2009 Half Year Results

Transcription

1 O I L S E A R C H L I M I T E D 2009 Half Year Results 25 August Half Year Results Agenda Performance Summary Peter Botten Financial Overview PNG LNG Project Operations Review Strategic Review and Outlook Zlatko Todorcevski Phil Bainbridge Phil Caldwell Peter Botten 2

2 Performance Summary First Half Performance Summary Sound operating performance in 1H09, despite challenging conditions NPAT of US$35.6 million. Result largely driven by lower oil prices. Average realised price of US$51.84 per barrel, 55% lower than in pcp. Marginally lower production and liftings imbalance Major progress on PNG LNG Project. All targeted milestones achieved, on track for FID late

3 2009 First Half Performance Summary Oil Search at an advanced stage of finalising terms for a sale of an effective interest in PDL 2, including a 3.5% interest in the PNG LNG Project, to International Petroleum Investment Corporation (IPIC). Terms subject to respective Board approvals, expected in the short term Funds to be used to support a range of growth initiatives concentrating on gas expansion and other commercialisation opportunities, as well as capital costs of the PNG LNG Project Oil Search awarded seven mineral exploration licences in PNG. Acquired to explore for Coal Seam Gas. Potentially significant coal basin identified, complements existing conventional gas position First Half Performance Summary Strategic Review well advanced PNG LNG is company transformational Material new growth opportunities Gas expansion Accelerated appraisal and exploration for reserve growth Results will be progressively rolled out year end 2009/early 2010 Balance Sheet remains strong with US$411m in cash Debt free, with US$ 391m draw down facility available Board has approved payment of two US cents per ordinary share, unfranked, interim dividend. Payable on 9 October

4 Potential Asset Sale Oil Search is at an advanced stage of finalising terms for the sale of an effective interest in PDL 2, including a 3.5% interest in the PNG LNG Project to IPIC Terms of transaction largely agreed, subject to respective Board approvals Full details of the proposed sale will be released following Board approvals Funds will further enhance Balance Sheet Strength to support capital obligations for growth initiatives and PNG LNG including : Further gas expansions Exploration and appraisal activities to confirm contractable reserves Finalisation of transaction and announcement expected in the short term 7 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 09 8

5 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) Financial Overview 10

6 2009 First Half Performance (US$ m) Revenue Cash Expenses EBITDAX Non-cash items Exploration Expense Interest income/(expense) Pre-tax Profit Tax Core Profit 1H (41.7) (50.8) (18.3) (1.7) 72.6 (37.0) % -65% -74% -73% 1H (56.0) (68.7) (70.6) (140.9) * Half year revenue and profit impacted by 55% fall in realised oil prices to $51.84/bbl and 20% lower oil sales due to sale of MENA producing assets and timing of liftings * Excludes net profit of US$131.1 million on sale of MENA assets/jv licence sale profit adjustment 11 Cash Earnings Performance % US$/bbl Oil Price % % 83% EBITDAX Margin 81% 78% H05 1H06 1H07 1H08 1H09 0 Cash operating margin remains healthy despite lower oil price 12

7 1H09 EBIT Drivers 400 US$m H08 EBIT Exploration Expense Cash Opex 17.9 Amortisation (236.9) Oil Price Impact of crude underlift position (39.6) Oil Volumes (5.0) Other H09 EBIT 0 13 EBIT decline driven by fall in oil prices, sale of MENA assets and underlift position at end June Active Cost Management Field Costs - Oil: PNG - Oil: MENA - Hides Other Prod n Opex - Oil - Hides 1H09 US$ m H08 US$ m Net Corp Costs FX Losses (2.7) 1.5 Total Global industry cost pressures easing Continuing active cost reduction programmes US$/boe Total cash costs per boe H09 Field Costs Other Opex Corp Costs/FX 14

8 Operating Cash Flows US$ m (209) Investing cash outflows included US$86m on production and US$119m exploration & evaluation (incl PNG LNG) Operating cashflow included US$20m of tax paid (with 2 nd PNG tax instalment of US$29m paid in late July) 0 Opening Cash* Operating Investing Financing Closing Cash* * Includes Company share of JV cash balances Treasury Update US$411 million in cash at end June Cash invested with highly rated bank counterparties US$391.5 million available from 5 year revolving facility, nil drawn down Group liquidity ~US$800 million No oil hedging undertaken during first half of year or currently in place - realising benefits of current price rebound (US$70.50/bbl realised in June) Sanction of PNG LNG Project will trigger the following additional cash inflows: Proceeds from PNG State buy-in to project gas licences (~ US$90 million) Claw-back from lenders of 70% of Project costs spent prior to Financial Close (~ US$190 million) 16

9 Capital Outlook Update US$ m Investing : Exploration PNG LNG Other gas commercialisation Development/Production Corporate (inc rigs) 1HA HF FY09F Financing : Dividends 0 * 0 * 0 * * Dividend fully underwritten 17 Gas Commercialisation PNG LNG Project 18

10 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 No change to timetable Final Investment Decision in late 2009, first LNG sales late 2013/early 2014 Early signs of a positive cost environment Continued strong support from the PNG Government 19 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 20

