On the Cusp. Oil Search and its partners are on the cusp of committing to the world scale PNG LNG Project, a thirty year plus legacy project:

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1 O I L S E A R C H L I M I T E D On the cusp Oil Search Update June On the Cusp Oil Search and its partners are on the cusp of committing to the world scale PNG LNG Project, a thirty year plus legacy project: Aiming for Final Investment Decision by end 2009, with first LNG in late 2013/early Strong momentum building With ~ 30% interest, PNG LNG will result in OSH booking ~ 580 mmboe reserves (cf 67 mmboe now) and will triple production and Company profitability. Positively impacts oil field values Will facilitate commercialisation of other discovered gas economics of additional LNG train/s extremely strong Share price significantly discounts oil assets plus assessed PNG LNG value (underscored by AGL & IPIC transactions in late 2008) and reflects no value for further gas developments or discovery of additional reserves

2 Oil Search Location Map 3 Strong 5 Year Share Price Performance OSH has delivered consistent top quartile performance. TSR for five years to end 2008 of 396%, 7 th out of ASX Share price (rebased to OSH) 5.00 Oil Search Woodside Santos WTI oil ASX Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 4

3 Financial Performance Share price underpinned by positive financial performance 900 US$m EBITDAX Revenue Core Net Profit Operating Cash Flow Balance Sheet Prepared for Major Investment US$462 million in cash at the end of April 09 (including US$6 million share of JV cash balances), no debt Cash invested with highly rated bank counterparties Amortising revolving facility established in October 08 with a syndicate of 16 banks. Achieved improved pricing and terms despite global financial crisis. Current facility size US$406 million, undrawn No oil hedging undertaken in 2008 or currently in place 6

4 World Class Safety Performance Total Recordable Incidents (TRIs) TRI / 1,000,000 Hours International Companies (OGP) Oil Search Australian Companies (APPEA) Strategic Priorities Continue to add significant shareholder value through: Development of PNG LNG Project Delivery of further growth through additional LNG trains and other gas based developments Optimisation of value and operational synergies between existing oil operations and new LNG development Measured exploration in PNG and MENA and continued optimisation of PNG gas portfolio 8

5 Previous strategic reviews have been instrumental in adding shareholder value and achieving sustained top quartile performance 2009 Strategy Update now taking place with three time horizons: Strategic Priorities 9 Strategic Priorities 6 12 months: PNG LNG delivery Definition of what we can do to ensure delivery Optimal financing Corporate and operating structure FID to first gas production Support construction operations and financing Definition of further growth options Development of 3rd LNG train Other LNG train and gas development options Exploration Oil and gas integration options Partner alignments Positioning organisation for legacy cashflow Post first gas Options for further growth and return expectations A New Oil Search 10

6 PNG LNG Project Platform for Major Growth 11 PNG LNG Project Juha 65 km 14 gas line & 8 liquids line Hides & Angore Juha Production facility 250 mmscfd Kutubu & Agogo Gobe 960 mmscfd Hides Gas Conditioning Plant 110km 8 condensate line Existing 270km 20 crude pipeline 310 km 32 gas onshore pipeline Kopi Kumul ~400km 34 subsea gas line 75km LNG Facility Port Moresby 12

7 PNG LNG Project Status Project momentum continues to build towards year end FID FEED activities on track, early works decision imminent Markets being confirmed Financing negotiations and due diligence on schedule Umbrella Benefits Sharing Agreement (BSA) signed Other legislation and approvals on track Meeting Milestones Building Momentum Progress on All Fronts 13 Project Status - Marketing PNG LNG seen as quality project, moving ahead, with high probability of delivery in 2013/14 timeframe: Quality, conventional proven resource Excellent operator, ExxonMobil, augmented by Oil Search with local knowledge Aligned Joint Venture and supportive Government Key terms of HOA agreed with major Asian buyer for 2 mmtpa Awaiting buyer s Government approvals Detailed terms being negotiated with a number of other potential buyers, more than enough demand to cover initial production Confident of confirming 6.3 mmtpa offtake through HOAs around mid-year 14

8 LNG contract pricing Analysis of Recent Contracts to Japan, Korea and China (DES) RasGas to KOGAS (from 2007) Dec 06 Crude Oil Parity Pluto to Japan (Estimated) Aug 07 Average Australia to PetroChina (Estimated) Sep 07 Bontang (Renewals) Mar 08 Shell (QG) to PetroChina Apr NWS Renewal Price Apr May 06 NWS-T1-3 (Bilateral Renewals) Mar May 06 Gorgon to Japan (HOA)* Oct 05 Mar 06 * Contractual price will likely be renegotiated JCC ($/bbl) 15 Source: FACTS GLOBAL ENERGY, FEB 2009 Source: FACTS GLOBAL ENERGY, Feb 2009 Asian LNG Markets Outlook 120 LNG Uncontracted Demand (mmtpa) Other New Markets India China Taiwan Korea Japan Source: FACTS GLOBAL FACTS ENERGY, Feb GLOBAL 2009 ENERGY, FEB 2009 Demand soft in the short term, but not impacting 2013/14 offtake Conservative approach by customers, with flight to quality 16

