2017 FIRST HALF RESULTS August 2017 OIL SEARCH LIMITED | ARBN 055 079 868 | ASX: OSH | POMSoX: OSH | US ADR: OISHY www.oilsearch.com
2017 HALF YEAR RESULTS 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. 2017 HALF YEAR RESULTS | PAGE 2 | 22 AUGUST 2017
2017 HALF YEAR RESULTS AGENDA 2017 HALF YEAR HIGHLIGHTS PETER BOTTEN FINANCIAL OVERVIEW STEPHEN GARDINER JULIAN FOWLES PNG PRODUCTION GAS DEVELOPMENT IAN MUNRO EXPLORATION/APPRAISAL KEIRAN WULFF KEY ISSUES AND CONCLUSION PETER BOTTEN 2017 HALF YEAR RESULTS | PAGE 3 | 22 AUGUST 2017
2017 HALF YEAR HIGHLIGHTS Total production of 14.81 mmboe, similar to 1H16: 1H17 1H16 – PNG LNG achieved record annualised rate of 8.65 MTPA in June following compressor upgrade, high rates Production volume (mmboe) 14.8 14.9 sustained into July Robust financial metrics: Sales volume (mmboe) 14.2 15.2 – Net profit after tax of US$129.1 million, more than five times 1H16 NPAT Oil price (US$/bbl) 53.35 41.61 – Unit production costs remained low at US$8.52/boe Net profit after tax (US$m) 129.1 25.6 – Improved operating cash flows and strong liquidity 2017 interim dividend of four US cents up from one US cent Operating cash flow (US$m) 419.2 239.2 in 1H16 Very encouraging exploration/appraisal results on Muruk, Interim dividend (US cents) 4.0 1.0 with activity set to accelerate in 2H17 onwards Dialogue progressing between PRL 15 and PRL 3 joint Net debt (US$m) 2,812 3,304 venture partners, focused on presenting aligned view on next phase of LNG expansion and development to new PNG Liquidity (US$m) 1,824 1,528 Government in 2H17 2017 HALF YEAR RESULTS | PAGE 4 | 22 AUGUST 2017
2017 HALF YEAR HIGHLIGHTS SAFETY PERFORMANCE REMAINS A KEY PRIORITY TOTAL RECORDABLE INCIDENT RATE Safety improvement workshops conducted 5 following increase in TRIR in OSH IOGP 4.7 1H17, corrective actions underway Per million Hours worked 4 Focus on maintenance 3.9 activities to ensure safety, reliability and stability of 3.1 operations 3 2.9 2.7 2.6 2.5 Marked improvement in 2.7 2.1 environmental performance 2.0 2.0 1.9 2.3 2 – four spills reported (vs 1.8 1.9 2.1 1.9 seven in 1H16), all minor 2.0 1.8 1.7 1.7 1.6 1.5 1.5 1.2 1.2 1 1.0 0 2017 HALF YEAR RESULTS | PAGE 5 | 22 AUGUST 2017
2017 HALF YEAR RESULTS AGENDA 2017 HALF YEAR HIGHLIGHTS PETER BOTTEN FINANCIAL OVERVIEW STEPHEN GARDINER JULIAN FOWLES PNG PRODUCTION GAS DEVELOPMENT IAN MUNRO EXPLORATION/APPRAISAL KEIRAN WULFF KEY ISSUES AND CONCLUSION PETER BOTTEN 2017 HALF YEAR RESULTS | PAGE 6 | 22 AUGUST 2017
FINANCIAL OVERVIEW 2017 HALF YEAR FINANCIAL PERFORMANCE Revenue up 16% - higher US$m 1H 2017 1H 2016 realised oil and gas prices Sales volume (mmboe) partially offset by lower sales 14.18 15.17 volumes Revenue 676.2 580.8 Cash operating costs down Production costs (126.2) (122.2) 12% mainly due to inventory adjustments and InterOil bid Other operating costs (55.0) (83.3) related costs in 1H16 Other income 5.6 2.1 Depreciation and 1 EBITDAX 500.5 377.4 amortisation down 13% following PNG LNG reserves Depreciation and amortisation (186.3) (214.2) upgrade from recertification at end 2016 Exploration costs expensed (24.9) (18.9) Effective tax rate of 32% Net finance costs (98.5) (96.3) compared to 47% for 1H16, Profit before tax 190.8 48.0 due to lower tax rate on oil fields and one-off non Tax (61.7) (22.4) deductible costs in 1H16 Net profit after tax 129.1 25.6 1 EBITDAX (earnings before interest, tax, depreciation/amortisation, non-core activities, impairment and exploration) is a non-IFRS measures that are presented to provide a more meaningful understanding of the performance of Oil Search’s operations. The non-IFRS financial information is derived from the financial statements which have been subject to review by the Group’s auditor. 2017 HALF YEAR RESULTS | PAGE 7 | 22 AUGUST 2017