11 Project Update FEED/Early Works FEED Bids for major supply contracts starting to come in. Technical and commercial analysis expected to be completed by end 3Q09, contractor selection (with award conditional on FID) in 4Q09 Early signs of downward pressure on costs, remain comfortable with capex estimates Early Works In June, Project participants voted to start early works (following UBSA and market progress) Work has commenced across a number of fronts Positive impact on overall timetable, enables full scale construction to commence early 2010 Testing in-country capability 21 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 now underway, based on ECA term sheet. Cornerstone of financing expected to be ECAs, with balance coming from banks, partner colending 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 22

12 Project Update In-country issues Umbrella Benefits Sharing Agreement UBSA signed in May in Kokopo Defines how range of benefits will be shared between governments (national, provincial, local) and landowners Individual licence-based forums planned for 3Q/4Q09 to determine detailed sharing arrangements within licences EIS approved in principle Submitted to Government in Jan, approved in principle in late July Other Licence applications will be submitted this week for all upstream, pipeline and plant licences 23 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 Final Investment Decision Sign SPAs 24

13 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 sufficient contractable gas to underpin the investment Integrated exploration and appraisal programme including seismic and drilling 25 Operations Review 26

14 Production Summary 6.0 Oil Search Net Production (mmboe) MENA Hides GTE SE Mananda SE Gobe Gobe Main Moran Kutubu H 06 2H 06 1H 07 2H 07 1H 08 2H 08 1H H09 Performance Excellent safety performance Production 3.81 mmboe produced in 1 st Half Good underlying performance from Kutubu base production, enhanced by new Usano and Kutubu Main Block wells at better than expected rates and successful workovers Moran and SE Mananda production impacted by problem with APF pumps and reduced contribution from M6 due to workover activity Natural decline at Gobe Main and SE Gobe - no new wells, but field performance currently exceeding forecast PNG oil field costs: PNG oil field costs per barrel increased from US$10.59 in 2008 to US$10.74/bbl in 1H09 due to lower production base. Absolute cost decline due to lower sales volumes, internal cost focus and easing industry cost pressures 28

15 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 29 Oil Field Management Plan 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 Focus areas include : Facility and field extension, with improved reliability and uptime Refurbishment of liquids export facility (Kumul) and operability already commenced Pursuit of rapid payback production opportunities Gas resource management in oil business, with revised investment model 30

16 FY09 Production Outlook Production guidance for 2009 of mmboe 2H09 production expected to be higher than 1H due to: Resumption of production from M6 Full period of production from new Moran development well M14 Full period of production from new Usano and Kutubu Main Block development wells No repeat of unscheduled facility shut-downs Rig strategy: Rig 103 and 104 utilising rigs to optimise moves between development and exploration well locations Hydraulic workover unit 2009 programme completed, likely Kutubu programme in 2010 Continued focus on costs and capital efficiency Exploration Update Active 2H09 programme, focusing on maturing gas prospects in PNG and low cost MENA commitments 2H09 activities include: PNG: Wasuma well in PPL219 commencing 4Q09 2D Seismic in Highlands Portfolio optimisation PNG CSG licences award / activity planning and startup Well site preparation in PPL 260 MENA: Shakal well in Kurdistan Caliph well in Libya Tubb a in Block 3, Yemen Spatha in Block 7, Yemen K42 Kurdistan award / seismic option startup MENA PNG 32

17 PNG Exploration 2010/11 PPL260 Kelebo / Kopiago 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 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 PPL244 PRL10 Kumul PPL234 Terminal 9 S 2011 PPL 234 gas test 2011 Flinders gas test 142 E 50km PRL E 33 MENA Exploration Le Kef Tajerouine K42 Block Tunisia Area 18, Libya Caliph well (drilling ahead) Iraq Shakal 1 (drilling ahead) Libya Dubai Office Block 7, Al Meashar 2H09 Sana a Office Yemen Block 3, Tubb a (drilling ahead) 34

18 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 (100%) will acquire 200 km 2D seismic data At end of option period, OSH has option to sign full Production Sharing Contract 100% interest in option agreement will convert to net 40% interest in any future PSC K42 seismic acquisition will be operated by OSH 35 Strategic Review 36

19 2009 Strategic Review Status Strategic Review well advanced, recognising:- PNG LNG is company and country transformational Revised operating philosophy in oil field operations Gas supply to LNG Value of gas Facility life and sustained operability Material future growth opportunities beyond PNG LNG T1 and T2 Further partnership development Resource certification requires accelerated appraisal and exploration Optimisation of licence portfolio Preparation for long life legacy cashflows Major results progressively communicated end 2009/beginning 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 (CSG) 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 38

20 Summary Focus for 2H 2009 is delivery of PNG LNG FID by year end Substantial work taking place, Project remains on track for year end sanction Potential sale of effective PDL 2 interest provides Balance Sheet strength, to drive growth in gas commercialisation and support PNG LNG capital commitments Strategic Review has highlighted opportunities for expansion of LNG development, with maturing, accelerated appraisal and exploration activities to deliver contractable reserves to underpin timely growth CSG activities represent a new play for PNG and complement our existing conventional gas portfolio. Further portfolio optimisation is likely 39 O I L S E A R C H L I M I T E D 40