2 0 0 9 and Pandora in 2 0 1 0

Juha North SE Gobe Angore Juha Hides Moran Agogo Kutubu Gobe Main

3 2

Barikew a Uram u Pandora P’nyang Kim u Juha North SE Gobe Angore Juha Hides Moran Agogo Kutubu Gobe Main

Location of Gas Resources: Exploration

2 0 0 9 – 2 0 1 1 exploration

program m e w ill test over 1 3 tcf m ean resource ( gross) , w ith average POS

• f ~ 1 5 %

Testing off-shore

prospectivity ( Flinders, Bigpela, PPL 2 3 4 , APPL 2 9 3 ) to com m ence in 2 0 0 9 / 1 0

Huria w ell expected to be

drilled prior to the Hides developm ent w ells

Considering a range of

farm -ins/ judicious farm - dow ns w ith strategic partners

Flinders Barikew a Deep Huria Hedinia Deep Cecilia I w a Bigpela W ell 1 Lead 7

3 3

Other Gas Grow th Opportunities

Other gas com m ercialisation opportunities can also offer

attractive returns, diversification and tim ely delivery. These range from export oriented projects to dom estic m icro projects including:

Methanol and other derivatives Gas to liquids ( GtL) Com pressed Natural Gas ( CNG) Gas for use in m ine operations eg extending m ine life at

Porgera

Pow er generation and other sm aller projects catering to the

needs of local com m unities & industry

Size of dedicated resource im portant in defining

com m ercial option

Range of study groups are being established w ith

Governm ent and other entities to form non-PNG LNG gas developm ent ‘m aster plan’

3 4

Other Gas Grow th Opportunities

Optionality in fields

such as P’nyang ( W estern Corridor) and Barikew a ( Eastern Hub) to be feedstock for either LNG or alternative developm ent

• ptions

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

Elk Douglas Stanley Ketu Elevala

3 5

AGL Asset Sale Outcom e a W in:W in for OSH shareholders

AGL is selling its interest in PDL 2 ( 1 1 .9 % ) and PDL 4 ( 6 6 .7 % ) Highest bidder expected to be know n by m id Septem ber

OSH and other licence partners ( ExxonMobil, JPP, MRDC) have pre-em ptive

• rights. 3 0 day pre-em ption period post notification

Can pre-em pt on either or both licences

Strong investm ent discipline w ill be applied w hen review ing pre-em ption

• pportunity. Considerations for OSH include:

Price Funding efficiency Pre-em ption intentions of partners

AGL sale outcom e a likely W in:W in for OSH shareholders:

I f a high sale price, dem onstrates strong m arket value and confidence w ith

‘look through’ im plications

Could represent a potential buying opportunity of w ell know n quality assets

subject to m eeting investm ent criteria

2 5 .6 % 1 0 .0 % 7 2 .3 % 4 9 .4 % 6 0 .0 % OSH % interest 2 7 .3 % SE Gobe Unit ( PDL 4 ) 6 6 .7 % Gobe Main ( PDL 4 ) 1 1 .9 % SE Mananda ( PDL 2 ) 5 .2 % Moran Unit ( PDL 2 ) 1 1 .9 % Kutubu ( PDL 2 ) AGL % interest Asset

3 6

AGL Asset Sale:

OSH Core Asset Value I m plications

• ‘See-through’ value range dependent
• n value ascribed to oil vs gas
• OSH offers m aterial upside in PNG LNG

Project equity, Other Gas and exploration increm ental to AGL assets, plus existing cash balances

OSH interest provides full exposure to Hides, Juha & Angore 3 C and 3 rd train upside 3 .1 – 3 .5 % 2 8 .5 % - 3 1 .5 % PNG LNG ( Project I nterest) As at 3 0 / 6 / 0 8 . Represents NSAI reserves less H1 actuals 1 0 .4 m m bbl 5 3 .8 m m bbl Producing Oil

Com m ents AGL OSH

5 ,0 0 0 5 ,5 0 0 6 ,0 0 0 6 ,5 0 0 7 ,0 0 0 7 ,5 0 0 8 ,0 0 0 8 ,5 0 0 8 0 0 8 5 0 9 0 0 9 5 0 1 0 0 0 Price paid for AGL's PNG Assets ( US$m )

I m plied OSH Core Asset "See-Through"

Value ( US$ m )

Core Assets

OSH: 3 year drilling program m e w ill test over one bnbbl unrisked oil and

• ver 8 tcf unrisked gas ( net to OSH) .

