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1
O I L S E A R C H L I M I T E D
Strong Long Term Share Price Performance
WoodsideSantos
ASX 100
WTI oil
Oil Search
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Jan 06
Share price (rebased to OSH)
Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11
2
OSH Strategies to Create Ongoing Value
Optimise current oil and gas production:Through improved efficiencies and pursuit of near field opportunities
Maximise value of PNG LNG Project (T1 & T2):By utilising in-country knowledge to assist Operator
Develop LNG and other gas expansion opportunities:Build gas resources for both PNG LNG expansion and standalone LNG project/s
Measured programme of other growth options: Optimise exploration portfolio
Ensure Oil Search’s Sustainability:Operate business in transparent and sustainable manner to ensure long term operating stability and enhance ‘social licence to operate’
3
PNG LNG Project Overview
44
Kumul Terminal
Port Moresby
7°S
145°E
HidesWellsJuha
Facility
EPC3LNG Facility
Kutubu CPF
145°E 146°E144°E143°E
6°S
8°S
9°S
GorokaKundiawa
Mt. Hagan
Mendi
Kerema
EPC5BKomo
Airfield
100km
147°E
Daru
Wabag
LEGENDOil Field
Gas Field
Oil Pipeline
LNG Gas Pipeline
Oil Facility
LNG Facility
Major Road
Lae
EPC2Offshore pipeline
EPC5AOnshore pipeline
and Infrastructure
Gobe PF
Kopi Wharf
C1 Southcomplete
C2Complete
C1 HGCP
EPC4Hides Gas
Conditioning Plant
PNG LNG Project Overview
6.6 MTPA, 2 train development, operated by ExxonMobilOver its 30-year life, PNG LNG expected to produce over 9 tcf of gas and 200+ million barrels of associated liquidsInitial Equities:
ExxonMobil - 33.2% Oil Search - 29.0%Kroton2 (PNG Government) -16.8% Santos - 13.5% Nippon Oil - 4.7% MRDC (PNG Landowners) - 2.8%
Fully contracted to Asian buyers, with continuing strong market interest
Sinopec (China) ~2.0 MTPATEPCO (Japan) ~ 1.8 MTPA Osaka Gas (Japan) ~1.5 MTPACPC (Taiwan) ~ 1.2 MTPA
5
Milestones achieved to 3Q11
Ground-breaking and pouring of first foundations at LNG plant site. Fabrication of process trains, tanks and jetty underway
Final delivery of line pipe to PNG for onshore pipeline, over 30km of welding and burial now completed
Construction of Caution Bay offshore pipeline support site
Continued early construction activities in Highlands (incl. earthworks at Hides plant site and Komo airfield, road and bridge upgrades)
Completion of offsite fabrication of new CALM Buoy for Oil Search PL2 Life extension project, shipped in October
Successful production tie–in for future gas facilities completed on Oil Search operated Associated Gas project
Completion of training facilities at Juni in Highlands
Ramp-up in PNG workforce and use of PNG suppliers. Total workforce at end June of 9,300, of which 6,600 were PNG nationals (71%)
66
Focus items for 4Q11/early 2012
Community engagement
Working with new Government to ensure continued alignment and delivery of obligations
Wellpad and Hides spine road development
Installation of new CALM buoy for Kumul loading terminal
Continued onshore pipeline installation and commencement of offshore pipelay
Continued progress at LNG Plant site
Rig mobilisation and arrival, commencement of drilling
Strong A$ - pressures easing
7
Timetable
8
2010 2011 2012 2013 2014
FinancialClose
•Complete pipe lay•Ongoing drilling•Complete Hides plant•Commission LNG plant with Kutubu gas
•Ongoing procurement and mobilisation
•Airfield construction•Drilling mobilisation•Start offshore pipeline construction
•Onshore line clearing and laying
•Start LNG equipment installation
•Continued early works•Detailed design•Order long leads and place purchase orders
