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1
US Investor Presentation
March 2010
O I L S E A R C H L I M I T E D
2
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.
3
Oil Search Profile
Established in Papua New Guinea (PNG) in 1929
Operates all of PNG’s producing oil and gas fields. Current gross production ~40,000 boepd, net share ~21,000 boepd
PNG Government is largest shareholder with 15%. In early 2009, Govt issued exchangeable bond over shares to IPIC of Abu Dhabi
29% interest in PNG LNG Project, world scale LNG project operated by ExxonMobil. Project in construction, first LNG sales expected 2014
Significant further gas resources still to be commercialised plus exploration interests in PNG and Middle East/North Africa
Market capitalisation ~US$7 billion. Listed on ASX (Share Code OSH) and POMSOX, plus ADR programme (Share Code OISHY)
4
Oil Search Locations
Tunisia Iraq
Yemen
Papua New Guinea
Australia Brisbane
Sydney
Port Moresby(Head Office)
Kutubu Ridge Camp
Dubai
Sana’a
Tunis
5
2009 Performance Summary
Highlight of 2009 was PNG LNG Project development decision:
Less than two years from FEED to Sanction
Transformational impact on Oil Search and PNG
ExxonMobil quality operator
Foundation for major LNG industry in PNG
Seven fold increase in proven and probable reserves, increasing from 67 mmboe to 567 mmboe, with significant further potential upside
NPAT of US$133.7 million, US$99.6m excluding PNG Government back-in and tax adjustments. Satisfactory result given commodity environment, with average oil price down 35%
Strong balance sheet with US$1.3 billion cash at year end, totalliquidity of US$1.6 billion (including line of credit). Sufficient for both PNG LNG equity contribution plus funding of T3/T4 gas exploration/ appraisal programme
6
Outstanding Safety Performance
Total Recordable Incidents (TRIs) of 1.16 in 2009
TR
I /
1,0
00
,00
0 H
ou
rs
0
2
4
6
8
10
12
14
1998 1999 2000 2001 2002 2003 2004 2005 2007
Oil Search
2006
Australian Companies (APPEA)
2008
InternationalCompanies
(OGP)
12.7
9.1 9.37.8
7.0 7.3
5.2
9.4
8.26.3 6.8
3.9 3.1 2.9 2.7 2.1
4.0
3.6
4.9
5.76.0
2009
8.5
10.69.8 10.7
5.8
1.7
4.7
2.4 2.31 2.05 1.162.04
7
Consistent TSRperformance over 5 years
Source: IRESS
Relative TSR performance for period ending 31 December, 2009
ASX 100 Index Median Company OSH performance# Ranking based on ASX 100 composition at the beginning of the reference period.
-5
0
10
20
30
40
1 Year 3 Year 5 Year
% T
SR
per
an
nu
m
1st
3rd
OSH Ranking #
42nd
8
Future Value Growth
Driven by :- PNG LNG delivery Project optimisation Further LNG train development Reserve growth and exploration success
Comprehensive programmes to delivervalue through to PNG LNG first gas
9
PNG LNG Project
10
PNG LNG Project
World class LNG project under construction
Aligned joint venture ExxonMobil Operator –
excellent track record Supportive Government
and communities Provides infrastructure
for future growth Transformational for Oil
Search and PNG
11
PNG LNG Projectthe road to sanction
2008 Signed JOA, aligning JV partners in March Signed Gas Agreement with Govt in May Commenced FEED in May Commenced marketing discussions late 2008 Developed financing plan
2009 Submitted EIS in January Signed UBSA in May Signed HOAs Commenced early works EIS approved in October Completed FEED, LNG plant capacity
increased to 6.6 MTPA
12
PNG LNG Projectthe road to sanction
December 2009 Completed LBSAs Signed 3 SPAs with TEPCO, Osaka Gas and Sinopec Development approval 8 December 2009 EPC contracts awarded 9 December 2009 Financing documents signed 15 December 2009 with
ECAs, Commercial Banks and ExxonMobil for $14 billion –world’s largest project financing
Government offered and Project accepted all development licences
Government paid past costs for equity back-in to new development licences
March 2010 Signed final SPA with CPC – now fully contracted LNG vessel charter contracts signed with
Mitsui OSK Lines Minor legislation amendments 12 March – Financial Close
13
PNG LNG Project
Construction has commenced (roads, bridges, camps, site preparation and training facilities). First LNG sales expected 2014
First phase CAPEX, including FEED and early works estimated at US$15 billion
Contracts: LNG Plant: Chiyoda/JGC Offshore Pipeline Saipem Hides Gas Plant CBI/Clough JV Onshore Pipeline Spiecapag Infrastructure McConnell Dowell/CCC JV Early Works Clough/Curtain JV Associated Gas (OSH only) Aker Solutions
Mix of fixed price/variable price contracts Resourcing by contractors underway now Operator ExxonMobil has excellent record of
delivering projects on time, on budget
14
Proposed PNG LNG Future Activities
2010 2011 2012 2013 2014
FinancialClose
Continued early works.Detailed design.