AGL: m inor exploration value in licence package Exploration OSH = ~ $ 6 0 0 m illion Cash & Receivables OSH has ~ 1 .6 tcf net of 2 C gas resources ( plus associated liquids) and ~ 3 .0 tcf of 3 C resources in other w ell positioned gas fields including P’nyang, Juha North, SE Gobe, Kim u, Barikew a, Pandora & Uram u Other Gas

Com m ents

Other OSH Assets

Excludes Other Gas, Exploration, Cash & working capital balances

3 7

PNG Oil Operations

3 8

Oil Operations: Providing Cash for Grow th

Since Oil Search took over operatorship of PNG oil fields

in 2 0 0 3 , fields have produced ~ 4 5 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 ( decline rate of 1 5 -2 0 % ) but

w ith appropriate investm ent, expect to m itigate decline curve for 2 -3 m ore years

PNG production is highly profitable – in 1 H0 8 , cash opex

• f US$ 1 0 / bbl, realised oil price of US$ 1 1 8 / bbl

Need to balance w ork program m es and hence production

• utcom es w ith dem and for rigs for exploration and gas

drilling

3 9

PNG Oil Fields

Usano Kutubu SE Mananda Moran SE Gobe Gobe Main

4 0

Production Sum m ary

Net Production ( m m boe)

MENA Hides GTE SE Mananda SE Gobe Gobe Main Moran Kutubu

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

4 1

Field Developm ent Drilling Activity

Usano:

2 0 0 8 : 4 w ells 2 0 0 9 : 1 w ells

SE Gobe:

2 0 1 0 : 1 -2 w ells

Kutubu:

2 0 0 9 : 3 w ells

Agogo:

2 0 0 9 : 2 w ells

Moran:

2 0 0 8 : 1 -2 w ells 2 0 0 9 : 1 -2 w ells

4 2

PNG Drilling Rig Strategy

Tw o ‘state of the art’ new rigs, ow ned by Oil Search:

Rig 1 0 3 – becam e operational late 2 0 0 7 . Had a num ber of

com m issioning and teething problem s, now resolved ( significant perform ance im provem ent on last developm ent w ell, UDT 9 ) . Leapfrog unit com m issioned

Rig 1 0 4 - delivery delayed prim arily due to late delivery of specialist

drilling equipm ent. Due to com m ence drilling activities in late Dec 0 8

Likely to use full tim e on developm ent activity in 2 0 0 9

Decisions to be m ade regarding Parker Rig 2 2 6 and Rig 1 0 1

( ex Rig 2 ) : Contract w ith Parker Rig 2 2 6 expires at end of Moran 1 4 w ell Contract expires w ith HAES on Rig 1 0 1 at end of Cobra 1 A w ell. Future

program m e under review

Rig choice for exploration/ gas drilling cam paign W orking w ith other operators in PNG

Hydraulic W orkover Unit operating w ell:

Mobilised low cost w orkover unit and com pleted first w orkover

4 3

Exploration

4 4

PNG Exploration

Portfolio optim isation

Data room prepared for farm dow n of som e exploration exposures

in PNG

Seeking to build on gas portfolio ( already outlined) Oil exploration

High grade rem aining prospects in close proxim ity to infrastructure Follow up Footw all plays based on encouragem ent from Cobra w ell Consider deeper Jurassic plays

Frontier “paradigm changers”

I n the past, PNG exploration focused on few plays Potential to open up new areas w ith selective, albeit high risk,

drilling

− Large hinterland structures w ith possible proven and also

younger untested reservoirs

− I nnovative seism ic acquisition ongoing in this play − Offshore fans and toe thrusts

Current w ells: Cobra ( testing) , W asum a, I w a and Cecilia ( 2 0 0 9 )

4 5

PNG Exploration

Iwa Wasuma Cobra Cecilia

4 6

Cobra 1 A

Seism ically defined footw all anticline

( ‘Sub-thrust Play’) adjacent to SE Gobe

• il field

Prim ary I agifu objective w as w ater w et,

but Hedinia Sand w as thicker than predicted pre-drill

Recovered oil, currently testing,

updip potential

Potential play-opener w ith

significant follow -up

De-risks m any along strike - large

structural features already identified in portfolio 10.9 Cue PNG Ltd 26.5 Murray Petroleum 6 2 .6 Oil Search W I % PPL 1 9 0

COBRA

PPL2 1 9 PPL1 9 0 PDL4 PDL4 PDL3 1 0 km Gobe Main SE Gobe W asum a

4 7

• Near field exploration opportunity

adjacent to the SE Gobe oil field

• I agifu sandstone prim ary objective -

proven reservoir at Gobe

• Seism ically defined structure - one
• f the last un-drilled ‘sim ple’

