UK Oil and Gas Investor Forum Bank of America Merrill Lynch April - - PDF document

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UK Oil and Gas Investor Forum Bank of America Merrill Lynch

April 2012

Oil Search Profile

Established in Papua New Guinea (PNG) in 1929 Operates all of PNG’s producing oil and gas fields. Current gross production ~33,500 boepd, net share ~18,500 boepd At December 2011, proven reserves were 330 mmboe, proven and probable 553 mmboe plus 318 mmboe 2C resources, taking 2P reserves and 2C resources to 870 mmboe PNG Government is largest shareholder with 15% . In early 2009, Govt issued exchangeable bonds over shares to IPIC of Abu Dhabi 29% interest in PNG LNG Project, world scale LNG project

• perated by ExxonMobil. Project in construction, first LNG sales

expected 2014 Exploration interests in PNG and Middle East/North Africa Market capitalisation ~US$9 billion. Listed on ASX (Share Code OSH) and POMSOX, plus ADR programme (Share Code OISHY)

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Key Oil and Gas Fields, PNG

Kum ul Term inal Port Moresby Porgora Gold Mine 7 °S

Juha Hides Moran Agogo Mananda 5 Proposed Juha Facility

PRL0 8 PPL2 4 0 PRL1 1 PDL7 PPL2 3 9 PDL1 PRL0 2 PDL2 PDL4 PDL3 PRL0 9 PDL6 PDL5 PRL1 4 2 6 0 2 3 3 PDL9 PDL8 PPL2 3 3 APPL3 8 6

LNG Facility Kutubu Moro Airport Flinders

6 °S 8 °S 9 °S

PRL0 1 PPL2 3 4

PRL1 0

PPL2 4 4

Kiunga Kundiaw a

• Mt. Hagan

Mendi Kerem a

Trapia Barikew a Pandora SE Mananda Uram u P’nyang

Madang Daru W abag

Hides Conditioning Plant & Kom o Airstrip Gobe/ SE Gobe

PPL2 7 6 PPL3 3 8 3 3 8 3 3 8 3 3 8 PPL3 3 9 3 3 9 3 3 9 3 3 9 PPL3 3 9 3 3 9 PPL3 1 2 3 3 9 3 3 9 PPL2 6 0

Lae 1 4 5 °E 1 4 6 °E 1 4 4 °E 1 4 3 °E 1 4 7 °E

Kim u

PRL3 APPL3 8 5 2 4 0 2 4 0

Kopi Scraper Station

1 4 2 °E 1 4 1 °E

Kopi W harf

PPL2 1 9

1 0 0 km

PNG LNG Project New Facilities PNG LNG Project Gas Resources Non PNG LNG Gas Resources Exploration Gas Resources

Angore

Elk/ Antelope

PPL2 7 7

Oil Field Gas Field Prospect Oil Pipeline Proposed Gas Pipeline OSH Facility LNG Facility Major Road

PPL2 7 7

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OSH Strategies to Create Value

Optimise current oil and gas production: Through improved efficiencies and pursuit of near field opportunities Maximise value of PNG LNG Project (T1 & T2): By utilising in-country knowledge to assist Operator Develop LNG and other gas expansion

• pportunities:

Build gas resources for both PNG LNG expansion and standalone LNG project/s Measured programme of other growth options: Optimise exploration portfolio Ensure Oil Search’s Sustainability: Operate business in transparent and sustainable manner to ensure long term operating stability and enhance ‘social licence to operate’

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PNG LNG Project Overview

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Kum ul Term inal Port Moresby

7 °S 1 4 5 °E

Hides Wells

Juha Facility LNG Facility

Kutubu CPF

1 4 5 °E 1 4 6 °E 1 4 4 °E 1 4 3 °E 6 °S 8 °S 9 °S

Goroka Kundiaw a

• Mt. Hagan

Mendi Kerem a

Komo Airfield 1 0 0 km

1 4 7 °E

Daru W abag

Lae

Offshore pipeline Onshore pipeline and Infrastructure

Gobe PF

Kopi Wharf

Hides Gas Conditioning Plant

Oil Field Gas Field Prospect Oil Pipeline Proposed Gas Pipeline OSH Facility LNG Facility Major Road

PNG LNG Project Overview

6.6 MTPA, 2 train development, operated by ExxonMobil Over its 30-year life, PNG LNG expected to produce over 9 tcf of gas and 200+ million barrels of associated liquids Initial Equities:

ExxonMobil - 33.2% Oil Search - 29.0% National Petroleum Company of PNG (PNG Government) -16.8% Santos - 13.5% Nippon Oil - 4.7% MRDC (PNG Landowners) - 2.8%

Fully contracted to Asian buyers, with continuing strong market interest

Sinopec (China) ~2.0 MTPA TEPCO (Japan) ~ 1.8 MTPA Osaka Gas (Japan) ~1.5 MTPA CPC (Taiwan) ~ 1.2 MTPA

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PNG LNG Project Overview

Main EPC contractors:

LNG Plant: Chiyoda/JGC Offshore Pipeline Saipem Hides Gas Plant CBI/Clough JV Onshore Pipeline Spiecapag Infrastructure McConnell Dowell/CCC JV Early Works Clough/Curtain JV Associated Gas (OSH only) Jacobs (formerly Aker Solutions)

Different labour environment to Australian LNG projects Two years into four-year construction period. First LNG sales expected 2014, capital cost US$15.7 billion

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Timetable

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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 AG

construction

• Com plete pipe lay
• 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

and laying

• Start LNG equipm ent

installation First Gas from Train 1 , then Train 2

• Com plete AG
• Continue onshore

pipe lay

• Com plete offshore

pipe lay

• Start Hides plant

installation

Focus items for 2012

Completion of Komo Airfield construction Structural steel erection, mechanical construction of major equipment at HGCP Continued construction at LNG Plant site including commencement of topside jetty works and tank hydrostatic testing Mechanical completion of offshore pipeline and Kopi / Kutubu sections of onshore pipeline Completion of AG CPF and Gobe plant modifications and PL2 Kumul refurbishment projects, including ready-to-supply commissioning gas status Commencement of development drilling Continued focus on working with government and local communities, maximising opportunities for local content

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PNG LNG Project Plant Site near Port Moresby

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PNG LNG Plant Site

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February 2 0 1 1 February 2 0 1 2

PNG LNG Project – Offshore Pipeline

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SEMAC I – Offshore pipelay vessel

PNG LNG Project Onshore Pipeline

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Pipe stringing Pipe burial Pipe w elding team Pipeline route clearing

PNG LNG Project – Upstream

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Hides Gas Conditioning Plant and Hides w ell pad access road Kom o Airfield

AG and PL 2 Life Extension Projects

1 5 1 5

TEG Dehydration Unit installation New Control Room at CPF - com m enced operations in January 2 0 1 2 New CALM Buoy being low ered into position – first offtake March 2 0 1 2

Growth Activities

OSH has embarked on largest drilling programme ever undertaken. Will continue through 2012 into 2013 Multi-tcf risked potential for gas and several hundred millions of barrels of

• il potential

For gas, pursuing two pronged strategy, focused on converting proven and probable to proven contractable reserves, plus new exploration:

PNG LNG Expansion Gulf Area LNG

For oil and gas:

Continuing near-field exploration in PNG Pursuing high-graded exploration outside PNG

Programme has potential to underwrite continued gas commercialisation and

• ngoing oil production

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Angore anticline, PNG Highlands

P’nyang South 1

Appraisal well successfully discovered gas in southern fault block Sidetrack currently underway to establish gas:water contact and extent of discovery PRL 3: ExxonMobil 49% , Oil Search 38.5% , JX Holdings 12.5%

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2011 Seismic Acquisition

6 °S 8 °S 1 4 4 °E 1 4 2 °E

Hides Kutubu SE Gobe Moran Agogo Juha Angore 1 0 0 km

P’nyang 1X P’nyang South 1 P’nyang 2X

P’nyang South

Trapia 1

Trapia exploration well scheduled to follow P’nyang South PRL 11: Oil Search 52.5% , ExxonMobil 47.5% Series of prospects in area with multi-tcf potential 2D seismic programme in 2012/13 to further mature prospects Recent acquisition of adjacent licence, PPL 277, 50:50 with ExxonMobil

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1 0 km

PPL 277 PPL 277

6 °S 8 °S 1 4 4 °E 1 4 2 °E

Hides Kutubu SE Gobe Moran Agogo Juha Angore 1 0 0 km P’nyang South

Trapia

PDL 1, PDL 7 and PDL 8 Hides and Angore Fields

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Hides Nogoli Cam p GTE PL 1 Hides GTE Plant PDL 1 – Hides Field 1 0 New W ells Drilling 2 0 1 2 +

