JP Morgan 2009 Australasian Conference

Transcription

1 O I L S E A R C H L I M I T E D JP Morgan 2009 Australasian Conference October 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. 2

2 Oil Search Profile Established in Papua New Guinea (PNG) in 1929 Operates all of PNG s producing oil and gas fields. Current gross production ~40,000 boepd, net share ~21,000 boepd As operator, responsible for generating 22% of PNG s export revenue and 13% of its GDP in 2008 and is PNG s largest investor and taxpayer PNG Government is largest shareholder with 17.6%. In early 2009, Govt issued exchangeable bond over shares to IPIC of Abu Dhabi. Money raised by this Bond secured equity funding for PNG Government s share in PNG LNG Project ~30% interest in PNG LNG Project, world scale LNG project operated by ExxonMobil. FID expected late 2009 Significant further gas resources still to be commercialised plus range of material exploration interests in PNG and Middle East/North Africa Market capitalisation ~US$6 billion. Listed on ASX (Share Code OSH) and POMSOX, plus ADR programme (Share Code OISHY) 3 Oil Search Locations 4

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) 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 Jul Sep-09 5 Financial Performance Share price underpinned by positive financial performance 900 US$m EBITDAX Revenue Core Net Profit Operating Cash Flow

4 2009 First Half Performance Summary Sound operating performance in 1H09, despite challenging conditions NPAT of US$35.6m vs US$133.3m in pcp. Result driven by 55% lower oil price of US$51.84 per barrel, marginally lower production and liftings imbalance Cash operating margin remained healthy at 78%, despite lower oil price Balance Sheet strong with current cash balance of >US$430m Debt free, with US$391.5m draw down facility available Board approved payment of two US cents per ordinary share, unfranked, interim dividend. Payable on 9 October World Class Safety Performance Total Recordable Incidents (TRIs) of 1.1 in 1H TRI / 1,000,000 Hours International Companies (OGP) Oil Search Australian Companies (APPEA)

5 Strategic Direction 9 The Next Growth Phase PNG LNG T1 and T2 is transformational for both Oil Search and PNG ~ 580mmboe of 2P reserves will be commercialised (pre-govt back-in) Nearly triples OSH s production base Introduces ~30 yr plus legacy cashflow More than doubles PNG s GDP, triples export revenues Substantial further growth potential Further 300mmboe discovered resource to commercialise 10

6 The Next Growth Phase Oil Search 2002/03 Strategic Review provided framework for delivery of consistent top quartile returns Now undertaking major strategic update in light of expected PNG LNG Sanction 2009 Strategic Review is focused on:- Optimisation of existing assets Producing fields Infrastructure Drilling rigs Delivery of PNG LNG T1 and T2 Future growth LNG Growth Achieving cost synergies with T1 and T2 Resource accumulation strategy Active appraisal and exploration programmes focused on material opportunities, portfolio optimisation 11 IPIC Transaction Expect to finalise terms shortly for sale of effective interest in PDL 2, including ~ 3.5% interest in PNG LNG Project, to IPIC Funds raised will strengthen Balance Sheet, providing capital for growth initiatives including: Exploration and appraisal activities to confirm contractible reserves LNG expansion Other gas commercialisation opportunities Also provides buffer for funding of PNG LNG Project IPIC welcomed by other JV partners, financiers Divestment is: Value-accretive for shareholders, relative to share price Provides a third-party see-through valuation Represents optimal way to raise funds for expansion 12

7 Gas Commercialisation 13 PNG LNG Project - Summary All targeted milestones achieved, including: Umbrella Benefits Sharing Agreement signed Markets alignment on commercial terms with customers, covering full 6.3 MTPA capacity Early Works approvals and commencement of activities Agreement on key terms for financing facility EIS approved in principle Final Investment Decision in late 2009, first LNG sales late 2013/early 2014 Final capital cost estimate expected 4Q09 Continued strong support from the PNG Government 14

8 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 LNG Facility 75km Port Moresby 15 Project Update FEED/Early Works FEED Technical and commercial analysis of bids for major supply contracts underway, contractor selection (with award conditional on FID) in 4Q09 Final capital cost available in 4Q09 Early Works Range of early works activities now underway, including construction of training facilities in Port Moresby and Highlands, work to open up northern and southern supply routes Activities will have positive impact on overall timetable, enables full scale construction to commence early 2010 Testing in-country capability 16

