Meeting Annual 2009 1
2 0 0 9 Annual Meeting Agenda � I ntroduction � 2 0 0 8 Perform ance Sum m ary � Strategic Priorities � PNG LNG Project Update � Com m ercialisation of Other Gas � Oil Operations and Exploration � Challenges of Present Oil Price Environm ent � Sum m ary 2
2 0 0 8 Perform ance Sum m ary � Record core NPAT of US$ 2 4 0 .0 m illion, 7 0 % higher than in 2 0 0 7 ( excluding MENA sale profit of US$ 1 2 8 ) � NPAT, including significant item s, of US$ 3 1 4 m illion, 1 2 8 % higher than 2 0 0 7 � PNG LNG Project continued to progress. Final I nvestm ent Decision ( FI D) scheduled for end 2 0 0 9 , one of only tw o in the region expected to reach FI D this year � Strong balance sheet w ith ~ US$ 5 0 0 m illion cash plus undraw n borrow ing facility 3
2 0 0 8 Perform ance Sum m ary � Board approved an unchanged final dividend for 2 0 0 8 of four US cents, m aking eight US cents for the year ( 2 2 toea per share) � Com pany introduced fully underw ritten Dividend Reinvestm ent Plan, as part of a num ber of initiatives to m anage the balance sheet 4
W orld Class Safety Perform ance Total Recordable I ncidents ( TRI s) 1 9 9 8 – 2 0 0 8 1 4 12.7 1 2 Australian Com panies TRI / 1 ,0 0 0 ,0 0 0 Hours 10.6 ( APPEA) 10.7 9.8 1 0 9.4 8.3 9.3 8.5 9 .1 8 7.8 8.2 7.0 7.3 6.8 6.3 6.8 6 5.8 5.2 4.7 I nternational Com panies 4 ( OGP) 3.1 4.0 2.9 2.7 2 2.04 Oil Search 1.7 2 .4 2 .3 1 2.05 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 5
Strong 5 Year Share Price Perform ance TSR for five years to end 2 0 0 8 of 3 9 6 % , 7 th out of ASX 1 0 0 Top quartile perform er for 5 consecutive years 7 .0 0 Share price ( rebased to OSH) 6 .0 0 Oil Search 5 .0 0 4 .0 0 3 .0 0 W oodside Santos 2 .0 0 W TI oil ASX 1 0 0 1 .0 0 0 .0 0 Jan 0 4 Jul 0 4 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 6
Financial Perform ance 2 0 0 3 - 2 0 0 8 9 0 0 US$ m 8 0 0 8 1 4 .3 EBI TDAX 7 1 8 .6 7 0 0 6 6 4 6 4 4 .5 6 9 8 .0 6 0 0 5 9 8 .2 5 5 4 .3 5 4 4 .8 Revenue Operating 5 0 0 5 0 7 .4 Cash Flow 4 1 6 .3 3 9 9 4 0 0 3 5 7 .7 3 5 0 .8 3 3 0 3 2 6 .8 3 0 0 2 3 9 .1 2 7 6 .7 2 0 7 .5 2 0 0 .2 2 4 0 .0 2 0 0 1 9 1 .3 1 0 7 .3 1 4 0 .8 1 0 0 Core 8 5 .7 Net Profit 0 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 7
Treasury Review � US$ 4 6 2 m illion in cash at the end of April ( including share of JV cash balances of US$ 6 m illion) , no debt � Cash invested w ith highly rated bank counterparties � US$ 4 3 5 m illion am ortising revolving facility established in October 2 0 0 8 w ith a syndicate of 1 6 banks. Achieved im proved pricing and term s despite global financial crisis. Currently undraw n � No oil hedging undertaken in 2 0 0 8 or currently in place 8
Strategic Priorities 9
Strategic Priorities � Continue to add significant shareholder value through: � Com m ercialisation of ~ 5 8 0 m m boe of discovered resource through the developm ent of PNG LNG Project � Delivery of further grow th through secondary gas developm ents including additional LNG trains and other gas based developm ents � Optim ising value and operational synergies betw een existing oil operations and new LNG developm ent � Measured exploration in PNG and MENA and continued optim isation of PNG gas portfolio � Platform of solid balance sheet, w ith cash and undraw n borrow ing facility 1 0
Strategic Priorities � Previous strategic review s have been instrum ental in adding shareholder value and achieving sustained top quartile perform ance � 2 0 0 9 Strategy Update now taking place w ith three tim e horizons: 1 1
Strategic Priorities � 6 – 1 2 m onths: PNG LNG Delivery � Definition of w hat w e can do to ensure delivery � Optim al financing � Corporate and operating structure � FI D to first gas production � Support construction operations and financing � Definition of further grow th options − PNG LNG 3 rd train developm ent − Other gas aggregation options − Exploration � Oil and gas integration options � Partner alignm ents � Positioning organisation for legacy cashflow � Post first gas � Options for further grow th and return expectations A NEW OI L SEARCH 1 2
Platform for Major Grow th PNG LNG Project 1 3
PNG LNG Project Juha Production Juha facility 2 5 0 m m scfd 9 6 0 m m scfd Hides Gas Hides & Conditioning Plant Angore 1 1 0 km 8 ” Kutubu & Agogo condensate line 6 5 km 1 4 ” gas line & 8 ” liquids line Gobe Existing 2 7 0 km 2 0 ” crude pipeline 3 1 0 km 3 2 ” gas onshore Kopi pipeline Kum ul ~ 4 0 0 km 3 4 ” subsea gas line LNG Facility 7 5 km Port Moresby 1 4
