Oil Search Roadshow September 2008

Transcription

1 O I L S E A R C H L I M I T E D Oil Search Roadshow September

2 Summary Oil Search has delivered sustained top quartile growth over past five years (53% annualised return) Delivery of PNG LNG Project over next four years, together with progressive development of 2 nd and 3 rd tier gas, has potential to multiply Company value over this period PNG LNG The Premier AsiaPac LNG Project: On track to deliver FID towards end 2009, with first LNG in late 2013/early 2014 Thirty+ year legacy project, with capacity to triple OSH production. Also positively impacts oil field life, value and reserves Current share price discounts assessed PNG LNG value and reflects no value for further gas developments or exploration 2

3 Profile Established in Papua New Guinea (PNG) in 1929 Operates all of PNG s producing oil and gas fields. Current gross production ~44,000 boepd, net share ~23,000 boepd As operator, responsible for generating 22% of PNG s export revenue and 16% of its GDP in 2007 PNG Government is largest shareholder at 17.6% PNG s largest investor and taxpayer At , 73.5 mmboe 2P reserves plus 950 mmboe undeveloped 2C gas and liquids resource. ~60% of gas resource is dedicated to PNG LNG, a world scale LNG development operated by ExxonMobil. Significant resources still to be commercialised Range of material 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 programme (Share Code OISHY) 3

4 4 Oil Search Location Map

5 Consistent strong performance over past 5 years Ranked No.5 TSR Performer amongst current ASX 100 for 5 year period to Dec 2007 (53% annualised return) Share price (rebased to OSH) Oil Search Woodside WTI oil Santos ASX Jul 03 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 OSH (A$/share) WTI (US$/bbl) (Actual values of the 1 st of the month) 1 Aug

6 World Class Safety Performance Total Recordable Incidents (TRIs) TRI / 1,000,000 Hours OSH OGP APPEA Australian Companies International Companies Oil Search

7 Strategy 2007/08 Strategy Review defined initiatives to drive continued top quartile returns, by unlocking value within existing asset base Major strategy objectives Ensure Final Investment decision for PNG LNG Project Transforms Oil Search into significant LNG producer, 30+ year legacy project Position Company to drive 2 nd phase gas developments using existing 2C, 3C gas resources and through gas exploration Optimise PNG oil field operating performance to sustain production and cashflows up to and beyond first gas Pursue material exploration opportunities in PNG and MENA 7

8 PNG LNG Project AsiaPac s next LNG development 8

9 Primary Focus - PNG LNG PNG LNG Project represents PNG s cornerstone gas development, will more than double country's GDP Affects economy of PNG and its balance of trade situation profoundly (ACIL Tasman report, Feb 2008) Will underpin Oil Search s production and profits for 30+ years Will commercialise ~550 mmboe of Oil Search s 2C gas resources and add ~20 mmboe to annual net production, tripling current production Will unlock value for OSH and shareholders New gas developments at premium prices (BG & Origin, Petronas/Santos, Shell/Arrow, QGC/Sunshine Gas) AGL sale will provide market a window to project value 9

10 Regional LNG markets are robust Regional market fundamentals remain robust Steady expansion from existing markets (Japan, Korea, Taiwan) Growth from emerging markets of India & China and new markets Decline in existing contracts and concern with new project timing Supply and Demand imbalance after 2012 Projects under construction do not match capacity Extensive set of projects in queue from 2013 onwards mmpta Pacific Basin LNG Supply and Demand to 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 Source Wood MacKenzie Global LNG, April Onstream Under Construction Possible Speculative Pacific LNG Demand 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 10

11 LNG Projects Under Construction and Proposed Large number of possible projects under consideration Not many possible projects will be able to cover the demand gap in 2013 Western Australia: strong cost pressures and competition for resources Potential first production post 2014/15 Australian CSG projects: 4+ projects competing for 2014 window, new technology with several hurdles to be overcome Increasing foreign focus PNG LNG is an attractive option relative to others 11

