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

Transcription

1 1 O I L S E A R C H L I M I T E D

2 2008 Full Year Results Agenda Introduction Performance Summary Financial Overview Operations Review Gas Commercialisation Operating at US40/bbl Outlook Brian Horwood Peter Botten Stephen Gardiner Mark Wilson Peter Botten Peter Botten Peter Botten 2

3 2008 Performance Summary 3

4 2008 Performance Summary Company in best economic position in eighty year history Excellent growth prospects, especially with PNG LNG and gas Strong balance sheet Good position to manage financial challenges Record core NPAT of US240.0 million, 70% higher than in 2007 (excluding MENA sale profit of US128) NPAT, including significant items, US314 million, 128% higher than 2007 PNG LNG Project continues to progress to Final Investment Decision. Most robust greenfields project in the region Strong balance sheet with US535 million cash. Line of credit of US435 million completed on competitive terms at peak of financial crisis demonstrating strong support by financiers 4

5 2008 Performance Summary Board approves an unchanged final dividend for 2008 of four US cents, making eight US cents for the year Company introduces fully underwritten Dividend Reinvestment Plan, as part of a number of initiatives to manage the balance sheet, to support the PNG LNG development and other growth initiatives 5

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

7 Strong 5 Year Share Price Performance TSR for five years to end 2008 of 396%, 7 th out of ASX 100 Top quartile performer for 5 consecutive years 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 7

8 Financial Overview 8

9 2008 Full Year Performance Oil Sales (mmbbl) Realised oil price (US/bbl) (US m) Revenue Cash Expenses EBITDAX Exploration Expense CORE NPAT* (121.3) (163.3) 13% 17% % (116.3) (91.2) Cash earnings before exploration expense and tax increased 17%, driven by stronger oil prices Exploration expense down US72.1 million on 2007, reflecting smaller exploration programme and higher exploration success * 2008 core NPAT excludes profit from sale of MENA assets (US127.6m) and impairment losses (US53.2m after tax) core NPAT excludes net impairment losses (US3.6m). 9

10 2008 Core Profit Drivers USm Profit (97.0) Oil Price Oil Volumes 25.2 Other Revenue 5.0 Cash Opex 7.5 Amortisation 72.1 Exploration Exp. (16.7) Net Interest Income (4.1) Other (59.3) Income Tax Profit 0 10 Stronger oil prices the key driver of 2008 profit, partially offset by weaker production MENA asset sale effective 1 May 2008, with no contribution to production and revenue from that date US27.1 million (30%) of total 2008 exploration expense incurred in MENA with no associated tax benefit Full year effective tax rate of 40% reflects tax-free profit from MENA assets sale. Excluding significant items, full year effective tax rate of 50%.

11 Cash Opex Profile Field Costs - Oil: PNG - Oil: MENA - Hides Other Prod n Opex - Oil -Hides Net Corp Costs FX Losses Total 2007 US m US m Overall cash opex down 4% year-on-year due to lower corporate net admin costs and sale of MENA operating assets PNG field opex per barrel increase driven by: Lower production/ liftings on a relatively fixed cost base Increased workover activity Global and PNG cost pressures Impact of strong A and Kina FX rates for most of the year The flow-through of record oil prices to royalties and fuel usage costs 11

12 Operating Cash Flows 875 USm 507 (235) Operating Investing (81) Financing Opening Cash Closing Cash 0 Operating cashflow reduced by US25 million in tax payments for prior periods (fully provided - no tax expense in 2008) Investing cashflow included US210 million net proceeds from sale of MENA assets Financing outflow included US89 million of dividend payments 12

13 Significant Items MENA asset sale Consideration of US200 million, plus working capital Profit on sale of US128 million, tax free Impairment of carrying values following annual impairment review of US91.5 million, pre tax (US53.2 million post tax): SE Mananda Arakubi Cobra Rig 101 MENA - US28.0 million - US26.6 million - US8.0 million - US19.7 million - US9.2 million 13

14 Treasury Review US535 million in cash at year end (including share of JV cash balances of US18 million), no debt US435 million revolving facility established October 2008 with a syndicate of 16 banks. Achieved improved pricing and terms despite global financial crisis Group liquidity at year end of US955 million Cash invested with highly rated bank counterparties No oil hedging undertaken in 2008 or currently in place 14

15 Operations Review 15

16 Net Production Net Production (mmboe) MENA Hides GTE SEM SE Gobe Gobe Main Moran Kutubu F 16

17 2008 Performance Excellent safety performance Production 8.58 mmboe, within revised forecast range post MENA sale Good underlying performance from Kutubu base production enhanced by new Usano wells and workovers No new wells on Moran due to delays in programme; no new wells on Gobe during the year PNG field costs: Field costs per barrel increased from US6.96/bbl to US9.72/bbl due to largely fixed cost base, increased workover activity and ongoing industry cost pressures over lower production 17