9 Project Status FEED & Contracting FEED activities targeting completion end 3Q09: Upstream contracting bids due early 3Q09 Downstream EPC bids due mid 3Q09. Competition between Chiyoda (APCI) and Bechtel (Phillips Cascade) Signs of downward pressure on costs, particularly steel and equipment Inflationary cycle broken, with costs more predictable Recent BSA paves way for early works decision: Early works comprises sizeable investment in upgrade/construction of infrastructure, enabling full scale construction to commence early 2010 Would represent a major vote of confidence in the Project by participants if approved Early works contracts ready to be awarded 17 CAPEX for LNG Projects 1,800 US$/tonne 1,600 1,400 1,200 1, Projects in operation Projects under construction Projects planned (pending FID) Oman LNG Trinidad (Atlantic LNG, T4) Qatar (RasGas T3 & T4) Egypt (Idku) Egypt (Damietta) Equatorial Guinea Australia (NWS, T5) Cost Escalation Yemen LNG Qatar (Qatargas II ) Peru LNG Indonesia (Tangguh LNG) Algeria (Skikda Rebuilt) Australia (Pluto) Angola LNG Algeria (Gassi Touil) Indonesia (Donggi LNG) Australia (Gladstone) Australia (Ichthys) PNG LNG Australia (Browse) Nigeria (Brass LNG) Iran ( Pars LNG) Iran (Persian LNG) Startup Source: FACTS GLOBAL ENERGY, Feb

10 Project Status Benefits Sharing Umbrella Benefits Sharing Agreement (BSA) signed in May landmark event for the Project, major democratic process with >2,000 stakeholders involved BSA is agreement between Government and landowners on how certain benefits are distributed Equity ownership Development levies Royalties Detailed sharing arrangements to be determined following licence-based development forums Focus now on award of new Production Development Licences (PDLs) Other discussions include: Local Business Development and spin off opportunities Training and skills development Past promises by Government Project Status - Financing Estimated capital costs of PNG LNG: US$10-11 billion real, US$ billion nominal (includes FEED expenditure), plus US$4 billion nominal of financing costs, early operating costs and debt service reserve account. Update on costs expected end 3Q09 Expect to fund 70% project finance (joint financing led by ExxonMobil), 30% equity Standard project finance facility. Detailed negotiations of financing Term Sheet taking place with Export Credit Agencies (ECAs) following positive site visits and good feedback from due diligence process Preliminary commitments and final terms from ECAs for project finance expected late 3Q09, following definition of LNG purchasers and capex Cornerstone of financing expected to be ECAs, with balance coming from banks and potentially partner co-lending and bond markets

11 Project Status Financing cont Post Govt back-in, Oil Search Project interest ~30% Share of joint financing ~ US$3.4bn Equity requirement at FID ~ US$1.2bn Standard project finance facility with parent company guarantee during construction, becoming non-recourse at completion OSH has no ratings-related funding driver or requirement from lenders to raise funding to support guarantee With >US$460 million in cash and undrawn facility of US$406 million at April 09 plus future cash flows, OSH in good position to meet equity requirements Position will be reassessed when capex and financing terms are known 21 PNG LNG Milestones Commence Early Works* Receive offers of project finance Sign HOAs Receive EPC bids Commence construction First LNG sales 1Q 09 2Q 09 3Q 09 4Q BSA Finalise Capex Final Investment Decision *Contingent on HOA & BSA 22

12 PNG LNG Project On Track PNG LNG progressing very well Early works decision imminent Schedule unchanged, targeting Final Investment Decision late 2009, LNG sales 2013/14 Seen as one of only a few projects in region moving to FID this year Entering favourable and more predictable cost environment Financiers strongly supportive and working to timetable Umbrella BSA signed, highlighting strong support from the PNG Government and Landowners for Project 23 Commercialisation of Other Gas 24

13 Positioning for LNG Expansion PNG LNG infrastructure will have capacity to accommodate further LNG train at minimal investment By leveraging off PNG LNG infrastructure, 3 rd train LNG economics are very strong. 4 th train would require further investment but synergies exist Number of potential sources of gas: Northern PNG LNG train Gas from Hides, Juha North (PRL 2) and P nyang (PRL 3) JV partners in PRL 2 & 3 XOM, OSH and NOEX Alternative additional LNG train Aggregate gas from Forelands/Offshore Focus for 2009 is on de-risking gas fields/prospects through seismic, further gas portfolio management and JV alignment Other gas commercialisation opportunities also being pursued Petrochemical studies with Itochu and MGC DomGas studies with Government 25 Location of Oil & Gas Resources PRL03 Juha North P nyang Hides Juha PRL02 PDL1 PRL11 Angore Hides FW Huria PPL239 PDL6 PDL5 PRL12 Moran Mananda Attic Agogo Hedinia FW Gobe Deep Kimu PPL240 PDL2 PPL233 PRL08 Kutubu PPL219 PDL4 PDL3 PRL09 PPL190 Gobe Main Wasuma SE Gobe Barikewa Barikewa Deep 7 S 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 Uramu PRL10 Kumul Terminal PPL234 Lead 7 Pasca B Flinders PPL244 9 S Pandora 142 E 50km PRL E 26

