O I L S E A R C H L I M I T E D 2010 Annual Meeting 23 April 2010 1 2010 Annual Meeting Agenda 2009 Performance Summary 2009 Financial Results PNG LNG Project Gas Expansion Operations Review Outlook 2
2009 Performance Summary Highlight of 2009 was PNG LNG Project development decision: Less than two years from FEED to Sanction Transformational impact on Oil Search and PNG ExxonMobil quality operator Foundation for major LNG industry in PNG Seven fold increase in proven and probable reserves, increasing from 67 mmboe to 567 mmboe, with significant further potential upside NPAT of US$133.7 million, US$99.6m excluding PNG Government back-in and tax adjustments. Satisfactory result given commodity environment, with average oil price down 35% Strong balance sheet with US$1.3 billion cash at year end, total liquidity of US$1.6 billion (including line of credit). Sufficient for both PNG LNG equity contribution plus funding of T3/T4 gas exploration/ appraisal programme 3 Outstanding Safety Performance Total Recordable Incidents (TRIs) of 1.16 in 2009 1 4 12.7 12.7 1 2 10.6 10.6 10.7 10.7 TRI / 1 ,0 0 0 ,0 0 0 Hours 9.8 9. Australian 1 0 Com panies ( APPEA) 9. 9.4 9. 9.3 8. 8.5 9 .1 7.8 7. 8 8. 8.2 7.0 7. 7. 7.3 6.8 6. 6.3 6. 6. 6.0 5.7 5. 6 5.8 5. 4.9 4. 5.2 5. I nternational 4. 4.7 4. 4.0 Com panies 4 3. 3.1 ( OGP) 3.9 3. 2.9 2. 3. 3.6 2.7 2. 2. 2.1 2.04 2. 04 2 Oil Search 1. 1.7 2 .4 2 .3 1 1.16 1. 16 2. 2.05 05 0 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 4
Strong Five Year Share Price Performance Annualised TSR for five years to end 2009 of 29.5% 7 .0 0 Share price ( rebased to OSH) Oil 6 .0 0 Search 5 .0 0 W oodside 4 .0 0 W TI oil Santos 3 .0 0 ASX 1 0 0 2 .0 0 1 .0 0 0 .0 0 Jan 0 5 Jul 0 5 Jan 0 6 Jul 0 6 Jan 0 7 Jul 0 7 Jan 0 8 Jul 0 8 Jan 0 9 Jul 0 9 Jan 1 0 5 Consistent Total Shareholder Returns (TSR) Oil Search ranked No 1 in ASX 100 for TSR over five years to 31 December 2009 4 0 OSH Ranking # 4 2 nd 1 st 3 0 3 rd 2 0 % TSR 1 0 0 -5 1 Year 3 Year 5 Year ASX 1 0 0 I ndex Median Com pany OSH perform ance # Ranking based on ASX 100 composition at the beginning of the reference period. Source: I RESS 6
Future Value Growth Driven by :- PNG LNG delivery Project optimisation Further LNG train development Reserve growth and exploration success Comprehensive programmes to deliver value through to PNG LNG first gas 7 2009 Financial Results 8
2009 Financial Performance 2009 2008 (US$’m) 512.2 814.3 Revenue -3 7 % (102.8) (116.3) Cash Expenses 409.4 698.1 -4 1 % EBITDAX (105.4) (127.2) Non-cash items (75.7) (91.2) Exploration Expense (3.3) 6.1 Interest income/(expense) 239.8 520.3 Pre-tax Profit -5 4 % (106.2) (206.9) Tax 133.7 313.4 NPAT -5 9 % 99.6 * 240.0 ** Core Profit Revenue and profit im pacted by 3 5 % decline in realised oil prices to $ 6 5 .4 0 / bbl and 7 % low er oil sales due to underlying field decline rates and sale of MENA producing assets * Excludes PNG Governm ent licence back-in adjustm ents and one-off tax credit * * Excludes net profit sale of MENA assets/ JV licence sale profit adjustm ent and im pairm ent losses 9 2009 EBIT Drivers 2 1 .8 ( 2 5 8 .9 ) US$ m 1 3 .5 1 5 .5 5 0 0 4 7 9 .6 Am ortisation Cash Opex Exploration Expense Oil Price 4 0 0 3 0 0 2 0 0 8 EBI T ( 3 3 .2 ) ( 1 0 .1 ) 2 2 8 .2 Volum es Other 2 0 0 Oil 2 0 0 9 EBI T 1 0 0 0 EBIT decline driven by fall in oil prices, PNG field production decline and sale of MENA assets 1 0
2009 Cash Flows Operating cashflow US$ ’m included US$79m of tax 1 5 0 0 paid (inclusive of prior period tax recoveries) 1 2 5 0 Investing cash outflows included US$139m on 1 0 0 0 production, US$324m on exploration & 8 5 1 8 5 1 evaluation, including 7 5 0 PNG LNG expenditure 2 8 4 2 8 4 1 ,2 8 8 1 ,2 8 8 ( 3 8 2 ) ( 3 8 2 ) Financing included 5 0 0 US$900m of proceeds from share placement, 2 5 0 5 3 5 5 3 5 SPP and underwritten DRP 0 g g g g g n n n n n i * i * i i i s n h t t c h a s o e s n s r e l p a a C a e v O C C n p n i O F I * Includes Company share of JV cash balances 1 1 Treasury Update US$1.39 billion in cash at end March 2010 Cash invested with highly rated bank counterparties US$348 million available from term revolving facility, nil drawn down US$391 million drawn down from PNG LNG Project finance facility on 31 March (including US$303.5m debt clawback relating to past expenditures) No oil hedging undertaken during 2009 or currently in place 1 2