12 LNG Pricing Strong pricing drivers: Supply/demand fundamentals Pull from Europe Delays in other projects Environmental advantages Pricing and challenges with competing energy sources LNG (US$/mmbtu) Crude Oil Parity Recent contract pricing around oil price parity: Recent contracts: Sept 07: Petrochina, 2-3 mtpa, years ex Browse Sept 07: Petrochina, 1 mtpa, 20 years ex Gorgon Nov 07: CPC, 2-3 mtpa, years ex Browse April 08: Petrochina, 3 mtpa, 25 years from 2011 ex QatarGas April 08: CNOOC, 2 mtpa, 25 years from 2009 ex QatarGas II NWS 2007 Contracting JCC ($/bbl) Traditional Contracting

13 PNG LNG: The Premier AsiaPac LNG Project World Class and World Scale LNG Project 2C resources of 9.3 tcf 6.3 mmtpa, 2 train LNG project Clean, liquids-rich gas No technology issues or concerns Well positioned for the Asia market Rapidly advancing in optimal timeframe to satisfy regional demand in 2013/2014 period Joint Venture is strongly aligned with supportive Government Strong Operator ExxonMobil is the Project operator excellent record of project delivery on time and on budget, assisted by comprehensive pre-feed process Oil Search providing PNG experience Strong Project team Real Expansion Capacity New infrastructure will stimulate additional gas development Substantial existing 2C and 3C resources 13

14 PNG LNG Project Integrated development of Hides, Angore and Juha gas fields plus associated gas from the Kutubu, Agogo, Gobe and Moran oil fields Upstream infrastructure including production wells, processing facilities and pipeline network linking to the export pipeline Gas export pipeline from PNG See schematic above for detail Highlands to LNG plant near Port Moresby Liquefaction plant, export loading and support facilities located in Portion 152, 20 km from Port Moresby 14

15 PNG LNG Project Fields Juha Main Hides Angore Moran Agogo Kutubu Gobe Main 15

16 PNG LNG Project Milestones reached in 1H08 Commercial alignment achieved, with Joint Operating Agreement (JOA) executed in March 2008 amongst the Project Owners Initial funding interests pre-government back-in agreed (OSH 34%) Unitisation and redetermination procedures agreed Actionable finance plan agreed Marketing Representative Agreement signed for joint marketing of 6.3 mmtpa, led by ExxonMobil, Project rolled-out to buyers at GasTech in Bangkok in March 2008 Gas Agreement signed May 2008 Outlines fiscal terms and legal obligations under which Project will operate over its life The terms include 30% tax rate and Additional Profits Tax (APT) which applies once a certain threshold level of return has been achieved Sets terms and mechanism for State equity participation in the Project Front End Engineering and Design (FEED) commenced in May

17 Project Status High quality project team assembled ExxonMobil personnel plus secondees from partners including OSH FEED activities proceeding on schedule. Target completion in 3Q09 (13 months): EOS (KBR/ WorleyParsons JV) conducting upstream FEED comprising: Preliminary engineering design for gas field developments Gas conditioning and compression facilities Pipeline and infrastructure Downstream FEED (LNG plant, storage, marine facilities) being conducted in two phases: Non-competitive phase - support from KBR Second, competitive EPC bid phase involving APCI (Air Products and Chemicals, Inc) and COP (ConocoPhillips) process licensed contractors Oil Search-managed associated gas FEED study commenced with WorleyParsons Many Project enhancements, optimisations being 17 considered

18 Project Status Marketing: Negotiations commenced between Project and selected offtakers Project is strongly positioned, competitive advantages recognised by customers Targeting end 08/early 09 for HOAs, SPAs prior to FID Government committed and supportive Leadership and co-ordination defined Discussions between Government and Landowners commenced on Benefits Sharing Agreement Environmental, licensing and permitting activities underway State Nominee agreed JV considering proposal for early works programme subject to marketing, Benefits Sharing Agreement and permitting progress 18

19 PNG LNG Capex Estimates EM Project Execution Performance Actual vs. Funded (%) Average Cost Schedule 2007 First phase capex ( ) expected to be between US$10 11 bn (real mid-2007 $s) Historically, ExxonMobil has delivered projects on time and on budget Subsequent capex is several years out (additional Hides drilling, Angore and Juha development and potential LPG extraction if required). Juha timing depends on Hides and Angore outcomes and performance Further updates to capex estimates from EPC bids (3Q 09) Further optimisation will occur during dual FEED 19 Source: ExxonMobil Analyst Briefing 5 th March, 2008.