Order long leads and place purchase orders.Opening supply routes.Contractor mobilisation.Commence AssociatedGas (AG) construction.
Pipe laying Kutubu to Hides.
Ongoing drilling.Complete Hides plant.Commission LNG plant
with Kutubu gas.
Ongoing procurement and mobilisation.
Airfield construction.Drilling mobilisation.
Offshore pipeline construction start.
Onshore line clearing.Start LNG equipment
installation.
First Gas from Train 1,
then Train 2
AG complete.Pipe laying
(Kutubu to Omati).Offshore pipe lay
complete.Start Hides plant
installation.
15
PNG LNG Ranking (Macquarie Equities)
Industry observers rank PNG LNG highly on returns
Source: Australian Energy Sector , Macquarie Equities Research, 12 January 2010
Qata
rGas3
PN
G L
NG
T3
Plu
to T
3
PN
G L
NG
T1
/T2
Po
seid
on
GLN
G T
2
Ich
thys
AP
LN
GT1
/T2
Wh
eats
ton
e
Su
nri
se
Go
rgo
n
GLN
G T
1
Bro
wse
Plu
to T
1
0
5
10
15
20
25
30
35
%
16
GasGrowth
17
PNG Gas Growth
Key strategic priority for Oil Search is to grow gas business in PNG
LNG remains optimum commercialisation route for additional gas
PNG LNG will provide infrastructure and capacity to facilitate expansion and provide excellent cost structure: Use of capacity in pipeline, jetty, tanks and services
Trained local work force
Government is supportive of future gas growth
Pace of gas growth will be determined by: Resource aggregation/exploration
Joint Venture alignment
Market access
18
Existing Gas Discoveries
PRL01
PPL234
PRL08PPL240
PRL03
PRL11
PDL7
PPL239
PDL1
PPL190
PPL219
PRL10
PRL02
PDL2
PDL4
PDL3
PRL09
PPL244
9°S
6°S
145°E50km
Kumul Terminal
PDL6PDL5
APRL14
PPL260
APPL249
APPL250
PPL
233
PDL9PDL8
142°E
Hides/Juha/Angore
Kutubu/Agogo/SEM
P’nyang
Pandora A
Uramu
Barikewa
Gobe/SEGElk/Antelope
Distribution of discovered 2P reserve/resource Significant discovered oil & gas reserves/resources
in Papuan Basin (predominantly in Fold Belt) Basin is predominantly gas prone 85% of basin’s resources by boe are gas
19
PNG Gas Growth Activities
Two largely independent core gas development streams: PNG LNG dedicated fields
Material core reserves Proven 300 mmboe (OSH share) sold Proven & probable 500 mmboe (OSH share) –
significant upside Field development optimisation Future appraisal Strong partner alignment
Other fields and exploration Material resources still to be commercialised Proven & probable 281 mmboe (OSH share) Future appraisal and exploration underway Developing material portfolio ex PNG LNG
Objective is to prove up sufficient proven contractible reserves to underwrite Trains 3 and 4
20
PNG Gas Growth Activities
Foldbelt/Highlands: Adjacent to PNG LNG upstream infrastructure Large structures, moderate risk, high OSH equity 2010 and 2011 activity:
− Drilling Korka− Barikewa seismic (completed) followed by appraisal drilling− Huria seismic− Mananda drilling
Gulf of Papua: Large under-explored areas with diverse licence holdings Planned 3D seismic will image subsurface, help high-grade
portfolio Opportunity to extend 3D survey into nearby licence 2010/2011 activity:
− 3D seismic survey− Drill Flinders− Appraise Pandora
Foreland and Strickland: Maintain watching position CBM test in 2010
21
Circle areas proportional to reserves potential