PNG LNG Project 1 3 PNG LNG Project World class Project Aligned joint venture ExxonMobil Operator – excellent track record Supportive Government and communities Provides infrastructure for future growth Transformational for Oil Search and PNG 1 4
PNG LNG Project the road to sanction 2008 Signed JOA, aligning JV partners in March Signed Gas Agreement with Govt in May Commenced FEED in May Commenced marketing discussions late 2008 Developed financing plan 2009 Submitted EIS in January Signed UBSA in May Signed HOAs Commenced early works EIS approved in October Completed FEED, LNG plant capacity increased to 6.6 MTPA 1 5 PNG LNG Project the road to sanction December 2009 Completed LBSAs Signed 3 SPAs with TEPCO, Osaka Gas and Sinopec Development approval 8 December 2009 EPC contracts awarded 9 December 2009 Financing documents signed 15 December 2009 with ECAs, Commercial Banks and ExxonMobil for $14 billion – world’s largest project financing Government offered and Project accepted all development licences Government paid past costs for equity back-in to new development licences March 2010 Signed final SPA with CPC – fully contracted LNG vessel charter contracts signed with Mitsui OSK Lines Minor legislation amendments 12 March – Financial Close 1 6
PNG LNG Project Construction has commenced (roads, bridges, camps, site preparation and training facilities). First LNG sales expected 2014 Investment for initial phase estimated at US$15 billion Mobilisation by key contractors of people and equipment underway Mix of fixed price/variable price contracts Operator ExxonMobil has excellent record of delivering projects on time, on budget 1 7 Proposed PNG LNG Future Activities • Continued early w orks • Com plete AG • Detailed design • Com m ence First Gas from • Order long leads and onshore pipe lay Train 1 , place purchase orders ( Kutubu to Om ati) then Train 2 • Com plete offshore • Open supply routes pipe lay • Contractor m obilisation • Start Hides plant • Com m ence Associated Gas ( AG) construction installation 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 • Ongoing procurem ent Financial • Pipe lay ( Kutubu and m obilisation to Hides) Close • Airfield construction • Ongoing drilling • Drilling m obilisation • Com plete Hides plant • Start offshore pipeline • Com m ission LNG plant construction w ith Kutubu gas • Onshore line clearing • Start LNG equipm ent installation 1 8
Gas Growth 1 9 PNG Gas Growth Key strategic priority for Oil Search is to grow gas business in PNG LNG remains optimum commercialisation route for additional gas PNG LNG will provide infrastructure and capacity to facilitate expansion and provide excellent cost structure: Use of capacity in pipeline, jetty, tanks and services Trained local work force Government is supportive of future gas growth Pace of gas growth will be determined by: Resource aggregation/exploration Joint Venture alignment Market access 2 0
PNG Gas Growth Activities Two largely independent core gas development streams: PNG LNG dedicated fields Material core reserves � Proven (1P) 300 mmboe (OSH share) – all sold � Proven & probable (2P) 500 mmboe (OSH share) � Focus on moving 2P into 1P contractible category through � field development optimisation and further appraisal Strong partner alignment � Other fields and exploration Existing proven & probable resources (2C) of 281 mmboe � (OSH share), still to be commercialised Programme to appraise these discoveries and explore for � new gas underway Developing material portfolio ex PNG LNG � Objective is to prove up sufficient proven contractible reserves to underwrite Trains 3 and 4 2 1 Requirements for LNG train growth in PNG PPL2 6 0 PNG LNG Project P’nyang Forelands 2 5 tcf Korka Gas Resources & Offshore Juha North PRL0 3 Resources Hides Non PNG LNG Gas Exploration Juha 3 C Angore Resources PRL0 2 PDL1 PRL1 1 Huria Other Hides FW 2 C Highlands Exploration Moran PPL2 3 9 PDL6 JV Partner PDL5 PRL1 2 Gas Resources 2 0 Resources Mananda Attic PPL2 3 3 3 C Kutubu Agogo Gobe Main Hedinia FW 4 th Train Threshold 2 C PPL2 1 9 PDL2 APDL1 4 PPL1 9 0 Gobe Deep SE Gobe PDL4 1 5 PDL3 PNG LNG 7 °S PPL2 4 0 PRL0 8 Barikew a 3 C Kim u PRL0 9 Upside 3 rd Train Threshold Barikew a Deep Uram u 1 0 PRL1 0 PNG Kum ul OSH Operated Licence PPL2 3 4 Term inal LNG OSH Interest Licence Base Petroleum Development Licence Lead 7 Volum e Petroleum Retention Licence 5 Licence Application Pasca B Oil Field Flinders Gas Field Oil & Gas Field 9 °S Oil Pipeline Pandora Proposed Gas Pipeline 0 5 0 km PRL0 1 1 42 °E 1 45 °E 2 2
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