20 Project Interest Determination JV Partners ExxonMobil Share of FEED costs 41.5% PNG LNG Interest 36% 34% Oil Search PNG LNG Interest Oil Search 34.0% 32% Santos AGL 17.7% 3.6% 30% OSH expected post Government back-in final project interest Nippon 1.8% 28% MRDC / State 1.4% 26% FEED Interest Methodology agreed for Project Interest determination Initial Project Interests will be established at FID, taking into account FEED cost estimates and LNG sales contract outcomes Periodic re-determination and equalisation processes established Government has the right to back-in (22.5%) to Hides, Angore and Juha licences Resulting State participation in PNG LNG Project post back of ~19% 20

21 PNG LNG Financing Debt: Joint debt financing approach, led by a Finance Committee coordinated by ExxonMobil with key input from OSH. Soc Gen financial advisor Recent road shows elicited strong interest from Export Credit Agencies, commercial banks and rating agencies. Banks positive attitude to PNG demonstrated by OSH s recent corporate facility Including capitalised interest through construction, financing fees and funding of the debt service reserve, seeking project finance for ~US$11.5 billion (nominal) OSH share of project finance ~US$3.2 billion (nominal) Equity: OSH s equity contribution (nominal) expected to be ~US$1.3 billion Funded from existing cash (~US$600m), corporate borrowing from refinancing (US$450m) and oil cash flows between (operating cash flow in 1H08 was US$348m) Will utilise hedging, if required, to protect cash flow and optimise borrowings 21

22 LNG Project Schedule FEED PNG Government Approvals Benefits Sharing Agreement Entry Gas Agreement EPC bids Environmental, Licences etc Marketing Project Financing HOA s PIM SPA s FID Close Detailed Engineering Design & Procurement Construction / Commissioning Possible early works First Cargo LNG *Schedule is Indicative only 22

23 Economic Importance of PNG LNG Project ACIL Tasman Report 6 February 2008 Affects economy of PNG and its balance of trade situation profoundly GDP will more than double Oil & Gas exports will increase 4 fold Up to 7,500 jobs in initial phase, 20% by nationals; 850 full time positions, developing national workforce over time Huge cash flows to Government national and provincial - and landowners through tax, royalties, levies and equity participation over 30 years Multiplier effects additional Government recognises importance. Leadership and Coordination defined: Political leadership through Ministerial Economic Committee Co-ordination branch approved and being implemented Retention Licence renewal: Government has announced PRL 11 and PRL 12 renewal Commitment to pursue Benefits Sharing Agreement: Targeting 4Q08/1Q09 Strong support for the Project at local community level 23

24 Impact on Oil Search For Oil Search, the Project will provide: Annual incremental net production of ~20 mmboe Booking of ~550 mmboe of Oil Search s 2C gas resources providing positive impact on depreciation Past costs pay back by Government on back-in at Final Investment Decision Value additions to the oilfields by: Incremental reserves due to extension of oil field life (Gobe to 2024, Kutubu to 2048) and revised reservoir opportunities Abandonment 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 commenced to analyse field management of gas and oil, optimal development and value synergies New Moran development plan 24

25 Benchmark of OSH Peers by AV/2P Reserves PNG LNG FID will allow booking of ~550 mmboe of 2P reserves 60 Agg. Value / 2P Reserves US$/boe 54.7 International Australian Median = US$13.8 boe Tullow Lundin Woodside ROC Oil AWE Maurel et Prom Addax Dana Santos JKX Cairn Venture Soco Beach Petroleum PA Resources QGC DNO Premier Oil Search (+550mmboe) Nexus Energy 25 Notes 1. Comparable global E&P independent listed companies 2. Assumes exchange rate of AUD/USD 3. Share prices as at 20-Aug-2008

26 26 Growth Opportunities

27 Gas Growth Opportunities PNG LNG Project sets the stage for additional gas-based growth opportunities, beyond PNG LNG Project debottlenecking (10 +15% above nameplate capacity) Additional LNG developments command the highest value: Sufficient 2C resources for additional train already exist in PNG fields Other gas development options also available with robust economics Oil Search seeking to: Increase contractible gas (exploration, appraisal, acquisition) Aggregate gas for highest value development option Key partnerships with State MOU signed in July New opportunities need to be considered in a framework of being material for a US$5 bn+ company 27