9 Project Update - Financing Comprehensive term sheet negotiated by PNG LNG Project finance team with a number of Export Credit Agencies (ECAs) All key terms agreed, including 70% debt: 30% equity gearing ratio Detailed discussions with commercial banks underway, based on ECA term sheet. Cornerstone of financing expected to be ECAs, with balance coming from banks, partner co-lending and potentially bond markets Offers of finance from ECAs & banks expected 4Q09 OSH s equity share covered by cash, corporate debt facility and cash flows 17 Project Update In-country issues Landowner agreements Umbrella Benefits Sharing Agreement signed in May in Kokopo Individual licence-based forums have commenced to determine detailed benefits sharing arrangements within the licence landowners EIS approved in principle Licence applications submitted for all upstream, pipeline and plant licences 18

10 PNG LNG Milestones Commenced Early Works Receive offers of project finance Signed HOAs Receive EPC bids Commence construction First LNG sales 1Q 09 2Q 09 3Q 09 4Q UBSA Finalise Capex Sign SPAs Final Investment Decision 19 Gas Resources in PNG 25 tcf 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 P nyang PRL03 Juha Hides FW PPL239 Mananda Attic PPL260 Juha North Hides Angore PDL1 PRL11 Huria PRL02 PRL12 Agogo Hedinia FW Gobe Deep Kimu PPL240 PDL2 PDL6 PDL5 PPL233 PRL08 Moran Kutubu PPL219 PDL4 PDL3 PRL09 Exploration Gas Resources Non PNG LNG Gas Resources PNG LNG Project Gas Resources Gobe Main APDL14 PPL190 Wasuma SE Gobe Barikewa Barikewa Deep Uramu PRL10 7 S 5 0 PNG LNG Base Volume OSH Operated Licence OSH Interest Licence Petroleum Development Licence Petroleum Retention Licence Licence Application Oil Field Gas Field Oil & Gas Field Oil Pipeline Proposed Gas Pipeline 142 E 50km Kumul PPL234 Terminal Lead 7 Pasca B Flinders Pandora PRL E 9 S 20

11 LNG Expansion PNG LNG infrastructure will provide substantial cost synergies for further LNG expansion Studies underway on third train, focusing on:- Timing Cost synergies Resource requirements Economics Key requirement is proving up sufficient contractible gas to underpin the investment Integrated exploration and appraisal programme including seismic and drilling 21 Operations Review 22

12 PNG Producing Oil & Gas Fields PPL260 PRL03 Hides PRL02 PDL1 PRL11 PPL239 PRL12 PDL6 PDL5 Moran 6 S SE Mananda Agogo PPL240 PPL233 Kutubu PPL219 PDL2 PPL190 PDL4 PDL3 PRL08 Gobe Main SE Gobe PRL09 PRL10 Kumul PPL234 Terminal PPL244 APPL342 OSH Operated Licence OSH Interest Licence Petroleum Development Licence Petroleum Retention Licence Licence Application Oil Field Gas Field Oil & Gas Field Oil Pipeline 9 S 142 E 50km PRL E 23 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 Existing oilfields are mature (decline rate of 15-20%) but with appropriate investment, expect to mitigate decline curve to approx 10% Strategic review of field operations nearing completion. Key objectives are: Delivering safe and cost effective operations Maximise cash flows to support PNG LNG financing Meet project delivery obligations for gas to PNG LNG Integrate and optimise oil & gas businesses Revised operating philosophy in oil field operations Gas supply to LNG Value and conservation of gas Improved reliability and sustained operability of facilities 24

13 Active Cost Management PNG production is highly profitable net oil field costs US$10.74/bbl in 1H09, US$9.97/boe including gas field costs Global industry cost pressures easing Continuing active cost reduction programmes Adverse currency movements will put upward pressure on opex in 2H09 US$/boe Total cash costs per boe H09 Field Costs Other Opex Corp Costs/FX 25 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,

14 OSH Net Production Production outlook for 2009 of mmboe Net Production (mmboe) MENA Hides GTE SEM SE Gobe Gobe Main Moran Kutubu F 27 PRL02 Field Development Drilling Activity PPL260 Hides PPL239 Juha PDL1 PRL 12 PRL12 PRL11 PPL233 Angore PDL6 PDL5 Moran: 2009 : 1 well 2010: 2 wells PPL219 SE Mananda PPL219 Kutubu: 2009 : 2 wells 2010: ±1 well Agogo: 2009 : 1 well 2010: ±1 well PDL2 PPL219 SE Gobe: 2010 : 1-2 wells Usano: 2009 : 2 wells Gobe Main PDL 4 PDL 3 PDL 4 PPL190 Cobra Iehi PPL240 PRL09 APRL14 Barikewa 50km Kimu PRL08 28