•Open supply routes•Contractor mobilisation•Commence AG construction
First Gas from Train 1,
then Train 2
•Complete AG •Continue onshore pipe lay
•Complete offshore pipe lay
•Start Hides plant installation
PNG LNG Plant Site
9
February 2011
July 2011
PNG LNG Plant Construction
10
Marine jetty piling
Process pipe rack construction
Largest OSH Drilling Programme
Embarking on one of the largest drilling programmes ever undertaken, starting 4Q11 continuing through 2012, into 2013
Multi-TCF risked potential for gas and several hundred millions of barrels of oil potential
Appraisal and development drillingHides
P’nyang
Kutubu, Moran and likely Mananda
ExplorationTrapia (PRL 11)
Near field oil exploration
Gulf Area drilling, subject to final seismic results
Taza, Kurdistan
Potential to underwrite continued gas commercialisation and short-medium term oil production
1111
Kumul Terminal
Port Moresby
7°S
Juha
PRL08
PPL240
PRL11
PDL7
PPL239 PDL1
PRL02
PDL2
PDL4PDL3
PRL09
PDL6
PDL5
PRL14
PPL260
APPL249
APPL250
233
PDL9PDL8
PPL233
APPL386
PPL219
LNG Facility
Gulf Offshore
6°S
8°S
9°S
PRL01
PPL234
PRL10
PPL244
Kiunga
Kundiawa
Mt. Hagan
Mendi
Kerema
Pandora
SE Mananda
Uramu
100km
Madang
Daru
Wabag
Gobe
PPL276
PPL338
338
338
338
PPL339
339
339
339
PPL339
339
PPL312
339 339
PPL260
Kopi Wharf
145°E 146°E144°E143°E 147°E
Kimu
PRL3
APPL385
240
240
V.
PNG LNG Expansion
12
Lae
LEGEND
Oil Field
Gas Field
Prospect
Oil Pipeline
Proposed Gas Pipeline
Major Road
P’nyang
Mananda 5 Kutubu, Agogo & Moran
Gulf Onshore
Hides
ExplorationGas Resources
PNG LNG ProjectGas Resources
Non PNG LNG Gas Resources
Barikewa
AngoreKomo Airstrip
Hides GasConditioning Plant
Elk/Antelope
Trapia
PNG LNG Expansion
Integrated exploration and appraisal drilling programme in the HighlandsResults by mid/late 2012Upside in Associated Gas fields:
Detailed evaluation ongoing by Oil SearchTargeting alignment with PNG LNG Co-Venturers in 2012
Hides Gas Water Contact Well:Hides development drilling scheduled to commence in late 2011, Gas:Water Contact well planned early in drilling sequenceOptimisation with logistics and construction (Komo and HGCP)
P’nyang and Trapia (formerly Huria) wells targeted for 4Q11 and 1Q12 spud respectively
13
PNG LNG Expansion
P’nyang (PRL 3) ExxonMobil 49%, Oil Search 38.5%, JX Holdings 12.5% Appraisal well scheduled for 4Q11Targeting southern fault block Aim is to move 3C to 2C and increase 1C resourcePotential 2C of ~2 tcf
14
Kumul Terminal
Hides
Kutubu
P’nyang 100km
SE Gobe
7°S
6°S
8°S
145°E144°E143°E142°E
Moran
Agogo
Juha
Angore
PNG LNG Expansion
15
Trapia 1 (PRL 11)Oil Search 52.5%, ExxonMobil affiliates 47.5% Exploration well scheduled for 1Q12
Series of prospects in area:
Reasonable seismic but structural uncertainty remainsMulti-tcf potential in areaPartial dependency. Exploration potential remains in event of success or failure at Trapia
Kumul Terminal
Hides
Kutubu
PRL11
10km
SE Gobe7°S
6°S
8°S
145°E144°E143°E142°E
Moran
Agogo
Juha
Angore
Gulf Area LNG Opportunity
16
PPL260
Kumul Terminal
PRL01
PPL234
PRL10
9°S
145°E 146°E144°E
Pandora
Gobe
Uramu
PPL276
PPL312
PPL338
PPL339
PPL339
339
339
338
338
338
339
339
339
3398°S
7°S
339
PPL244
50km
3D Seismic Regions
3D Seismic Regions
2D Seismic Lines
2D Seismic Lines
Multi-licence, multi play type, multi well opportunity being developed
Large, modern 3D seismic dataset acquired to unlock potential of Gulf
All offshore data complete and being interpreted. Results of initial interpretation are encouraging
2D onshore in PPL 338 and 339 seismic processed, interpretation underway
Rig options and timing being assessed