PNG LNG Project Status Project m om entum continues to build tow ards year end FI D � FEED activities on track, targeting com pletion end 3 Q0 9 � Markets being confirm ed � Governm ent/ Landow ner agreem ents being progressed � Financing negotiations and due diligence on schedule � Legislation and approvals on track � Com petitive bidding for dow nstream build � Som e relief in capex item s identified Meeting Milestones Building Mom entum Progress on All Fronts 1 5
Project Status - Marketing � PNG LNG seen as quality project, seen to be m oving ahead w ith high probability of delivery in 2 0 1 3 / 1 4 tim efram e: � Quality, conventional proven resource � Excellent operator augm ented by Oil Search w ith local know ledge � Aligned Joint Venture and supportive Governm ent 1 6
Project Status - Marketing � Key term s of HOA agreed w ith m ajor Asian buyer for 2 m m tpa � Aw aiting Governm ent approvals � Detailed term s being negotiated w ith a num ber of other potential buyers, m ore than enough dem and to cover initial production � Confident of confirm ing 6 .3 m m tpa offtake through HOAs around m id-year 1 7
LNG contract pricing Analysis of Recent Contracts to Japan, Korea, and China ( DES) 1 8 Crude Oil Parity RasGas to KOGAS (from 2007) 1 6 Dec 06 Shell (QG) to PetroChina Apr 08 1 4 Bontang (Renewals) Mar 08 1 2 Average Australia to PetroChina (Estimated) Sep 07 1 0 Pluto to Japan (Estimated) Aug 07 8 6 Gorgon to Japan (HOA)* Oct 05 – Mar 06 4 NWS NWS-T1-3 Renewal Price (Bilateral Renewals) Apr – May 06 Mar – May 06 * Contractual price will likely be renegotiated. 2 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 JCC ($/bbl) 1 8 Source: F ACTS G LOBAL E NERGY, Feb 2009
Asian LNG Markets Outlook LNG Uncontracted Dem and ( m tpa) 1 2 0 Other 1 0 0 New Markets I ndia 8 0 China Taiw an 6 0 Korea 4 0 Japan 2 0 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 2 2 0 1 5 2 0 2 0 Source: F ACTS G LOBAL E NERGY, Feb 2009 � Dem and soft in the short term , but not im pacting 2 0 1 3 / 1 4 offtake � Conservative approach by custom ers, w ith flight to quality 1 9
Project Status – FEED & Contracting � FEED activities targeting com pletion end 3 Q0 9 � Preparatory w ork for early w orks activities underw ay, subject to continued progress on m arkets and BSA � Upstream contracting bids due early 3 Q0 9 � Dow nstream EPC bids due late 3 Q0 9 . Com petition betw een Chiyoda ( APCI ) and Bechtel ( Phillips Cascade) � Signs of dow nw ard pressure on costs, particularly steel and equipm ent � I nflationary cycle broken, w ith costs m ore predictable 2 0
Project Status – Benefits Sharing � Benefits Sharing Agreem ent ( BSA) is an overarching agreem ent betw een Governm ent and landow ners on how certain benefits are distributed: � Equity ow nership � Developm ent levies � Royalties � Magnitude of benefits prescribed by Oil and Gas Act and Gas Agreem ent � Other discussions include: � Local Business Developm ent and spin off opportunities � Training and skills developm ent � Past prom ises by Governm ent 2 1
Project Status – Benefits Sharing � BSA discussion a m ajor exercise in Project developm ent dem ocracy � Forum in Kokopo, w ith landow ner representatives from all Project im pact areas, from Juha to Portion 1 5 2 in Port Moresby plus State and Provincial Governm ents � Unprecedented gathering w ith over 1 ,0 0 0 attendees � Strong support for closure, BSA has never not been achieved � Getting ahead of critical path � W ill be follow ed by local, site specific discussions 2 2
Project Status - Financing � Detailed negotiations of financing Term Sheet now taking place w ith Export Credit Agencies ( ECAs) follow ing positive site visits and good feedback from due diligence process � Core financing proposal has broad support, including 7 0 % project finance, 3 0 % equity contributions � Standard project finance facility w ith parent com pany guarantee that falls aw ay at com pletion � OSH has no ratings-related funding driver or requirem ent from lenders to raise funding to support guarantee � Prelim inary com m itm ents and final term s from ECAs for project finance expected late 3 Q0 9 , follow ing definition of LNG purchasers and capex � Continued strong interest from banks for participation follow ing road show s in March/ April � Cornerstone of financing expected to be ECAs, w ith balance com ing from banks and potentially partner co-lending and bond m arkets 2 3
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