36.81% 16.66% 24.03% 20.50% 2.00%

PDL 1

ExxonMobil Oil Search Santos PNG Govt Gas Resources Gigira Ltd.(L/O) 36.81% 40.69% 20.50% 2.00%

PDL 7

ExxonMobil Oil Search PNG Govt Gas Resources Hides No.4 Ltd.(L/O) 36.812% 40.69% 20.50% 2.00%

PDL 8

ExxonMobil Oil Search PNG Govt Gas Resources Angore Ltd. (L/O)

PDL 7 – South Hides Hides Gas Conditioning Plant Construction 2 0 1 2 / 1 3 PDL 8 – Angore Field 2 New W ells 1 0 km Kom o Airstrip

Hides development drilling programme:

Scheduled to commence in mid 2012, with GWC well planned for early in drilling sequence GWC well has potential to increase overall Hides resource volume significantly Drilling timing adjusted to accommodate Project critical path optimisation

Further Resources from Oil Fields

2 0

6 °S 8 °S 1 4 4 °E 1 4 2 °E

Kutubu Gobe Moran Agogo 1 0 0 km SE Mananda

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 0 1 0 2 0 1 1

5 0 CPF, APF, GPF Flare History 1 0 2 0 3 0 4 0

2 0 1 2 F

6 0 7 0 Daily Average ( m m scf/ d)

PNG LNG Project Sanction Forecast

Reserves and deliverability review underway for oil and gas in existing oil fields Will provide optimal production management plan post commencement

• f gas production for PNG LNG

Number of recent discoveries, identification of areas for potential new reserves and success in gas conservation ahead of original prognosis will provide further resources for PNG LNG Potential upside for both gas and ongoing oil production

Gulf Area LNG

Multi-licence, multi play type, multi well opportunity with material equity Large, initial seismic programme completed in 2011:

~6,300 km² 3D offshore and 95 km 2D onshore

Significant resource potential identified in proven hydrocarbon (gas & condensate) province

Over 30 opportunities identified across multiple play types Potential to support two LNG trains

Initiating additional 3D seismic programme over most prospective neighbouring area

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PRL0 1 PPL23 4 PRL1 0

9 °S 1 4 5 °E 1 4 6 °E 1 4 4 °E

Gobe

PPL27 6 PPL31 2 PPL33 8 PPL33 9 PPL33 9 3 3 9 3 3 9 3 3 8 3 3 8 3 3 8 3 3 9 3 3 9 3 3 9

8 °S 7 °S

3 3 9 PPL24 4

5 0 km

Elk/ Antelope

Kum ul Term inal

Pandora

Flinders 2 0 1 1 3 D Seism ic Regions 2 D Seism ic Lines 2 D Seism ic 2 0 1 1 Lines

Uram u

Hagana Tadiva Lade New 2 0 1 2 3 D Seism ic Region 2 0 1 1 3 D Seism ic Regions

Gulf Area LNG Opportunities

High quality 3D dataset assembled 6 independent play types identified to date, each analogous to proven play types elsewhere:

Submarine fan & channel play types – as yet untested in PNG Carbonate plays – proven in PNG

Several drill-ready prospects, with many follow-up opportunities, if successful

Am plitude Map

6 km

NE

Mud/ silts

SW

3 km 1 0 0 m

Sand Filled Channel Com plexes 2 D Seism ic Lines Turbidite Sheet Sands

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Example of Offshore 3D Seismic PPL 234

?

Faulted Miocene Faulted Miocene

Is gas migrating from the deep kitchen through faults in the Miocene section? 2 3

Kurdistan Region of Iraq

• Taza PSC

Oil Search operator with WI of 60% , ShaMaran 20% , KRG 20% Very prospective location adjacent to four fields Large, simple 4-way dip closure identified from 2010 seismic Well planning underway for mid-2012 spud

2 4 2 4

Taza PSC Taza Prospect

Up to 1 8 0 km 2 Kor Mor Gas Field Pulkhana Oil Field Jam bur Oil Field

Taza Seismic

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Four regional reservoir targets:

Jeribe Euphrates/Serikagni Kirkuk Group Jaddala

Recoverable resources in success case: 200 - 400 mmbbl (mean estimate), dependent

