2018 FIRST HALF RESULTS August 2018 OIL SEARCH LIMITED | ARBN 055 079 868 | ASX: OSH | POMSoX: OSH | US ADR: OISHY www.oilsearch.com
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. 2018 FIRST HALF RESULTS 21 AUGUST 2018 | PAGE 2
AGENDA PRESENTATION PETER BOTTEN MANAGING DIRECTOR STEPHEN GARDINER CHIEF FINANCIAL OFFICER JULIAN FOWLES EGM – PNG BUSINESS UNIT IAN MUNRO EGM – GAS, MARKETING & EXPLORATION 2018 FIRST HALF RESULTS 21 AUGUST 2018 | PAGE 3
2018 FIRST HALF HIGHLIGHTS Total production of 10.24 mmboe: – 31% lower than 1H17 due to 7.5 mag earthquake in February – OSH involved in major recovery effort, with activities ongoing Net profit after tax of US$79.2 million, DPS of 2 US cents/share Strong recovery since coming back online, with PNG LNG reaching record daily rate >9 MTPA in May Mid-term SPAs signed with PetroChina and BP, taking total contracted volumes for PNG LNG to 7.5 MTPA Steady progress on new LNG development activities following alignment on downstream concept in 1Q18: – Three train LNG development – Underpinned by strong resource position in Elk-Antelope and P’nyang gas fields (>8tcf 1C and 11tcf 2C) – Discussions on technical definition, financing, commercial plus engagement with Government underway 2018 FIRST HALF RESULTS 21 AUGUST 2018 | PAGE 4
2018 FIRST HALF HIGHLIGHTS CONT . Successful appraisal in PNG forelands (Kimu 2, Barikewa 3), plus expansion of exploration portfolio in onshore Gulf Material upside in oil fields identified Alaska: – Recent drilling from ConocoPhillips highlights material resource upside in Pikka Unit – 2018/19 appraisal drilling campaign matured – Building world-class team – Highly valuable Option 2018 FIRST HALF RESULTS 21 AUGUST 2018 | PAGE 5
SAFETY AND ENVIRONMENTAL PERFORMANCE No major injuries to OSH staff and TOTAL RECORDABLE INCIDENT RATE (TRIR) contractors due to earthquake and aftershocks 3 2.7 2.6 Per million hours 2.5 However, TRIR increased to 2.7 2.0 1.9 worked 1.9 per million hours worked: 2 1.7 1.5 1.6 1.5 1.2 – Largely associated with 1.0 1.0 seismic operations in onshore 1 Gulf, all minor, no LTIs OSH IOGP – Improvement plan introduced 0 2012 2013 2014 2015 2016 2017 1H 2018 end 1Q, resulting in decrease in reported incidents (5 in 2Q LOST TIME INJURY FREQUENCY vs. 9 in 1Q) 0.75 No material environmental Per million hours 0.59 incidents 0.49 worked 0.50 No loss of hydrocarbon 0.34 0.26 containment as a result of 0.25 earthquake 0.00 0.00 0.00 2013 2014 2015 2016 2017 1H 2018 2018 FIRST HALF RESULTS 21 AUGUST 2018 | PAGE 6
2018 FIRST HALF FINANCIAL OVERVIEW Net profit after tax of US$79.2m, 39% 1H18 1H17 lower than 1H17, reflecting impact of PNG Highlands earthquake on production and Sales volume (mmboe) 9.8 14.2 costs Production impact on earnings partially Net Profit after tax (US$m) 79.2 129.1 offset by continued recovery in oil and LNG prices Operating cash flow (US$m) 215.2 419.3 Operating cash flow of US$215.2m, impacted by lower sales volumes Interim dividend (US cents) 2.0 4.0 Total liquidity of US$1.26 billion at 30 June 2018, reflecting lower cash flows Net debt (US$m) 3,048 2,812 combined with outflows including acquisition of Alaska assets (US$416m) Liquidity (US$m) 1,260 1,824 and US$166m PNG LNG project finance debt repayment Average realised oil and 71.45 53.35 condensate price (US$/bbl) 2018 interim dividend of 2.0 US cents per share Average realised LNG and 9.02 7.67 gas price (US$/mmBtu) 2018 FIRST HALF RESULTS 21 AUGUST 2018 | PAGE 7