28 Gas Resource Base PNG discovered gas reserves by field (Source: Wood Mackenzie Path Finder) Technical Gas ~ 17,000 bcf Gobe Area Kuru Iehi Bwata 2% 1% 1% 0.3% Pandora B Pasca Moran 2% Uramu 1% Ketu 1% 2% 2.3% Elevala 3% Douglas 3% Elk 3% Barikewa 4% Kimu 4.8% Koko SE Mananda 0.1% 0.1% Stanley 0.1% PNG LNG Project Hides (Technical Reserve) 30% Pandora A 7% Kutubu Area 8.3% P`nyang 10% Juha 6% Angore 7% 28 ~1/3 rd of PNG gas resources are held in the Hides field PNG LNG Project accounts for approximately half of PNG s discovered gas resource OSH has ~1.6 tcf net of discovered gas plus associated liquids not dedicated to PNG LNG

29 Oil Search Vision for LNG Expansion 25 tcf PNG LNG Base Volume PNG LNG 3C Upside Other Highlands JV Partner Resources 3C 2C Forelands & Offshore Resources 3C 2C Exploration 4 th Train Threshold 3 rd Train Threshold tcf additional gas volumes required to underpin construction of additional train PNG LNG fields comprise Hides, Juha Main, Angore, Kutubu, Agogo, Moran and Gobe Main Other Highlands JV partner resources (OSH best estimates) include P nyang and Juha North Forelands & Offshore resources include Barikewa, SE Gobe, Pandora & Uramu Considerable exploration upside. 3 year programme targeting >13 tcf gross resource 0 29

30 Location of Gas Resources: PNG LNG Project Fields Juha Hides Angore Field Hides 2C 5.3 3C 9.9 Agogo Moran Kutubu Gobe Main Juha, Angore, Kutubu, Moran, Gobe Main Total Sufficient 3C upside in existing PNG LNG Project fields to underwrite a third 3.15 mmtpa train Appraisal drilling planned for 2010/11 on Hides 30

31 Location of Gas Resources: Other field resources P nyang Juha North Hides Juha Agogo Angore Moran Kutubu Field Highlands: P nyang Juha North 2C 2.3 3C 4.7 Kimu Gobe Main SE Gobe Barikewa Uramu Forelands and Offshore: Kimu, Barikewa, SE Gobe, Uramu, Pandora Total Pandora Based on OSH best estimates Appraisal drilling at Barikewa in 2009 and Pandora in

32 Location of Gas Resources: Exploration P nyang Juha North Hides Juha Huria Angore Moran Cecilia Kutubu Agogo Hedinia Deep Iwa Kimu Barikewa Deep Bigpela Gobe Main SE Gobe Barikewa Lead 7 Flinders Uramu Well exploration programme will test over 13 tcf mean resource (gross), with average POS of ~15% Testing off-shore prospectivity (Flinders, Bigpela, PPL 234, APPL 293) to commence in 2009/10 Huria well expected to be drilled prior to the Hides development wells Considering a range of farm-ins/judicious farmdowns with strategic partners Pandora 32

33 Other Gas Growth Opportunities Other gas commercialisation opportunities can also offer attractive returns, diversification and timely delivery. These range from export oriented projects to domestic micro projects including: Methanol and other derivatives Gas to liquids (GtL) Compressed Natural Gas (CNG) Gas for use in mine operations eg extending mine life at Porgera Power generation and other smaller projects catering to the needs of local communities & industry Size of dedicated resource important in defining commercial option Range of study groups are being established with Government and other entities to form non-png LNG gas development master plan 33

34 Other Gas Growth Opportunities P nyang Juha North Stanley Ketu Elevala Douglas Kimu SE Gobe Barikewa Elk Uramu Optionality in fields such as P nyang (Western Corridor) and Barikewa (Eastern Hub) to be feedstock for either LNG or alternative development options Pandora 34