• n recovery factors

and phases present

Taza 1

Proposed Location Lower Fars Upper Fars Saliferous

2km

SW NE

Kor Mor Gas Field Pulkhana Oil Field Jam bur Oil Field dow ndip

Tunisia – Tajerouine PSC

Seismic acquired in 2010, with additional infill seismic shot in late 2011 Proven oil plays present and new deeper gas play developed Fiscal regime favourable – discovery would be material Semda-1 planned for 2H 2012, after Taza. Has potential for >100 mmboe

2 6 2 6

~ 1 0 km

Tajerouine

2 7 2 7 2 7

Moran, SE Mananda, Agogo 6 w ellsite & Agogo Production Facility

World Class Safety Performance

Total Recordable Injury Frequency Rate of 1.85 in 2011

TRI / 1 ,0 0 0 ,0 0 0 Hours Oil Search Australian Com panies ( APPEA) I nternational Com panies ( OGP)

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Oil Search Production

(existing fields)

1 2 3 4 5 6 7 8 9 10

2009 2010 2011 2012 2013 2014

Net Production ( m m boe)

7 .6 6 8 .1 2

( Forecast)

6 .2 -6 .7 6 .6 9

Hides GTE S E Mananda S E Gobe Gobe Main Moran Kutubu

Production Outlook, 2012 – 2013

2011 production of 6.69 mmboe, at upper end of 2011 guidance of 6.2 – 6.7 mmboe

35+ successful development and near field wells in recent years Workover programme has added more barrels

Production guidance for 2012 of 6.2 – 6.7 mmboe, unchanged from 2011. Oil field

• utput impacted by:

Significant contributions from successful 2011 wells and workovers Natural decline 16 day CPF/APF shutdown for tie-in of Associated Gas facilities (completed)

Robust workover and development drilling programme in 2012, coupled with continued focus on maturing near-field portfolio and appraising new pools identified following recent near-field success Production in 2013 expected to be broadly flat, subject to success of work programmes Rig strategy:

Following P’nyang drilling, Rig 103 to be mobilised back to PDL 2 Will provide optionality to pursue exploration and appraisal opportunities without potential adverse impact on development programme

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Hedinia 10 and Agogo 6

Highly successful near-field exploration to date. Prospects are complex and invisible

3 1 Kutubu oil field Sub-thrust forelim b

ST1 ST2 ST3

3 1 Agogo oil field Sub-thrust forelim b

2012/13 Development & Near-Field Appraisal Drilling Activity

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PRL0 8 PPL2 4 0 PRL1 1 PRL1 2 PPL2 3 9 PDL1 PPL2 3 3 PPL2 1 9 PRL0 2 PDL2 PDL5 PDL6 PRL0 9 PRL1 4 PPL2 6 0 APPL3 8 6 PDL 4 PDL 3 PDL 4 PRL 1 2

5 0 km

Angore Juha Hides SE Mananda Barikew a Kim u Cobra I ehi

PPL2 4 0 PPL2 3 3

6 °S 1 4 3 °E 1 4 4 °E 7 °S

Mananda 5

Usano:

2 0 1 2 : ± 1 w ell, 1 w orkover

Kutubu:

2 0 1 2 : ± 1 w ell, 4 w orkovers 2 0 1 3 : 1 w ell, 2 w orkovers

Agogo:

2 0 1 2 : 1 w ell 2 0 1 3 : 1 w ell

Moran:

2 0 1 2 : 1 w ell 2 0 1 3 : 1 w ell

SE Gobe:

2 0 1 2 : 2 w ell interventions

PNG Issues

Unprecedented political uncertainty in PNG over past 6 months:

No impact to operations with continued progress on all projects Security and safety of staff paramount

Election in June/July 2012 with new government formed in August/September:

Anticipate no change to operating status but cautious and watchful Continue push for transparency and governance regarding benefits Enhance community engagement, including Health Foundation

Reaching peak of in-country activities, with continued but manageable stress on government systems, personnel and services availability OSH likely to be PNG’s largest single investor in 2012, with over US$2bn to be spent on development, appraisal, exploration and

• perations:

Significant vote of confidence in quality of assets and ability of Company to work with Government, bureaucrats and community and manage

• perating and investment risks

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Summary

Peak activity year for PNG LNG Project delivery in 2012:

Construction at PNG LNG plant site, HGCP and Komo Completion of Associated Gas and life extension projects Focus on management of in-country issues

Major drilling programme focused on gas expansion and resource

• underwriting. Potentially transformational for Oil Search:

P’nyang and Trapia wells Hides and Associated Gas field evaluation Gulf area drilling

Active oil exploration programme:

Near field opportunities Kurdistan, Tunisia

Continued strong oil field production performance Unprecedented opportunity to underscore long term value growth from OSH’s portfolio of assets Remain confident that country risks and challenges can be managed through 2012

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Oil Search Production Outlook,

• incl. PNG LNG T1/2

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2 0 0 8 2 0 0 9

8 .6 0 7 .6 6

2 0 1 0

8 .1 2

2 0 1 1

6 .6 9

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

2 5 Net Production ( m m boe) 5 1 0 1 5 2 0

MENA Hides GTE SE Mananda SE Gobe Gobe Main Moran Kutubu

2 0 1 7

6 .2 -6 .7

( Forecast)

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Appendix 1: 2012 Guidance

Production:

6.2 – 6.7 mmboe

Operating costs

US$21 - 24/boe (incl. corporate costs) Impacted by:

Major workover programme to maximise oil recoveries before gas production FOREX PNG inflation Associated Gas activities Sustainability initiatives

Depreciation, depletion and amortisation:

US$7 - 9/boe Future DD&A profile impacted by life extension activities and development drilling opportunities

Appendix 2: 2012 Investment Outlook

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US $’ m Investing : Exploration inc gas growth PNG LNG Production Corporate (inc rigs) Business Development** Financing : Dividends 2011 (A) 145 1,287 129 7 10 0*

* Dividend fully underw ritten * * Previously included in Exploration

# 2 0 -2 5 % of spend in MENA # # I ncludes capitalised interest and fees

2012 (F) 240 – 280# 1,650 – 1,750## 130 – 150 10 7 0*

Appendix 3: Liquidity Outlook

Strong balance sheet, augmented by continued strength in oil production and high oil price Outlook updated for 2011 financial results, forward prices and revised PNG LNG Project cost Liquidity at 31 December 2011 ~US$1.3 billion (US$1.05bn cash plus corporate facility of US$246.5m) At end December 2011, US$1.75 billion drawn down under PNG LNG project finance facility Company remains well placed to meet existing commitments, with sufficient liquidity to deliver on strategic plan initiatives

Key Assumptions:

• 1. Brent Forward curve pricing as at 17 February 2012
• 2. PNG LNG Project on schedule and revised budget
• 3. Train 3 FEED costs included, Train 3 construction costs excluded
• 4. Production profiles, other Capex / Exploration based on OSL business plan
• 5. Existing oil facility refinanced

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2 0 1 4 US$ m m Liquidity ( cash plus undraw n bank debt)

Dec 2 0 1 1

Appendix 4: Other Key PNG Players

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Talisman/Mitsubishi and Sasol have significant acreage in Western

• Forelands. InterOil has strong

position in Eastern Forelands OSH strategy focused on core PNG LNG Foldbelt acreage and Gulf - viewed as offering greatest potential for large gas discoveries

Port Moresby

8 °S 6 °S 1 4 6 °E 1 4 2 °E

Juha

1 0 0 km

Hides & Angore Gobe Kutubu & Agogo

Petroleum Licences

Oil Search Equity Participation

Port Moresby

1 0 0 km

Juha Gobe Kutubu & Agogo Hides & Angore

8 °S 6 °S 1 4 6 °E 1 4 2 °E

Talism an Equity Participation NGE & I nteroil Equity Participation

NGE I nteroil

Port Moresby Juha Gobe Kutubu & Agogo Hides & Angore

8 °S 6 °S 1 4 6 °E 1 4 2 °E 1 0 0 km

DISCLAIMER

While every effort is made to provide accurate and complete information, Oil Search Limited does not warrant that the information in this presentation is free from errors or omissions or is suitable for its intended use. Subject to any terms implied by law which cannot be excluded, Oil Search Limited accepts no responsibility for any loss, damage, cost or expense (whether direct or indirect) incurred by you as a result of any error, omission or misrepresentation in information in this presentation. All information in this presentation is subject to change without notice. This presentation also contains forward-looking statements which are subject to particular risks associated with the oil and gas industry. Oil Search Limited believes there are reasonable grounds for the expectations on which the statements are based. However actual outcomes could differ materially due to a range of factors including oil and gas prices, demand for oil, currency fluctuations, drilling results, field performance, the timing of well work-overs and field development, reserves depletion, progress on gas commercialisation and fiscal and other government issues and approvals.

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