2018 FIRST HALF FINANCIAL PERFORMANCE Solid first half profit despite production NET PROFIT AFTER TAX (US$M) shut-in from PNG Highlands earthquake, assisted by continued rise in oil and LNG prices Key financial measures impacted include: – Revenue down 17.5% – Production costs up 13.9% – Depreciation and amortisation down 29.5% Production costs impacted by earthquake remediation work, LNG cargo purchase and reprioritised maintenance activities Insurance recoveries released against operating costs as repairs are undertaken Effective tax rate of 34.2% compared to 32.3% for 1H17, due to one-off adjustments on lower taxable profits 2018 FIRST HALF RESULTS 21 AUGUST 2018 | PAGE 8
UNIT PRODUCTION COST OF US$14.04/BOE – IMP ACT OF PNG HIGHLANDS EARTHQUAKE US$M 1H 2018 1H 2017 UNIT PRODUCTION COST (US$/BOE) Production costs: 14 14.04 PNG LNG 85.5 67.2 12 PNG Oil and Gas 58.3 59.0 10.08 10 8.67 143.8 126.2 8.50 Royalties and levies 8 1.7 4.6 Gas purchases 3.3 8.6 6 2015 2016 2017 1H2018 Inventory movements (10.6) (10.6) Other costs of production 3.2 - UNIT PRODUCTION COSTS BY PROJECT (US$/BOE) Total cost of production 141.3 128.9 PNG Oil & Gas PNG LNG 50 43.69 45 Unit production costs expected to recover to 40 pre-earthquake levels in 2H18, supported by 35 improved PNG LNG production rates post 30 earthquake start-up 25 20.74 20 15 Lower royalties, levies and gas purchases 9.60 10 5.62 reflect 31% lower production 5 0 Other costs of production include funding for 1H2018 1H2017 LNG related projects and studies 2018 FIRST HALF RESULTS 21 AUGUST 2018 | PAGE 9
FINANCIAL METRICS REMAIN SOLID CASH FLOW WATERFALL (US$M) Positive operating cash flow, despite earthquake impact on sales volumes, 1500 buoyed by strong oil and gas prices 215 (564) 1,015 Liquidity position remains sound at 1000 1,015 US$416m Alaska US$1.26 billion acquisition (255) Investing cash outflows included 412 Non Non 500 Escrow Escrow US$416 million for Alaska North Non Escrow Non Escrow Slope acquisition Escrow Escrow 0 Escrow Opening Cash Operating Investing Financing Closing Cash US$165.7 million of PNG LNG 31-Dec-17 30-Jun-18 project finance debt repaid on LIQUIDITY (US$M) schedule 1,000 Corporate debt facilities totalling US$850 million undrawn at 30 June 750 500 Cash balances to commence rebuilding in 2H18 despite material 250 ongoing capital programme 0 2014 2015 2016 2017 1H 2018 Cash (US$m) Corporate Facilities Available (US$m) 2018 HALF YEAR RESULTS 2018 FIRST HALF RESULTS 21 AUGUST 2018 | PAGE 10
BALANCE SHEET CAPACITY TO SUPPORT GROWTH PROJECTS Extensive modelling supports OSH’s ability to fund LNG and CASH FLOW PRIORITIES REMAIN Alaska North Slope developments: UNCHANGED – Based on more conservative oil price medium-term Free cash flows outlook than current levels After scheduled debt servicing, sustaining capital expenditure and commitments – Debt funding through expansion of PNG LNG project finance facility plus new project finance facilities for Dividends Papua LNG and Alaska Nanushuk development In accordance with dividend policy to distribute 35%-50% of core NPAT – Equity component funded from existing cash balances, cash from operations (~US$1bn pa, depending on oil Growth Capital Investments prices) and existing/new corporate facilities LNG expansion in PNG & Alaska North Slope INDICATIVE PNG LNG REPAYMENT PROFILE (NET, US$M) Other Growth Initiatives 600 Exploration 400 Surplus Capital Return to shareholders: 200 - Share buy-backs, special dividends - Principal Repayment Total Principal & Interest 2018 HALF YEAR RESULTS 21 AUGUST 2018 | PAGE 11
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