35 AGL Asset Sale Outcome a Win:Win for OSH shareholders AGL is selling its interest in PDL 2 (11.9%) and PDL 4 (66.7%) Asset Kutubu (PDL 2) Moran Unit (PDL 2) SE Mananda (PDL 2) Gobe Main (PDL 4) SE Gobe Unit (PDL 4) AGL % interest 11.9% 5.2% 11.9% 66.7% 27.3% OSH % interest 60.0% 49.4% 72.3% 10.0% 25.6% Highest bidder expected to be known by mid September OSH and other licence partners (ExxonMobil, JPP, MRDC) have pre-emptive rights. 30 day pre-emption period post notification Can pre-empt on either or both licences Strong investment discipline will be applied when reviewing pre-emption opportunity. Considerations for OSH include: Price Funding efficiency Pre-emption intentions of partners AGL sale outcome a likely Win:Win for OSH shareholders: If a high sale price, demonstrates strong market value and confidence with look through implications Could represent a potential buying opportunity of well known quality assets subject to meeting investment criteria 35

36 AGL Asset Sale: OSH Core Asset Value Implications Implied OSH Core Asset "See-Through" Core Assets 8,500 Value (US$m) OSH AGL Comments 8,000 7,500 Excludes Other Gas, Exploration, Cash & working capital balances Producing Oil 53.8 mmbbl 10.4 mmbbl As at 30/6/08. Represents NSAI reserves less H1 actuals 7,000 6,500 PNG LNG (Project Interest) 28.5% % % OSH interest provides full exposure to Hides, Juha & Angore 3C and 3 rd train upside 6,000 5,500 Other OSH Assets Comments 5, Price paid for AGL's PNG Assets (US$m) See-through value range dependent on value ascribed to oil vs gas OSH offers material upside in PNG LNG Project equity, Other Gas and exploration incremental to AGL assets, plus existing cash balances Other Gas Exploration Cash & Receivables OSH has ~1.6 tcf net of 2C gas resources (plus associated liquids) and ~3.0 tcf of 3C resources in other well positioned gas fields including P nyang, Juha North, SE Gobe, Kimu, Barikewa, Pandora & Uramu OSH: 3 year drilling programme will test over one bnbbl unrisked oil and over 8 tcf unrisked gas (net to OSH). AGL: minor exploration value in licence package OSH = ~$600 million 36

37 PNG Oil Operations 37

38 Oil Operations: Providing Cash for Growth Since Oil Search took over operatorship of PNG oil fields in 2003, fields have produced ~45 mmbbl in excess of previous operator s expectations and field life extended Aim is to optimise PNG oil cash generation over the next 5 years to support PNG LNG Project funding requirements Existing oilfields are mature (decline rate of 15-20%) but with appropriate investment, expect to mitigate decline curve for 2-3 more years PNG production is highly profitable in 1H08, cash opex of US$10/bbl, realised oil price of US$118/bbl Need to balance work programmes and hence production outcomes with demand for rigs for exploration and gas drilling 38

39 PNG Oil Fields SE Mananda Moran Kutubu Usano Gobe Main SE Gobe 39

40 Production Summary 6.0 Net Production (mmboe) MENA Hides GTE SE Mananda SE Gobe Gobe Main Moran Kutubu H 06 2H 06 1H 07 2H 07 1H 08 40

41 Field Development Drilling Activity Moran: 2008 : 1-2 wells 2009 : 1-2 wells Agogo: 2009 : 2 wells Kutubu: 2009 : 3 wells Usano: 2008 : 4 wells 2009 : 1 wells SE Gobe: 2010 : 1-2 wells 41

42 PNG Drilling Rig Strategy Two state of the art new rigs, owned by Oil Search: Rig 103 became operational late Had a number of commissioning and teething problems, now resolved (significant performance improvement on last development well, UDT 9). Leapfrog unit commissioned Rig delivery delayed primarily due to late delivery of specialist drilling equipment. Due to commence drilling activities in late Dec 08 Likely to use full time on development activity in 2009 Decisions to be made regarding Parker Rig 226 and Rig 101 (ex Rig 2): Contract with Parker Rig 226 expires at end of Moran 14 well Contract expires with HAES on Rig 101 at end of Cobra 1A well. Future programme under review Rig choice for exploration/gas drilling campaign Working with other operators in PNG Hydraulic Workover Unit operating well: Mobilised low cost workover unit and completed first workover 42