18 2008 PNG Drilling Two new rigs (103 and 104) commissioned and operating since Feb 08 and Dec 08 Hydraulic workover unit commissioned in Aug 08 Significant performance improvements achieved, more to come Parker Rig 226 decommissioned to Lae Programme for 2009 based on 2 operating rigs, with flexibility to increase activity, based on oil price 18

19 2008 Exploration PNG PNG gas discovery at the Cobra 1A ST3 well in PPL 190 Highlands seismic programme safely completed Portfolio optimisation review. Culminated in Gedd purchase, farm-down to NOEX MENA Divestment of non-material Middle East and North Africa (MENA) assets to KEC Prior to divestment, one well was drilled in Egypt (Salma-1 in ERQ,) and one in Yemen (Dahgah-1 in Block 43,) In retained assets, key activities included acquisition of 3D seismic in Yemen Blocks 3 and 7 and 2D in Shakal. Shakal well spudded in October and still drilling 19

20 Reserves & Resources At 31 December 2008, OSH s 2P reserves were 66.9 mmboe, compared to 73.5 mmboe at 2007 year end. Reduction reflects 2008 production of 8.58 mmboe, the sale of the Company s producing MENA assets (-1.1 mmboe) and an upward revision to Kutubu reserves (+3.1 mmboe) At 31 December P resources, comprising gas and associated liquids, were 886 mmboe, compared to 952 mmboe at end of Movements due to: 40 mmboe downward revision to PNG LNG Project LPG as Project does not plan to extract LPGs at this stage; aligned with PNG LNG Project design plan 14 mmboe revision to the estimate of condensate and black oil to be recovered from the oil fields during the fields blowdowns 12 mmboe net downward movement after addition for Cobra discovery and revised estimates of some other fields PNG LNG Project sanction would result in the booking of approx 580 mmboe. Leaves 1.6tcf of gas and associated liquids left to commercialise 20

21 2009 Production Outlook Production outlook for 2009 of mmboe PNG production subject to results of: Drilling campaign at Kutubu (4 wells), Moran (2 wells) and workover campaign in Kutubu and in Moran Field uptime availability and ongoing reservoir management Increased focus on costs and capital efficiency Detailed review of operating synergies between oil and LNG underway 21

22 2009 Exploration Continued portfolio and exploration spend optimisation Focus on high value PNG gas and low cost MENA 22 commitments PNG: Jan 09: 4 block/4 well farm down of PNG exploration assets to NOEX. Net capex saving of ~60m over next 3 years. Acquisition of Gedd interests Wasuma well in PPL219 2D Seismic in Highlands and offshore MENA: Shakal well in Kurdistan Caliph well in Libya 1 well each in Blocks 3 and 7, Yemen 2D seismic in Tunisian blocks, Le Kef and Tajerouine Exploration Expenditure (USm) F MENA PNG 2010F

23 Gas Commercialisation 23

24 PNG LNG Project - Summary PNG LNG progressing very well. On track for a Final Investment Decision in late 2009, first LNG sales 2013/14 Market fundamentals remain positive for with strong buyer interest from key Asia Pac customers Increasing signs of a favourable cost environment Recent meetings and site visit by lead lenders confirm significant funds still available for well structured, high quality projects such as PNG LNG Continuing strong support from the PNG Government 24

25 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 159km 20 crude pipeline 310 km 32 gas onshore pipeline Kopi Kumul ~400km 34 subsea gas line LNG Facility 75km Port Moresby 25

26 PNG LNG Project Milestones reached in 2008 Commercial alignment achieved, with Joint Operating Agreement (JOA) executed in March 2008 between the Project Owners Marketing Representative Agreement signed and Project rolled-out to buyers at GasTech in Bangkok in March 2008 Gas Agreement signed May 2008 Front End Engineering and Design (FEED) commenced in May 2008 Required legislative and regulatory amendments passed in September 2008 Financing roadshows held in July and December

27 Project Update Marketing Market fundamentals remain positive for and PNG LNG remains positively positioned for this time window: Credible and aligned Joint Venture Supportive Government Meeting all milestones no deferrals HOA term sheets out with a number of key Asia Pac buyers Buyers remain positive but are considering implications of current economic conditions FEED FEED ~ 50% complete at end 2008 Signs of downward pressure on costs, particularly materials costs (steel, equipment). Slots for long lead items opening up. Project will take advantage 27 of more favourable cost cycle