14 Oil Operations and Exploration 27 PNG Producing Oil & Gas Fields PRL03 PRL02 PDL1 Hides PRL11 PPL239 PRL12 SE Mananda Agogo PDL2 PDL6 PDL5 PPL233 Moran Kutubu PPL219 Gobe Main PPL190 PPL240 PDL4 PDL3 PRL08 SE Gobe 7 S PRL09 PRL10 Kumul Terminal PPL244 PPL234 9 S OSH Operated Licence OSH Interest Licence Petroleum Development Licence Petroleum Retention Licence Licence Application Oil Field Gas Field Oil & Gas Field Oil Pipeline 142 E 50km PRL E 28

15 Providing Cash for Growth Since Oil Search took over operatorship of PNG oil fields in 2003, fields have produced ~50 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 (base decline rate of 15-20%) but with appropriate investment, expect to continue to mitigate base decline curve PNG production is highly profitable (net oilfield costs, excluding tariffs, are under US$10/bbl). Increased focus on managing facilities sites, costs and improving capital efficiency Detailed review of operating synergies between oil and LNG underway 29 PNG Gross Oil Production 80,000 70,000 60, Devt capex = $7.91/bbl, Opex =$9.82/bbl Oil Rate (bopd) 50,000 40,000 30,000 20,000 Pre-OSH Decline 10,

16 Net Production Production outlook for 2009 of mmboe Net Production (mmboe) MENA Hides GTE SEM SE Gobe Gobe Main Moran Kutubu F Exploration Focus on high value PNG gas and low cost MENA commitments PNG: De-risk gas prospects through seismic prior to exploration/ appraisal drilling 2D seismic in Highlands and offshore Portfolio optimisation Farm-down to NOEX, Gedd acquisition, farm-in to PPL260 Wasuma well in PPL 219 (drilling likely to extend into 2010) MENA: Shakal well in Kurdistan Caliph well in Libya (spudded) 1 well each in Blocks 3 and 7, Yemen Withdrawal from Bina Bawi 32

17 PNG Exploration PRL /12 Follow-up Sub thrust leads adjacent to Gobe, Hedinia and Hides. Technical/Seismic work in 2009 Fold Belt PPL239 PRL02 PRL12 PDL1 PPL240 PRL11 PDL2 PDL6 PDL5 PPL233 PRL /12 Distal Foldbelt Oil Play PPL21 9 PDL4 PDL3 PRL09 PPL /10 Wasuma oil test with sub-thrust test Cobra sub-thrust success 7 S 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 Offshore Programme PPL244 PRL10 Kumul PPL234 Terminal 9 S 2010/11 PPL234 gas test 2010 Flinders gas test 142 E 50km PRL E 33 MENA Exploration Le Kef Tajerouine Area 18, Libya Caliph well (drilling) Bina Bawi Shakal 1 underway Dubai Office Block 7 drilling 09 Sana a Office Block 3 drilling 09 34

18 Capital Management Measures In light of recent oil price falls, Oil Search has commenced implementing prudent capital management strategies Focus is to ensure funding is available for areas of highest value creation: First priority is to fund Company s share of PNG LNG Project Second priority is to fund exploration/activities that progress third LNG train expansion, alternative gas development ambitions Manage development drilling and workover programme to ensure cash flows for PNG LNG, gas expansion Dynamic environment, capital requirements impacted by: Oil price (as always) Capital cost of PNG LNG (will be known in 3Q09) PNG LNG financing terms and costs (known in 3Q09) Production outcomes (relatively stable) 35 Capital Management Measures cont. Starting from a solid base with a strong balance sheet Active capital management programme underway: Controlling discretionary spend in production, exploration and corporate Cost control/cutting measures Introduced underwritten DRP Recognise need for flexibility and pro-active management as inputs and parameters change Many other levers to deliver capital requirements of PNG LNG, including hedging, asset sales, capital raisings etc Any capital management initiative actioned will be selected to ensure maximisation of shareholder value Oil Search in a strong position to manage these variables 36

19 Summary 37 OSH s key business priority is delivering the PNG LNG Project Deliver PNG LNG Project 2. Project Build, Positioning for Growth 3. Project Completion, Delivering Growth 60,000 Oil Production (bopd) 50,000 40,000 30,000 20,000 LNG Liquids LNG Gas 10,000 PNG Development

20 Summary Oil Search is in an excellent position for further growth PNG LNG moving forward, premier Asia Pac greenfields project, with all essential pieces coming together Strong balance sheet and liquidity to meet LNG obligations but proactive management required Focus increasing on LNG train expansions, other secondary gas growth. Requires measured exploration and appraisal, new business activities and alignment of JVs Core oil production remains robust. Operations review to identify and deliver oil and gas synergies 39 O I L S E A R C H L I M I T E D 40