43 43 Exploration

44 PNG Exploration Portfolio optimisation Data room prepared for farm down of some exploration exposures in PNG Seeking to build on gas portfolio (already outlined) Oil exploration High grade remaining prospects in close proximity to infrastructure Follow up Footwall plays based on encouragement from Cobra well Consider deeper Jurassic plays Frontier paradigm changers In the past, PNG exploration focused on few plays Potential to open up new areas with selective, albeit high risk, drilling Large hinterland structures with possible proven and also younger untested reservoirs Innovative seismic acquisition ongoing in this play Offshore fans and toe thrusts Current wells: Cobra (testing), Wasuma, Iwa and Cecilia (2009) 44

45 PNG Exploration Cecilia Wasuma Iwa Cobra 45

46 Cobra 1A PDL4 Gobe Main SE Gobe PPL219 Wasuma COBRA PPL 190 Oil Search Murray Petroleum Cue PNG Ltd WI % PDL3 PPL190 PDL4 10km Seismically defined footwall anticline ( Sub-thrust Play ) adjacent to SE Gobe oil field Primary Iagifu objective was water wet, but Hedinia Sand was thicker than predicted pre-drill Recovered oil, currently testing, updip potential Potential play-opener with significant follow-up De-risks many along strike - large structural features already identified in portfolio 46

47 Wasuma PDL4 Gobe Main SW SE Gobe SE Gobe PDL3 PPL190 PPL219 PDL4 Wasuma WASUMA 10km Wasuma NE PPL 219 Oil Search Merlin Petroleum WI % Near field exploration opportunity adjacent to the SE Gobe oil field Iagifu sandstone primary objective - proven reservoir at Gobe Seismically defined structure - one of the last un-drilled simple Hangingwall anticlines within the main Foldbelt trend May also have deeper target Footwall Mean recoverable reserves 35 mmbbl with upside potential to 100 mmbbl Chance of success 1 in 5 Well site construction commenced 47

48 Iwa SE Mananda 10km SW PDL6 PDL5 Moran Paua Agogo Kutubu PPL219 PDL2 Lake Kutubu PPL233 IWA Extension of SE Hedinia Anticline NE Darai Ieru Upper Ieru Toro Iagifu Hedinia Imburu D Koi-Iange PDL 2 Oil Search ExxonMobil Merlin Petroleum PRK AGL (PNG) WI% Near field exploration opportunity located along trend of Usano oil field and adjacent to SE Hedinia gas field Toro sandstone primary objective Additional upside in Hedinia sandstone (flowed oil when DST d in SE Hedinia 1x) & Iagifu sandstone Two alternative models Oil exploration prospect separated by fault from SE Hedinia gas field: Mean recoverable reserves (Toro) 30 mmbbl with upside potential to 60 mmbbl Chance of success 1 in 6 Gas appraisal along trend of SE Hedinia (no fault compartmentalisation): Mean recoverable reserves (Toro) 150 bcf with upside potential to 250 bcf Chance of success 1 in 2 48

49 MENA Exploration Strategy Sale of some of MENA assets to Kuwait Energy recently completed for US$200 million & WC Re-focus on MENA assets that have potential to make a material contribution Retained assets provide significant upside potential seeking to mature and de-risk through seismic/drilling Pre-drill POS can be reduced to >20% through technology or quality of acreage Continue to seek material opportunities in world class petroleum systems Maintain and build on core regional relationships Key strategic advantage of OSH is ability to operate at a local level Manageable budget yet material opportunities 49

50 MENA Exploration Le Kef Tajerouine Bina Bawi Shakal Area 18 Dubai Office Sana a Office Block 7 Block 3 50

51 Shakal Kurdistan, Iraq Pulkhana Field Shakal compartment Shakal PSC Oil Search Shakal Prod. Ltd (op) Petoil Govt (unassigned) Govt. WI% Near Top Euphrates depth map 10km Shakal 1 will target a large sub-thrust anticline Three Tertiary carbonate units are primary target with up to 1,350 metres of closure Each target has potential of >80 mmbbl recoverable Key risk is fault separation from adjacent Pulkhana field Well planned to spud early September 51

