OIL SEARCH 2019 FULL YEAR RESULTS 25 February 2020 OIL SEARCH LIMITED | ARBN 055 079 868 | ASX: OSH | PNGX: 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. OIL SEARCH 2019 FULL YEAR RESULTS | 25 FEBRUARY 2020 PAGE 2
EMERGENCY EVACUATION OIL SEARCH 2019 FULL YEAR RESULTS | 25 FEBRUARY 2020 PAGE 3
AGENDA Result Agenda Speaker 2019 Highlights Keiran Wulff Safety Performance Keiran Wulff Social Responsibility Keiran Wulff Financial Overview & Performance Stephen Gardiner Production Keiran Wulff Gas Development and PNG Exploration Keiran Wulff Alaska Bruce Dingeman Strategic Review Keiran Wulff Summary Keiran Wulff OIL SEARCH 2019 FULL YEAR RESULTS | 25 FEBRUARY 2020 PAGE 4
2019 OPERATIONAL AND FINANCIAL HIGHLIGHTS 4.5 US¢/share US$312.4 million 27.9 mmboe final dividend, taking full year NPAT in 2019 produced in 2019 dividend to 9.5 US¢/share, 46% payout ratio US$35.5 million 96% US$12.48/boe spent on Oil Search’s increase in 2P + 2C liquids unit production cost sustainable development reserves and resources, (including upstream, pipeline programmes in PNG and driven by Alaska and liquefaction costs) Alaska during 2019 OIL SEARCH 2019 FULL YEAR RESULTS | 25 FEBRUARY 2020 PAGE 5
SAFETY FOCUS INITIATIVES UNDERWAY TO REFOCUS EFFORTS ON SAFETY ◊ ◊ 2019 TRIR increased due to incidents associated One Tier 1 and four Tier 2 Process Safety events in with remote seismic and marine operations within PNG PNG ◊ No Process Safety incidents in Alaska ◊ Initiatives underway to improve safety processes Total Recordable Incident Rate (per million Tier 1 and 2 Process Safety Events hours worked) 14 3.0 12 2.6 2.5 2.5 10 2.0 1.9 1.9 2.0 1.7 8 1.6 1.5 1.5 1.7 1.6 6 1.5 1.0 1.2 4 1.0 1.0 1.0 0.5 2 - - 2012 2013 2014 2015 2016 2017 2018 2019 2012 2013 2014 2015 2016 2017 2018 2019 OSH IOPG Tier 1 Tier 2 IOPG: Global Oil and Gas Industry Trade Association Tier 1: Hydrocarbon release >500kg during 1-hour period OIL SEARCH 2019 FULL YEAR RESULTS | 25 FEBRUARY 2020 PAGE 6 Tier 2: Hydrocarbon release between 50 – 500kg during 1-hour period
RESERVES AND RESOURCES 96% INCREASE IN 2P RESERVE AND 2C LIQUIDS RESOURCES, DRIVEN BY ALASKA ◊ 2P and 2C oil reserves and resources rose 96% to End 2019 Liquids Change Gas Change Total 1 Change Reserves and 497 mmbbl, while 2P and 2C oil and gas reserves (mmbbl) (%) (bcf) (%) (mmboe) (%) Resources and resources increased 17% to 1,682 million 1P Reserves 53.9 1,874.1 421 (0%) (3%) (3%) barrels of oil equivalent 1 (mmboe) 2P Reserves 67.1 (1%) 2,101.9 (5%) 479 (4%) ◊ 243.6 mmbbl increase in Alaska 2C resource: 2C Resource 430.0 4,635.1 1,202 132% 2% 28% ♦ +116.1 mmbbl following technical work, Total 2P + 2C 497.1 96% 6,737.0 (0%) 1,682 17% including the 2019 appraisal wells, confirmed by independent auditor, Ryder Scott 2P + 2C Reserves and Resources ♦ +127.5 mmbbl related to exercise of the mmboe Armstrong/GMT option 1,800 ◊ 37.1 bcf (+21%) and 0.7 mmbbl (+41%) increase in 128 1,600 141 Muruk net 2C gas and liquids resource to 211.1 bcf 1,400 (27) and 2.4 mmbbl, respectively 1,200 ◊ 1,000 Based on 2019 production of 27.9 mmboe, 1P 1,682 reserves life of 15 years, 2P reserves life of 17 800 1,442 years and 2P reserves and 2C resources life of 60 600 years 400 200 ◊ Solid platform for growth, with significant further - potential End 2018 Production Discov, Extens, Rev Acqu/Div End 2019 OIL SEARCH 2019 FULL YEAR RESULTS | 25 FEBRUARY 2020 1 PNG LNG gas volumes converted at 1 mmboe = 5.1 bcf, all other gas volumes converted at 1 mmboe = 6 bcf PAGE 7
STREAMLINED AND REFRESHED MANAGEMENT TEAM Keiran Wulff Managing Director Stephen Gardiner Diego Fettweis Beth White Bruce Dingeman Michael Drew Bart Lismont Chief Financial EVP & President EVP & President EVP Corporate & Acting EVP EVP Technology & Officer General Counsel Commercial & PNG Alaska Value Assurance Strategy OIL SEARCH 2019 FULL YEAR RESULTS | 25 FEBRUARY 2020 PAGE 8