Outer circle unrisked potential, inner circle risked potential
Red =GasOrange= CondensateGreen = Oil
Proposed 2010/11 PNG Gas Exploration
PRL01
PPL234
PRL08PPL240
PRL03
PRL11
PDL7
PPL239
PDL1
PPL190
PPL219
PRL10
PRL02
PDL2
PDL4
PDL3
PRL09
PPL244
9°S
6°S
145°E50km
Kumul Terminal
PDL6PDL5
APRL14
PPL260
APPL249
APPL250
PPL
233
PDL9PDL8
Flinders
Barikewa Deep
Wasuma (PPL 219 & 190)
Cecilia West
KorkaHuria (PDL 8)
Mananda FW
Mananda Attic
142°E
22
PNG Offshore 3D Survey
4,700 km2 3D
4,700 km2 of 3D seismic to be acquired in 2010 – largest in PNG history
Gulf ofPapua
23
Operations
24
Oil Search Production
0
2
4
6
8
10
12
14
2004 2005 2006 2007 2008 2009
Net Production (mmboe)
11.05
12.17
10.219.76
8.608.12
7.2-7.4
2010
Kutubu
Moran
Gobe Main
SE Gobe
SEM
Hides GTE
MENA
(Forecast)
2525
2009 Production Performance
Excellent safety performance
2009 production of 8.12 mmboe Strong underlying performance
in all fields Two new rigs (103 and 104)
operating throughout year with significant performance improvements
Total cash costs (inc corporate costs, FX) of US$12.99/boe, down 7% from 2008Achieved despite 4%
reduction in saleable oil volumes and inflationary environment in PNG
Production impact of recent drilling at Usano
0
2,000
4,000
6,000
8,000
10,000
12,000
1992
1994
1996
1998
2000
2002
2004
2006
2009
Oil Rate (bopd)
Usano Main Block
Usano East Block
UDT 7
UDT 11
UDT 8,9
UDT 10,12
26
Oil development drilling continues to add value
Since 2003, gross PNG proven (1P) oil reserves have increased by51 mmbbl and proven and probable (2P) reserves by 37 mmbbl
Development drilling has added 2P reserves at average cost of US$11.72/bbl
Many further opportunities exist, including appraisal of Agogo deep (ADT 2), drilled in late 2009/10, recently tested at 2,000 bopd.Testing of discovery is ongoing
PNG Oil Fields – Gross Ultimate Recoverable Reserves (pre-LNG)
1P
2P
440
460
480
500
520
540
560
Mil
lio
ns
of
Barr
els
2003 2004 2005 2006 2007 2008 2009
2727
Reserves & Resources31 December 2009
Six-fold increase in proven (1P) reserves, from 50 mmboe at end 2008to 344 mmboe: PNG LNG Project reserve booking of 301 mmboe 2009 production of 8.1 mmboe Oil reserve additions at Kutubu, Gobe and SE Gobe of 2.4 mmboe
Seven-fold increase in proven & probable (2P) reserves, from 67 mmboe to 567 mmboe: PNG LNG Project reserve booking of 505 mmboe 2009 production of 8.1 mmboe Oil reserve additions at Kutubu, Gobe and SE Gobe of 2.8 mmboe
2C resources, comprising gas and associated liquids, of 281 mmboe at end 2009, compared to 886 mmboe at end 2008: Adjustment of 79 mmboe, due to Government back-in, to PNG LNG,
initial equity determination and field reserve changes PNG LNG Project reserves booking of 505 mmboe Decrease of 21 mmboe for revisions to certain fields’ 2C estimates
and Government back-in
Total 2P and 2C reserves and resources of 848 mmboe
2828
2010 Operations Outlook
Gas value driving revised Operating Framework:
Field reliability management
Gas conservation with minor oil production impact Value-adding PNG production activities will continue in
2010, including 1 – 2 wells at Moran, appraisal of Agogo ADT 2 deep play and workover campaign in Kutubu, Moran, SE Gobe
Ongoing focus on costs and capital efficiency following 2009 Operations Review