Hangingw all anticlines w ithin the m ain Foldbelt trend

• May also have deeper target

Footw all

• Mean recoverable reserves 3 5

m m bbl w ith upside potential to 1 0 0 m m bbl

• Chance of success 1 in 5
• W ell site construction com m enced

W ASUMA

PPL2 1 9 PPL1 9 0 PDL4 PDL4 PDL3 1 0 km Gobe Main SE Gobe W asum a SE Gobe W asum a

NE SW

W asum a

8.75 Merlin Petroleum 9 1 .2 5 Oil Search W I % PPL 2 1 9

4 8

Near field exploration opportunity located

along trend of Usano oil field and adjacent to SE Hedinia gas field

Toro sandstone prim ary objective Additional upside in Hedinia sandstone

( flow ed oil w hen DST’d in SE Hedinia 1 x) & I agifu sandstone

Tw o alternative m odels

Oil exploration prospect separated by fault

from SE Hedinia gas field: − Mean recoverable reserves ( Toro) 3 0 m m bbl

w ith upside potential to 6 0 m m bbl

− Chance of success 1 in 6

Gas appraisal along trend of SE Hedinia

( no fault com partm entalisation) : − Mean recoverable reserves ( Toro) 1 5 0 bcf

w ith upside potential to 2 5 0 bcf

− Chance of success 1 in 2 I W A

1 0 km

NE SW

I w a

SE Mananda Moran Paua Kutubu

Lake Kutubu

Agogo PDL2 PPL2 3 3 PPL2 1 9 PDL5 PDL6 Extension of SE Hedinia Anticline

11.90 AGL (PNG) 6.75 PRK 6.78 Merlin Petroleum 14.52 ExxonMobil 6 0 .0 5 Oil Search

W I % PDL 2

4 9

MENA Exploration Strategy

Sale of som e of MENA assets to Kuw ait Energy recently

com pleted for US$ 2 0 0 m illion & W C

Re-focus on MENA assets that have potential to m ake a

m aterial contribution

Retained assets provide significant upside potential –

seeking to m ature and de-risk through seism ic/ drilling

Pre-drill POS can be reduced to > 2 0 % through

technology or quality of acreage

Continue to seek m aterial opportunities in w orld class

petroleum system s

Maintain and build on core regional relationships

Key strategic advantage of OSH is ability to operate at a

local level

Manageable budget yet m aterial opportunities

5 0

MENA Exploration

Sana’a Office Dubai Office

Block 3 Block 7 Tajerouine Le Kef Area 1 8 Bina Baw i Shakal

5 1

Shakal – Kurdistan, I raq

Shakal 1 w ill target a large sub-thrust anticline Three Tertiary carbonate units are prim ary target w ith up

to 1 ,3 5 0 m etres of closure

Each target has potential of > 8 0 m m bbl recoverable Key risk is fault separation from adjacent Pulkhana field W ell planned to spud early Septem ber

20 Govt. 20 Govt (unassigned) 9 Petoil 36 Shakal Prod. Ltd (op) 1 5 Oil Search

W I % Shakal PSC

Near Top Euphrates depth map

1 0 km

Pulkhana Field Shakal com partm ent

5 2

Area 1 8 located in under-explored Pelagian Basin, offshore Libya.

Pelagian Basin contains ~ 7 bn boe reserves

Area 1 8 is located on trend to productive Pelagian Basin fields Exploration targets:

Eocene carbonate ( ~ 2 0 0 m m bbl m ean reserves) , proven play Cretaceous carbonate ( ~ 7 0 m m bbl) , proven play Jurassic clastic gas play ( ~ 1 tcf) new play Triassic clastic play ( ~ 2 .2 tcf) new play

Caliph Prospect w ill target all three plays Other prospects and leads in the perm it are defined on 2 D seism ic

Area 1 8 – Offshore Libya

70 Petrobras (Operator) 3 0 Oil Search

W I % Area 1 8

5 3

Yem en Block 3 and 7

Proven com m ercial fairw ay On trend w ith OMV basem ent discovery

( 2 P reserves ~ 1 0 0 m m bbl)