15 2009 Exploration Update Active 2H09 programme, focusing on maturing gas prospects in PNG and MENA commitments 2H09 activities include: PNG: Wasuma well in PPL219 commencing 4Q09 2D Seismic Portfolio optimisation PNG CSG licences activity planning and start-up Well site preparation in PPL 260 MENA: Shakal well in Kurdistan Caliph well in Libya Tubb a in Block 3, Yemen Al Meashar in Block 7, Yemen K42 Kurdistan award / seismic option start-up MENA PNG 29 PNG Exploration 2010 PPL260 Korka gas test CSG 7 Licences PRL03 Fold Belt PRL02 PDL1 PPL239 PRL12 PPL260 PRL11 PDL6 PDL5 2010/11 Huria gas test 2011/12 distal foldbelt oil play 6 S PPL /12 Follow-up sub thrust leads adjacent to Gobe, Hedinia and Hides. Technical/seismic work in 2009/10 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 PPL240 PDL2 PRL08 PPL219 PDL4 PDL3 PRL09 APDL14 PPL offshore programme 2009/10 Wasuma oil test with sub-thrust test Cobra sub-thrust success 2011 Barikewa Deep gas test PRL10 Kumul PPL234 Terminal PPL244 9 S 2011 PPL 234 gas test 2011 Flinders gas test 142 E 50km PRL E 30

16 CSG Exploration Licences Awarded seven Mineral Exploration Licences in Strickland Basin (Western Province) of PNG (CSG exploration governed by Mining Act in PNG, licences administered by Mineral Resources Authority) Covers large area 17,500 square kilometres OSH to investigate potential for Coal Seam Gas production from Pliocene coals present in basin Commitment to spend ~US$5m over two years. Includes drilling several shallow wells and sampling/analysis of coals encountered Existing well data is sparse, however, wells have encountered thick coals in the shallow Era Formation Oil Search holds 100% in all seven licences ELA1724 ELA1725 ELA1726 ELA1720 ELA1723 ELA1721 ELA S 20km 141 E 142 E 143 E 31 Comparison to QLD CSG Region 32

17 MENA Exploration Le Kef Tajerouine K42 Block Tunisia Area 18, Libya Caliph well (drilling ahead) Iraq Shakal 1 (testing) Libya Dubai Office Block 7, Al Meashar 2H09 Sana a Office Yemen Block 3, Tubb a (drilling ahead) 33 Oil Discovery at Shakal 1, Kurdistan Well reached TD (3,038 metres) in August having drilled all primary targets Strong hydrocarbon kicks in secondary target while drilling This interval (Jaddala-Aalije) being tested First test interval of 40 ft flowed oil at up to 750 bopd on 13/64 choke Results of test of second 40 ft interval and third interval (due shortly) will be analysed to determine appraisal programme Oil Search has been closely involved in testing operations Appraisal may involve further seismic or a well in

18 Libya Caliph-1 Caliph is a frontier wild-cat testing proven and new plays offshore Libya Exxon, Hess, BP, NOEX all drilling in area Well has encountered difficult drilling conditions due to high pressure and high gas Has had to be sidetracked twice Now close to second of four target intervals High hydrocarbon gas levels, with wet components are encouraging Logs being run to evaluate shows 35 Block K42 Kurdistan Seismic Option Agreement with Kurdistan Regional Government (KRG) over Block K42 in North-East Iraq K42 block covers 511 square kilometres and lies in south-eastern section of Zagros Fold Belt adjacent to Pulkhana oil discovery and Kor Mor gas condensate field, under development Also along structural trend from Jambur field, currently producing with reserves of approximately 1 billion barrels of oil Initial option period of 18 months. OSH (75%) will acquire 200 km 2D seismic data, commencing early in 2010 Government has awarded 3 rd party interest to Shamaran Petroleum Corp (Lundin) At end of option period, OSH has option to sign full Production Sharing Contract 75% interest in option agreement will convert to net 40% interest in any future PSC K42 seismic acquisition to commence early in

19 PNG LNG transforms OSH s production outlook 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 Summary Oil Search on the cusp of major growth and corporate refocus Is in an excellent position to deliver sustained growth: Strong balance sheet >US$430m cash, with undrawn facility for US$391m, plus likely sale proceeds from oil and LNG interests Delivery of PNG LNG T1 and T2 first priority Strategic review has identified further growth potential, with activities action plan to deliver Focus will move to appraisal and exploration post PNG LNG sanction 38

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