52 Area 18 Offshore Libya Area 18 Oil Search Petrobras (Operator) WI % Area 18 located in under-explored Pelagian Basin, offshore Libya. Pelagian Basin contains ~7 bn boe reserves Area 18 is located on trend to productive Pelagian Basin fields Exploration targets: Eocene carbonate (~200 mmbbl mean reserves), proven play Cretaceous carbonate (~70 mmbbl), proven play Jurassic clastic gas play (~1 tcf) new play Triassic clastic play (~2.2 tcf) new play Caliph Prospect will target all three plays Other prospects and leads in the permit are defined on 2D seismic 52

53 Yemen Block 3 and 7 Block 7 Block 3 Oil Search PetOil MND Yemen Oil Company WI% Block 3 Block 7 Oil Search Kufpec ARC/Voyager Adelphi Yemen Oil Company WI% Example of large, basement-involved structures Proven commercial fairway On trend with OMV basement discovery (2P reserves ~100 mmbbl) >800 km 2 3D seismic recently completed in Blocks 3 and 7 Main focus is basement play but shallower plays also present Currently processing and interpreting seismic Drilling planned to begin mid

54 Financial Overview 54

55 Financial Performance US$m Revenue EBITDAX Core Net Profit 600 Full Year Half Year H 08 55

56 Treasury Update ~US$600 million in cash following receipt of MENA asset sale funds. No debt Refinancing of 5 year US$ oil facility in final stages: Very positive response from bank market with competitive offers for more than twice the amount sought Facility size increased by US$50 million to US$450 million Pricing and facility terms more favourable than those on the facility it is replacing Almost half the facility provided without political risk insurance strong endorsement for PNG With cash and finance facility, liquidity is >US$1bn No oil hedging undertaken during first half of year or currently in place 56

57 FY08 Capital Outlook Update Exploration expenditure for full year 2008 expected to be US$ million, inclusive of acquisition of Shakal interest in Kurdistan Gas commercialisation and new business expenditure of US$80 million, including growing FEED spend on PNG LNG as activities ramp up Development expenditure of US$150 million, plus US$20 million on rig acquisition payments 57

58 58 Outlook

59 Gas set to dominate portfolio over time Value NPV Over Time (Unrisked) Fourth Train Cash Third Train PNG LNG Oil Substantial unrealised value exists within Oil Search s existing asset portfolio (particularly PNG gas) Current share price discounts assessed PNG LNG value and reflects no value for further gas developments or oil exploration success Value calibration anticipated from: PNG LNG: Key milestones reached (LNG HOA s, early works) Progress on demonstrating value growth options (exploration and appraisal programme, agreements etc.) 59

60 Outlook Production outlook for 2008 of mmboe Cash flows from operations continue to strengthen already healthy balance sheet. Liquidity of >US$1 bn provides excellent financing flexibility for PNG LNG as well as an active exploration, appraisal and development programme PNG LNG Project on track to make Final Investment Decision in late 2009, first production expected late 2013/2014. Will deliver key infrastructure to PNG. 30 year+ legacy project Debottlenecking opportunities in PNG LNG and resource upside in Hides are likely to provide next tranche of value creation Significant existing 2C resources outside PNG LNG remain to be commercialised. Value enhanced by PNG LNG Project infrastructure. Oil Search working with PNG Government on non-project gas development 60

61 Likely Catalysts in Q 2008 AGL Asset sale Spud Shakal well in Kurdistan 4Q 2008 PNG LNG Offtake HOAs late 08/ early 09 Spud Caliph well in Libya 1Q 2009 Benefits Sharing Agreement 2Q 2009 Decision to commence early works Finalise EPC bids 2H 2009 FID on PNG LNG Financial Close 61

62 Summary PNG LNG Project and commercialising remaining gas will drive Company value. Rising NPV over time, as cash flows get closer and Project de-risks Core PNG oil business remains robust, with stable production and cost outlook, provides cash flows to support LNG and other development options Exploration activities wound back from 2007 high levels, but material prospects still to be drilled in both PNG and MENA AGL asset sale provides industry value benchmark, with partial value see-through. May provide opportunity to increase PNG LNG interest, but only in the right circumstances series of gates for decision-making Considerable upside value in existing asset base still to be recognised by market 62

63 63 O I L S E A R C H L I M I T E D