28 Project Update cont Financing Roadshow to ECAs, rating agencies completed in December 2008, field trip conducted in January Feedback is that project finance is available Expect to fund project 70% project finance, 30% equity (unchanged) Preliminary commitments from ECAs for project finance expected 3Q09, financing on-schedule for late 2009 FID OSH s equity share covered by cash, corporate debt facility and cash flows IPIC deal to secure State s equity announced in November 2008, well received by Project participants, lenders In-country issues EIS submitted to Government in January 2009 Benefits Sharing discussion underway, targeting end 1Q/2Q 28

29 Future 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 29

30 Positioning for Gas Growth Key focus is to position OSH for additional long term gasbased growth opportunities Further LNG developments command the highest value and are highest priority: Additional PNG LNG train Based on Hides, Juha and proximate gas eg P nyang Timing driven by ExxonMobil Alternative additional LNG train Aggregate gas from Forelands/Offshore 2009/2010 programme is focused on de-risking gas prospects through seismic Further gas portfolio management: farm-ins/outs and acquisition opportunities being considered (follows NOEX farm-in and Gedd purchase, both announced January 09) Progress petrochemical studies with Itochu and MGC Progress DomGas studies with Government 30

31 Location of Oil and Gas Resources P nyang Juha North Hides Juha Hides FW Huria Angore Moran Mananda Attic Agogo Hedinia FW Gobe Deep Kutubu Gobe Main Wasuma SE Gobe Kimu Barikewa Deep Barikewa PNG LNG Project Gas Resources Bigpela Uramu Eastern Ridge Non PNG LNG Gas Resources Lead 7 Pasca B Flinders Exploration Gas Resources Pandora 31

32 Operating in a US40/barrel environment 32

33 Impact of Lower Oil Prices Significant drop in oil prices from US140+/bbl in July 2008 to ~US40/bbl in early 2009 Oil Price (Brent US/bbl) Lower oil price levels are likely to persist into 2009 and possibly into Macro-Oil 80 ICE Futures 70 Oil Search must focus on prudent capital management strategies to ensure delivery of the PNG LNG Project Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

34 Capital Management Measures Focus is on areas of highest value creation Priority is to fund OSH s share of PNG LNG Project Balanced development drilling programme to generate cash flow Exploration that progresses LNG expansion, alternative gas development ambitions High potential exploration commitments Objective is to fund all exploration and development expenditures from operating cash flow, preserve liquidity (cash and corporate debt facility) for PNG LNG 2009 budgets reflect this philosophy Detailed review of oil and LNG operational synergies underway 34

35 2009 Capital Outlook US m 2008 Actual Investing : Exploration Gas (incl. PNG LNG) Development/Production Corporate (inc rigs) MENA net sale proceeds (210) 2009 * Outlook ** Financing : Dividends 89 *** *Subject to amendment depending on market conditions/ opportunities ** Excludes any expenditure for PNG LNG early works/long lead items *** Underwritten DRP for four US cent 2008 final dividend 35

36 Impact of Revised Budgets Production PNG oil fields are mature, require infill drilling, workover activity to maintain production rates. But will defer opex and capex work programmes that don t deliver payback in low oil price environment Own rigs provide flexibility to expand drilling programme if oil price improves Production outlook mmboe Costs Apply tight cost control. Signs of downwards pressure on costs, will benefit in 2009/2010 Exploration Continued exposure to high reward wells, including Caliph (Libya) and Block 3 & 7 in Yemen, Wasuma in PNG late 2009 Focus on seismic activities to high grade gas prospects for future drilling Judicious farm-downs to reduce risk, cash outflow Take advantage of downturn to acquire gas acreage 36

37 PNG LNG s competitive advantages at low oil prices Conventional LNG project no new technology = reduced risk Existing proven and probable resource base no new drilling required Economics helped by liquids - ~ 15% of total revenue stream Joint Venture is aligned, Government is very supportive, fiscals agreed ExxonMobil as Operator fully committed, significant funds available for investment despite economic conditions, seeking to apply leverage to reduce input costs Recognised in market as the most economically robust greenfields project, high degree of certainty product will be available in the timeframe 37

38 Summary 38

39 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 70,000 60,000 LNG Liquids Production (boepd) 50,000 40,000 30,000 20,000 10,000 PNG Development LNG Gas

40 Summary Oil Search is in an excellent position for further growth PNG LNG moving forward, with all essential pieces coming together Strong balance sheet and liquidity to meet LNG obligations. Positive response from financing institutions. Proactive management required Measured exploration and continued new business Core oil production remains robust. Operations review to identify and deliver oil and gas synergies A Challenging Time but a Time of Real Opportunity 40

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