OPERATING RESPONSIBLY IN ALASKA AND PNG CORE FOCUS FOR OIL SEARCH ◊ Operating sustainably has been part of Oil Search’s vision for the past decade ◊ Have been a major socio-economic contributor in PNG for many years and continue to provide multiple services in health, education, power and infrastructure across PNG, both directly and through the Oil Search Foundation ◊ Same corporate ethos has been extended to Alaska, with major focus on working closely with the community to understand their needs and help deliver sustainable solutions ◊ Growing focus globally on climate change. Presents challenges but also opportunities, including gas as a transition fuel, Biomass project, etc ◊ Climate change and energy transition will be a key element of 2020 Strategic Review ◊ Current business is robust – 2018 Climate Change Resilience Report indicates long term resilience of Oil Search’s portfolio, including in a 2° C world. Physical risk study completed in 2019, to be incorporated into future project decisions ◊ Efforts to operate sustainably have been recognised globally: ♦ DJSI, FTSE4Good, STOXX Global ESG Leader, Vigeo World 120, Ethibel EXCELLENCE, Sustainability Yearbook 2020, etc OIL SEARCH 2019 FULL YEAR RESULTS | 25 FEBRUARY 2020 PAGE 9
FINANCIAL PERFORMANCE “Net profit after tax was US$312.4 million, 8% lower that in 2018, largely due to the fall in global energy prices” (Peter Botten, Oil Search 2019 Full Year Results, 25 February 2020) OIL SEARCH LIMITED | ARBN 055 079 868 | ASX: OSH | PNGX: OSH | US ADR: OISHY www.oilsearch.com
FINANCIAL PERFORMANCE WATERFALL NET PROFIT AFTER TAX, 2018 – 2019 (US$M) ◊ NPAT of US$312.4 million, down 8% on the prior year US$m ◊ Revenue increased 3% with production increasing (+11%) 450 following the 2018 earthquake, offset by lower realised liquids 49 400 pricing (-11%) and LNG and gas prices (-5%) 350 40 ◊ (59) Higher production costs (+20%), depreciation and amortisation - 300 30 20 (+27%), largely driven by increased production, and an 250 (88) increase in net finance charges (+10%) (21) 200 341 ◊ Effective tax rate of 30.4%, compared to 32.8% in 2018, 312 150 242 primarily driven by lower profit impacting oil field additional 100 profits tax 50 ◊ Other increases include higher recoveries from JVs on - capitalised assets, including IFRS 16 Leases , and insurance recoveries relating to prior year work, offset by impairment of licences relinquished in the year ◊ 2019 final dividend of 4.5 US cents per share, taking full year dividend to 9.5 US cents per share (46% payout ratio) OIL SEARCH 2019 FULL YEAR RESULTS | 25 FEBRUARY 2020 PAGE 11
PRODUCTION COSTS (US$m) 2018 2019 ◊ Higher production costs in FY19 reflect: Production costs (by unit) ♦ PNG LNG: higher shared costs, including impact of PNG LNG 171.0 179.9 offshore liquids loading facility repairs PNG Oil & Gas 119.0 168.8 ♦ PNG Oil and Gas: ongoing earthquake remediation Total production costs 290.0 348.7 work and deferment of in-field activities from 2018 Royalties & levies 13.2 15.1 ♦ No insurance receipt offsets for PNG Oil and Gas- Gas purchases 16.9 22.9 related spend in FY19 Inventory movements 0.5 5.3 ♦ PNG LNG earthquake remediation offset by insurance Other costs of production 5.7 15.5 proceeds, with excess proceeds relating to prior year Total cost of production 326.3 407.5 work taken to Other Income Unit Production Cost (US$/boe) ◊ Higher royalties and gas purchases primarily attributable to 12.48 11.51 increased production volumes 2.07 1.53 ◊ Inventory movements reflect higher year end liftings ◊ Other costs of production impacted by higher pre-FEED and 10.41 9.98 study costs relating to PNG expansion ◊ Unit PNG LNG production costs fell 7% to US$7.20 per boe FY18 FY19 Normalised Workovers/Earthquake/CALM Buoy OIL SEARCH 2019 FULL YEAR RESULTS | 25 FEBRUARY 2020 PAGE 12
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