Long lead item procurement process commencing
Elk/Antelope
Flinders
Gulf Area LNG Opportunity
Prospectivity:Targeting 4Q for initial assessment of prospectivity across all licencesFinal views by year end
Partnering:Discussions initiated and ongoing with potential strategic farm-in partnersInternational interest heightened by InterOil sale process
Drilling:Planning ongoing:
Well design commencedLong lead item procurement process commencedSite survey planning Rig selection and sourcing discussions ongoing
Timing:Targeting 2012. Timing dependent on:
ProspectivityRig selection and availabilityStrategy selected Status of partnering discussions
17
PPL 244 – Flinders Fan
Preliminary interpretation of seismic over Flinders indicates potential hydrocarbon bearing sands
Larger areal extent than previously thought
1818
A
B
Flinders FanMaximum Seismic Amplitude
BAFlinders Fan
Kurdistan - Taza PSC
PSC signed after exercising Option Agreement
Oil Search entry as Operator in extremely active Kurdistan Region of Iraq
Very prospective location adjacent to three fields
Large, simple 4-way dip closure identified from 2010 seismic
Well scheduled to spud in 1H12
1919
TazaProspect
Kor MorGas Field
PulkhanaOil Field
JamburOil Field
Taza PSC
Tunisia
20
2010 seismic evaluation complete. Infill line being conducted in 4Q11Large structures mappedProven plays present and new deep gas play developedPrime prospect in Tajerouine permit has potential for >100 mmstb oil and >400 bcf gasFiscal regime favourableProspect sizes commercially attractiveExploration well to be drilled in late 2012
20
~10km
Tajerouine
21
Oil Search Production
2008 2009
8.607.66
2010
8.12
2011
6.2-6.7
2012 2013 2014 2015 2016 2018
25Net Production (mmboe)
0
5
10
15
20
MENAHides GTESE ManandaSE GobeGobe MainMoranKutubu
2017
2011/12 Development & Near-Field Appraisal Drilling Activity
22
PRL08
PPL240
PRL11
PRL12
PPL239 PDL1
PPL233
PPL219
PRL02
PDL2
PDL5PDL6
PRL09
PRL14
PPL260
APPL386
PDL4
PDL3
PDL4
PRL12
50km
AngoreJuha
Hides
SE Mananda
PPL240
PPL233
APPL350
6°S
143°E 144°E
7°S
Usano:2011 : 1 well, 1 workover2012 : 1 well
Kutubu:2011 : 1 well, 1 workover
Agogo:2011 : 1 well2012 : ±1 well
Moran:2012 : 1-2 wells
SE Gobe:2011 : 3-4 workovers
Gobe Main:2011 : 1 workover
Mananda 5
Near Field Exploration
Detailed review of “near field” exploration potential in and around existing producing fields as part of 2010 strategic reviewMore than 25 opportunities identified. Recent successes support new structural modelPotential:
125 mmboe net (approximately half oil, half gas)
Higher risk than historical development drilling:Difficulty imaging Untested reservoir properties Complex geology
Risk management:Integrating with existing pads and wells to reduce costFall back of safer, conventional proven targetsStep wise approach, building out from known positions
23
24
Near Field Exploration
Focused on:Deeper Koi-Iange play:
Potentially underlies all producing reservoirsPenetrated by IDT 25, due to be tested in 4Q 2011
Forelimb play:ADT 2/Hedinia 10 lookalikes Agogo 6 due to spud shortly
24
Play extensions:Based on detailed remapping and 2011 seismic Potentially SE Mananda and Kube Kabe (north of Kutubu)
Footwall targets:Hedinia, Moran, Mananda
FootwallsForelimbs
Deeper targets e.g.Koi Iange
25
Hedinia 10 ST3 Discovery
Kutubu oil field
Sub-thrust forelimb
Hedinia 10 drilled beneath Kutubu oil field to test structure analogous to Agogoforelimb discovery (ADT 2ST3)
Hedinia 10ST2 & 3 confirmed oil in Toro reservoir
Preparations underway to complete Hedinia 10 ST3 well as an oil producer, tied in to existing PDL 2 surface facilities
First oil by end of November