FINANCIAL OVERVIEW FINANCIAL METRICS REMAIN SOLID CASH FLOW WATERFALL (US$M) CASH FLOW BREAK-EVEN ANALYSIS (US$/BOE) 1500 419 ( 109 ) 60 ( 199 ) 50 Average realised oil price US$53.35 974 1000 863 40 29.4 10.4 Non 30 Non 1.5 Escrow 6.4 500 Escrow 20 11.1 10 Escrow Escrow 0 0 Operating costs Interest Sustaining Principal Total Opening Cash Operating Investing Financing Closing Cash expense capex repayments Operating cash flow of US$29.57/boe LIQUIDITY (US$M) INDICATIVE PNG LNG REPAYMENT PROFILE (NET, US$M) 1,000 600 750 400 500 200 250 - 0 2013 2014 2015 2016 1H 2017 Cash (US$m) Corporate Facilities Available (US$m) Principal Repayment Total Principal & Interest Flexible balance sheet with US$1.82bn of liquidity 2017 HALF YEAR RESULTS | PAGE 8 | 22 AUGUST 2017
FINANCIAL OVERVIEW OPERATING MARGINS EBITDAX MARGIN CASH MARGIN BY ASSET (US$/BOE) 100 120 111 60 114 98 95 100 50 90 80 40 23.95 US$/boe 85 53 % 51 60 38.33 30 78 45 80 7.15 40 20 72 75 73 74 20 20.74 70 10 72 1.85 69 5.62 65 0 0 2012 2013 2014 2015 2016 1H 2017 PNG Oil & Gas PNG LNG EBITDAX Oil & Condensate Price Margin Production costs Other costs Cash Margin EBITDAX margin improvement reflecting higher realised Healthy cash margins: prices and higher proportion of PNG LNG production – PNG LNG ~US$38/boe – PNG Oil and Gas ~US$24/boe 2017 HALF YEAR RESULTS | PAGE 9 | 22 AUGUST 2017
FINANCIAL OVERVIEW UNIT PRODUCTION COSTS OF US$8.52/BOE – LOWER HALF OF FULL YEAR GUIDANCE Production costs stable, despite increased planned oil field US$m 1H 2017 1H 2016 work programmes Production costs: PNG LNG unit production costs down 11% due to higher PNG LNG 67.2 72.1 production and further realised cost savings PNG Oil and Gas 59.0 50.1 PNG oil and gas production unit costs reflect lower production 126.2 122.2 and higher maintenance activities, with major scheduled shut- in in May Unit production cost (US$/boe) 8.52 8.21 Royalties and levies 4.6 2.0 UNIT PRODUCTION COSTS (US$/BOE) Gas purchases 8.6 6.5 25 PNG Oil & Gas PNG LNG Inventory movements (10.6) 15.0 20.74 20 Total cost of production 128.9 145.6 14.25 15 10 6.34 5.62 5 0 1H2017 1H2016 2017 HALF YEAR RESULTS | PAGE 10 | 22 AUGUST 2017
FINANCIAL OVERVIEW 2017 FULL YEAR GUIDANCE 2017 CAPITAL COST GUIDANCE (US$350 – 400M) 2017 Guidance 1 Production 2,000 5.5 – 6.2 mmboe 2,3 Oil Search operated 1,750 PNG LNG Project: 1,500 LNG 102 – 105 bcf Power 0.62 – 0.65 bcf 1,250 Liquids 3.3 – 3.6 mmbbl 1,000 23.5 – 24.3 mmboe 2 Total PNG LNG Project US$918m PRL 15 750 Total Production acquisition 29.0 – 30.5 mmboe costs 500 Operating Costs 250 Production costs US$8.00 – 9.50 / boe 0 4 Other operating costs US$135 – 145 million 2013 2014 2015 2016 2017 Guidance Depreciation and amortisation US$11.50 – 12.50 / boe Exploration & Evaluation Development Production Other PP&E Exploration & Evaluation: US$240 – 260m 1 Numbers may not add due to rounding. 2 Gas volumes have been converted to barrels of oil equivalent using an Oil Search specific conversion factor of Development: US$35 – 45m 5,100 scf = 1 boe, which represents a weighted average, based on Oil Search’s reserves portfolio, using the Production: US$40 – 50m actual calorific value of each gas volume at its point of sale. 3 Includes 2.8 – 3.0 bcf (net) of SE Gobe gas sales exported to the PNG LNG Project (OSH – 22.34%). Other PP&E: US$35 – 45m 4 Includes Hides GTE gas purchase costs, royalties and levies, selling and distribution costs, rig operating costs, power expense and corporate administration costs (including business development) and other expenses 2017 HALF YEAR RESULTS | PAGE 11 | 22 AUGUST 2017
2017 HALF YEAR RESULTS AGENDA 2017 HALF YEAR HIGHLIGHTS PETER BOTTEN FINANCIAL OVERVIEW STEPHEN GARDINER JULIAN FOWLES PNG PRODUCTION GAS DEVELOPMENT IAN MUNRO EXPLORATION/APPRAISAL KEIRAN WULFF KEY ISSUES AND CONCLUSION PETER BOTTEN 2017 HALF YEAR RESULTS | PAGE 12 | 22 AUGUST 2017
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