Aligning and maximising use of infrastructure to support LNG project
Production outlook for 2010 of 7.2 – 7.4 mmboe, with incremental activity expected to flatten decline curve in 2011 - 2013
2929
Exploration Outlook
PNG: Exploration for gas – key to driving LNG expansion Additional oil focused exploration in 2010:−Wasuma (25 mmbbl mean, currently drilling in PPL 219) −Mananda Attic (30 mmbbl mean in PPL 219, plus gas
play)
MENA: Focus on finding material oil and maximising asset
value:−Evaluate commerciality of Shakal (Kurdistan Region, Iraq) and
Tubb’a (Yemen) discoveries−Oil–focused drilling ongoing within Blocks 3 and 7 in Yemen,
targeting 3D-defined structures – encouraging signs in Al Meashar–1, Block 7
−Seismic in Kurdistan (Block K42 in world class exploration province) and Tunisia planned to define drillable large structures
30
PNG 2010 Exploration Summary
PRL01
PPL234
PRL08PPL240
PRL03
PRL11
PDL7
PPL239
PDL1
PPL190
PPL219
PRL10
PRL02
PDL2
PDL4
PDL3
PRL09
PPL244
142°E
9°S
6°S
145°E50km
Kumul Terminal
PDL6PDL5
APRL14
PPL260
APPL249
APPL250
PPL
233
PDL9PDL8
Commitment
Discretionary
Future Commitment
Well Types
Prospect/Lead (POS%)Mean Oil Gross (mmstb)Mean Gas Gross (bscf)
Seismic
CommitmentDiscretionary
Permit 2D(distance)/3D(area)
Flinders (12.5%)1.0 tcf+
Korka (15%)1.3 tcf +
Mananda Attic (45%)30 mmstb
Mananda FW (10%)1.2 tcf +
PPL 234 3000+km2
PRL11 80km
PPL233 55km
PDL2 100km
Wasuma HW(30%)25 mmstb
Wasuma Deep (20%)25 mmstb
31
MENA 2010 Exploration Activity Summary
Sana’a Office
Dubai Office
Commitment
Discretionary
Future Commitment
Well Types
Prospect/Lead (POS%)Mean Oil Gross (mmstb)Mean Gas Gross (bscf)
Seismic
CommitmentDiscretionary
Permit 2D(distance)/3D(area)
Tajerouine
Le Kef
K42
Shakal
Block 7
Block 3
Taj. + Le Kef 600km
K42 200km
Shakal 50km
Jebel Milh (17%)28 mmstb
Block 3 & 7 400km
Al Measher (20%)20 mmstb
Block 3/7 well,late 2010
32
Outlook and Summary
33
Outlook and Summary
Oil Search’s core business in excellent shape to drive further value growth over next 3 years
PNG LNG Project construction underway ExxonMobil quality operator for delivery
Contractors mobilising
Buyers secured, with pricing locked in
Finance secured, excellent package
Significant impact on PNG already being felt
PNG LNG is country and Company transformational
34
OSH good value on 1P reserves relative to Global Energy Sector
0
5
10
15
20
25
30
35
40A
rro
w
Hu
sky
Mu
rph
y
BG
Mara
thon
Rep
sol
Woo
dsi
de
EN
I
Ch
evro
n
An
ad
ark
o
Sh
ell
Hess
Talism
an
Ap
ach
e
Devo
n
San
tos
Oil
Searc
h
Exxo
nM
ob
i
To
tal
BP
Ph
illip
s
Note: Enterprise Values as at 31 January, 2010. 1P reserves based on latest publicly available reserves figures
Source: Public information
Enterprise value (US$m) / 1P reserves (mmboe)
35
Significant additional LNG Reserve Booking Potential
Sanction of PNG LNG has delivered incremental reserves of 301 mmboe and 505 mmboe on 1P and 2P basis respectively
Additional net 2C resources of 281 mmboe in other OSH fields
Total resources in OSH and other PNG fields (ex PNG LNG) estimated at 1,686 mmboe (9 tcf)
PNG 2009Reserves & Resources (100% Licence Estimates)
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Mil
lio
ns
of
Barr
els
Oil
Eq
uiv
.