Full extent of discovery will be assessed following post-well analysis and early production performance
ST1
ST2ST3
%,
1
1
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ª
ª
' '
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'ª
1ª
ª '
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'ª''
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k
1 '
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PDL 2
PDL 6 PDL 5
AHT 2
AHT 1ADT 2
ADT 1ADD 3
ADD 1
Moran 9
Moran 8Moran 6X
Moran 4X
Moran 13
Moran 10
Moran 14
Moran 12
ADD 1ST1
Moran 12A
Moran 14A
Mananda 5
Mananda 3X
Mananda 4X
Mananda 2S
SE Mananda 5SE Mananda 3SE Mananda 4SE Mananda 2X
Mananda 3XST1
SE Mananda 1X
PPL 219
PPL 287
PPL 233 PPL 378
APF
143°5'E143°0'E142°55'E
6°10'S
6°15'S
6°20'S
26
Mananda 5 Discovery
25 mmboe discovery, ~50:50 oil:gasConfirmed oil in Toro A, B & C Ambiguous in Imburu & Digimu 3 year Licence Extension offered by DPE. Declaration of Location gazetted
Subsurface, engineering and in-country issues evaluation ongoingDecision made to acquire new grid of 2D seismic lines. Acquisition to start late 2011
PotentialPipeline Route
0 2 4 61 Km
SE MANANDA
MORAN
AGOGO
2011-12 Seismic Survey
27
2011/12 Focus Areas
Maintain OSH’s industry-leading safety performance in high activity environment
Strong commitment to cost effectiveness
PNG LNG Project commitments driving operational developments:
Deliver the Associated Gas Project as planned
Improved reliability and long term integrity
Life extension programmes for facilities
Upgrade of key systems and processes
Enhanced development of personnel
Continued focus on capturing additional in-field and near field reserve opportunities
27
PNG Operating Environment
PNG has built enviable investment record of fiscal stability in resources sector over past 15 years
Unprecedented investment now taking place in oil, gas and mining, encouraged by attractive fiscal policy and stability
History of constructive dialogue between industry and Government to manage issues and expectations
Anticipate that this will continue with new Government, led by Prime Minister Peter O’Neill
Rapidly changing economic and social landscapeChanges in traditional tribal culture
Increased expectations and opportunities
Education and communications
Focus on improving benefits distribution system, transparency and service delivery
Strong support from landowner leaders and key institutions
28
Managing Operating Risk
Oil Search has increased its focus on managing in-country issues
Seen as key way to mitigate operating risk
Expanded Sustainability Group is focusing on:Government/regulatory
Promoting transparencySovereign wealth funds Supporting benefits distribution processProviding support to PNG Government bodies, when appropriate
Relationship building between Government, Landowners and other businesses
Oil Search Health Foundation:Expanding the successful OSH model for health programmes to other areas of PNGNominated as Principal Recipient for grants from The Global Fund to deliver HIV and malaria programmes
2929
Summary
Delivery of PNG LNG underway:
Robust project
Outside crowded Australian LNG space, conventional onshore gas, limited technical risks
High quality Operator, making good progress towards first sales in 2014
Largest ever drilling programme
Oil fields generating strong cash flows. Production impacted by associated gas construction in 2H, but expect production to remain flat in 2012/13 despite field maturity
PNG challenging environment, increased focus on managing risk
Balance sheet remains strong, ample liquidity to meet LNG obligations and to mature expansion activities
30