> 8 0 0 km 2 3 D seism ic recently

com pleted in Blocks 3 and 7

Main focus is basem ent play but

shallow er plays also present

Currently processing and interpreting

seism ic

Drilling planned to begin m id-2 0 0 9

Yemen Oil Company MND PetOil Oil Search

Block 3

Yemen Oil Company ARC/Voyager Kufpec Oil Search

Block 7

Adelphi 6.00 20.00 34.00 4 0 .0 0

W I %

8.50 21.25 21.25 3 4 .0 0

W I %

15.00

Example of large, basement-involved structures Block 7 Block 3

5 4

Financial Overview

5 5

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

Financial Perform ance

4 6 6 .7 4 1 0 .7 1 3 3 .3

2 0 0 5 2 0 0 6 2 0 0 7 1 H 0 8

Revenue EBI TDAX Core Net Profit Half Year Full Year US$ m

5 6

~ US$ 6 0 0 m illion in cash follow ing receipt of MENA

asset sale funds. No debt

Refinancing of 5 year US$ oil facility in final stages:

Very positive response from bank m arket w ith com petitive

• ffers for m ore than tw ice the am ount sought

Facility size increased by US$ 5 0 m illion to US$ 4 5 0 m illion Pricing and facility term s m ore favourable than those on

the facility it is replacing

Alm ost half the facility provided w ithout political risk

insurance – strong endorsem ent for PNG

W ith cash and finance facility, liquidity is > US$ 1 bn No oil hedging undertaken during first half of year

• r currently in place

Treasury Update

5 7

FY0 8 Capital Outlook Update

Exploration expenditure for full year 2 0 0 8 expected

to be US$ 1 5 0 - 1 6 0 m illion, inclusive of acquisition

• f Shakal interest in Kurdistan

Gas com m ercialisation and new business

expenditure of US$ 8 0 m illion, including grow ing FEED spend on PNG LNG as activities ram p up

Developm ent expenditure of US$ 1 5 0 m illion, plus

US$ 2 0 m illion on rig acquisition paym ents

5 8

Outlook

5 9

Gas set to dom inate portfolio over tim e

Substantial unrealised value

exists w ithin Oil Search’s existing asset portfolio ( particularly PNG gas)

Current share price discounts

assessed PNG LNG value and reflects no value for further gas developm ents or oil exploration success

Value calibration anticipated

from :

PNG LNG: Key m ilestones

reached ( LNG HOA’s, early w orks)

Progress on dem onstrating

value grow th options ( exploration and appraisal program m e, agreem ents etc.)

2 0 0 8 2 0 0 9 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 Cash Fourth Train Third Train PNG LNG Oil

Value

NPV Over Tim e ( Unrisked)

6 0

Outlook

Production outlook for 2 0 0 8 of 8 .5 – 9 .0 m m boe Cash flow s from operations continue to strengthen

already healthy balance sheet. Liquidity of > US$ 1 bn provides excellent financing flexibility for PNG LNG as w ell as an active exploration, appraisal and developm ent program m e

PNG LNG Project on track to m ake Final I nvestm ent

Decision in late 2 0 0 9 , first production expected late 2 0 1 3 / 2 0 1 4 . W ill deliver key infrastructure to PNG. 3 0 year+ legacy project

Debottlenecking opportunities in PNG LNG and resource

upside in Hides are likely to provide next tranche of value creation

Significant existing 2 C resources outside PNG LNG

rem ain to be com m ercialised. Value enhanced by PNG LNG Project infrastructure. Oil Search w orking w ith PNG Governm ent on non-Project gas developm ent

6 1

Likely Catalysts in 2 0 0 8 -2 0 0 9

3 Q 2 0 0 8

AGL Asset sale Spud Shakal w ell in Kurdistan

4 Q 2 0 0 8

PNG LNG Offtake HOAs late 0 8 / early 0 9 Spud Caliph w ell in Libya

1 Q 2 0 0 9

Benefits Sharing Agreem ent

2 Q 2 0 0 9

Decision to com m ence early w orks Finalise EPC bids

2 H 2 0 0 9

FI D on PNG LNG Financial Close

6 2

Sum m ary

PNG LNG Project and com m ercialising rem aining gas w ill

drive Com pany value. Rising NPV over tim e, as cash flow s get closer and Project de-risks

Core PNG oil business rem ains robust, w ith stable

production and cost outlook, provides cash flow s to support LNG and other developm ent options

Exploration activities w ound back from 2 0 0 7 high levels,

but m aterial prospects still to be drilled in both PNG and MENA

AGL asset sale provides industry value benchm ark, w ith

partial value see-through. May provide opportunity to increase PNG LNG interest, but only in the right circum stances – series of gates for decision-m aking

Considerable upside value in existing asset base still to

be recognised by m arket

6 3

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