Oil Only Oil + PNG LNGOSH Fields'Reserves &Resources
All OtherResources
2P/2C
Oil Search 2009PNG Fields Net Reserves & Resources
0
100
200
300
400
500
600
700
800
900
Mil
lio
ns
of
Barr
els
Oil
Eq
uiv
. (N
ET
)
Oil Fields Oil + PNG LNG Oil + PNG LNG +Resources
1P/1C 2P/2C
36
Active programmes to deliver in 2010
Field and development optimisation (Central Foldbelt)
Seismic acquisition and drilling
Accelerated exploration (NW Foldbelt and Gulf)
Seismic and drilling, CSM
Selected acquisitions (PRL 1, PPL 244 and others)
Partner alignment (PNG LNG and others)
37
OSH has financial capacity:
US$1.29 billion in cash at end December
US$362.5 million available from term revolving facility, nil drawn down
Group liquidity ~US$1.65 billion
Sanction of PNG LNG Project in December delivered US$88 million net to OSH from PNG Government back-in to Project gas licences
Claw-back from lenders of 70% of Project costs spent prior to Financial Close will deliver ~US$300 million inflow in late March
Strong balance sheet
38
2010 Guidance Summary
Production: 7.2 – 7.4 mmboe. Incremental activity in 2011 – 2013
expected to flatten decline curve Opex:
US$16-18/boe Increase due to FX, PNG inflation, increased spend to
improve reliability & extend life and relatively fixed cost base on lower production. In addition, accelerated focus on workovers to maximise oil recovery prior to gas blow down
Likely to stabilise/decline in 2011 D,D & A:
US$6-8/boe Decrease due to recognition of LNG reserves
Capex: Exploration – US$210m (80% in PNG, 20% in MENA) Production/Other – US$85m (inc corporate & other gas) PNG LNG – US$1,000 - 1,350m (inc capitalised interest &
upfront fees)
39
Production Outlook
PNG LNG adds ~18 mmboe pa to OSH at plateau in 2015 onwards. 30 year Project life
T3 could add an additional ~9 mmboe pa, with T4 of similar magnitude
Net
Pro
du
ctio
n (
bo
ep
d)
0
10,000
20,000
30,000
40,000
50,000
60,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
LNG GasLNG Gas
PNG DevelopmentPNG Development
70,000
80,000
Potential T3 LNG GasPotential T3 LNG Gas
LNG CondensateLNG Condensate
90,000
Potential T3 LNG CondensatePotential T3 LNG Condensate
40
Summary
Primary focus in 2010/2011 on proving up sufficient contractible gas to underwrite T3/T4
Core oil production remains solid. Focus on life extension, reliability and gas conservation A new value equation
Measured oil exploration in PNG and MENA
Activities underwritten by strong balance sheet, with sufficient liquidity to meet PNG LNG obligations, T3/T4 appraisal and exploration activity
41
Port Moresby144°E
6°S
146°E142°E
Appendix 1. PNG Attracting Growing Interest
PNG transaction value ~US$1.4 billion over past 18 months, inc NOEX acquisition of AGL licences
Talisman and Sasol have acquired significant acreage in Western Forelands. Interoil has strong position in Eastern Forelands
OSH strategy focused on enhancing position in core PNG LNG Foldbelt acreage and Gulf -viewed as offering greatest potential for large gas discoveries
Sasol & Interoil Equity Participation
80km
8°S
Port Moresby144°E
8°S
6°S
146°E142°E
Talisman Equity Participation
80km
Juha
Gobe
Kutubu & Agogo
Hides & AngoreJuha
Gobe
Kutubu & Agogo
Hides & Angore
Port Moresby144°E
8°S
146°E142°E
Petroleum Licences
CSG Licences
6°S
80km
Oil Search Equity Participation
Juha
Gobe
Kutubu & Agogo
Hides & Angore
42
Appendix 2. Papuan Basin Major Areas – OSH assessment
NW Fold BeltLarge undrilled surface anticlines remain
Low risk on reservoir, charge and seal
StricklandA number of undrilled small low risk prospects and leads are present.
Poor quality seismic
Southern ForelandA number of risky small undrilled prospects and leads remain
Poor quality seismic Gulf of PapuaA number of prospects and leads across varied play fairways
Prospects can be quickly de-risked with 3D seismic
Aure Fold BeltArea is under explored –Elk indicates significant potential for carbonate plays and emerging play potential
Key risk is reservoir effectiveness
Interior Fold BeltNumerous oil & gas seeps indicate a working hydrocarbon system
Central Fold BeltOnly proven oil prone area.
Significant subthrustpotential exists
8°S
142°E 144°E
100km