Microsoft PowerPoint - 1509 Morgan Stanley UK Conference.pptx

Morgan Stanley UK Conference

September/October 2015

Oil Search Limited

ARBN 055 079 868

ASX: OSH | POMSoX: OSH US | ADR: OISHY

www.oilsearch.com

Oil Search Profile

Tunis ErbilSulaymaniyah

TUNISIA IRAQ

Dubai

PAPUA NEW GUINEA

Kutubu Ridge Camp

Port Moresby (Head Office)

AUSTRALIA

Brisbane Sydney

» Established in Papua New Guinea (PNG) in 1929

» 29% interest in world class PNG LNG Project, operated by ExxonMobil, and

~60% interest in all PNG's producing oil fields, operated by OSH

» Pursuing two major LNG growth opportunities - potential PNG LNG expansion and Papua LNG Project. Both among most competitive LNG projects globally

» Material gas exploration upside in PNG

» Oil exploration interests in Middle East/North Africa

» Market capitalisation ~A$11bn (~US$8bn)

» Listed on ASX (Share Code: OSH) and POMSOX, plus US ADR programme (Share Code: OISHY)

Overview

» Strong production from quality assets:

• PNG LNG Project performing above expectations

• Oil assets performing well

  » Solid balance sheet with liquidity of ~US$1.6bn

  » LNG growth projects advancing:

• PNG LNG production optimisation/debottlenecking underway

• P'nyang drilling in 2016 planned to underwrite potential Train 3

• Papua LNG Project expected to advance to FEED in 2016

• Major near-field exploration programme planned for 2016+

  » Business Optimisation Programme aimed at streamlining organisation:

• Focus on costs and prioritisation of capital

• Significant reduction in opex and increase in efficiencies

  » WPL one-for-four takeover proposal rejected by OSH Board:

• Opportunistic

• Grossly undervalues existing assets/growth

• Few synergies

• Would change investment profile

• OSH not stressed and able to fully fund growth projects

Oil Search licence interests, PNG

P'nyang

Proposed Juha Facility

Hides Gas Conditioning Plant

& Komo Airfield

Juha

Kimu

PPL260

Juha North

Kutubu

SE Gobe Barikewa

Hides

Angore

Moran Agogo

Elk/Antelope

Gobe Main

PNG LNG Project Gas Fields

PNG LNG Project Facilities

Non PNG LNG

Gas/Oil Fields

Papua New Guinea

Hides

Kutubu

Port Moresby

OSH Operated OSH Interest Oil Pipeline Oil Facility

Oil Field Gas Pipeline Gas Facility Gas Field

Condensate Pipeline

Uramu

Hagana

Flinders

LNG Plant

Morgan Stanley UK Conference - September/October 2015

PNG LNG Project - producing consistently above nameplate capacity

» 52 LNG cargoes exported in 1H15, >125 cargoes loaded to date since Project start-up in 2014

» Annualised production in 1H15 of ~7.1 MTPA, compared to nameplate capacity of 6.9 MTPA:

- Supported by strong upstream deliverability (including OSH- operated gas supply) and LNG plant reliability

» Project has established excellent reputation as a reliable gas supplier

» Current focus is on production optimisation / debottlenecking:

CHINA

Qingdao LNG Terminal

TAIWAN

Yung-An LNG Terminal

Senboku LNG

Terminal

JAPAN

Futtsu LNG Terminal

- Already delivering substantial incremental value, with further upside potential

» Final components of foundation development (Angore drilling, tie-in of Hides F1) expected to be completed in 2015

Located close to Asian LNG markets

PNG

Solid demand for PNG LNG spot cargoes

» Full contractual volumes being taken, with contract ramp-up underway to plateau of 6.6 MTPA in 2Q16

» Good demand for spot volumes, >85% of spot cargoes have been sold to contract customers

» PNG LNG product well received by market, reflecting:

• High heating value gas - well suited to Asian reticulation network

• Proximity to Asian LNG markets

• Diversification source

30 Long-term contracts

25 Spot and medium-term 20

LNG cargoes sold since PNG LNG start-up

15

10

5

0

2Q14 3Q14 4Q14 1Q15 2Q15

2015 Production Outlook

» 2015 production guidance increased to 27 - 29 mmboe, comprising:

Net Production (mmboe)

30

27 - 29

• 6.3 - 6.9 mmboe from operated oil fields and Hides GTE* 25

• 21 - 22 mmboe from PNG LNG Project

  » 2H15 focus items : 20

• Ongoing oil production optimisation initiatives, with focus on process safety, reliability and well integrity 15

• Continued delivery of Kutubu, Gobe Main and SE Gobe (third-party) gas to PNG LNG Project,

  operation of liquids export system via Kumul Marine 10

  Terminal

• Support operator in maximising PNG LNG 5

production opportunities through optimisation / debottlenecking

0

PNG LNG (T1 + T2)

Hides GTE SE Mananda Gobe

Moran Kutubu

6.69 6.386.74

19.27

21 - 22

6.3 - 6.9

* Includes SE Gobe gas sales

2011 2012 2013 2014 2015F

1 LNG sales products at outlet of plant, post fuel, flare and shrinkage 2 Oil forecast assumes successful development drilling in 2015

3 Gas:oil conversion rate used in 2014 & 2015: 5,100 scf = 1 barrel of oil equivalent (prior years 6,000 scf/boe)

Next phase of LNG development in PNG

» OSH holds material positions in NW Hub (P'nyang field) and Gulf Hub (Elk-Antelope field), likely sources of gas for next phase of development

» Both PNG LNG expansion and Papua LNG Project in lowest quartile for costs globally

P'nyang

Juha

Hides

Angore

Moran

Agogo

Kutubu

OSH Operated OSH Interest Oil Pipeline Oil Field

Gas Pipeline Gas Field

NW HUB PNG LNG FIELDS

and remain economically attractive

Mananda SE Mananda

Gobe Main

GULF

» Delivery of near-term trains is common objective for industry, Government and communities

» OSH well positioned to play key role to ensure optimum development

» Multiple exploration opportunities remain to

Kimu

SE Gobe

Barikewa

Uramu

Gulf of Papua

Elk-Antelope

Hagana Flinders

HUB

supply further gas

PNG LNG facility

NW Hub: PNG LNG expansion and domestic power

P'nyang

» MoU signed in January 2015 by ExxonMobil (as operator of PNG LNG and PRL 3) and PNG Government sets schedule to develop P'nyang gas field, to underpin:

Papua New Guinea

Hides

Kutubu

Port Moresby

Strickland

Juha

Muruk

Hides

Angore

• PNG LNG Project expansion (high value debottlenecking and potential third LNG train)

  
  

• Delivery of domestic power to PNG

» PDL application under review from Government

» Commencement of delivery of up to 25MW of interruptible electricity from PNG LNG plant to PNG Power in Port Moresby in July supported Pacific Games and satisfied key commitment of MoU

PRL 3	WI %
ExxonMobil affiliates (operator Esso PNG P'nyang Ltd)	49.0
Oil Search	38.5
JX Nippon	12.5

» PNG LNG expansion identified by ExxonMobil as 'very well positioned to compete' globally*

- Supported by successful delivery and performance of foundation Project, competitive cost structure, stable and transparent fiscal terms

* ExxonMobil 2Q 2015 earnings conference call

P'nyang South 2 appraisal well to further constrain 1C and 2C resource

P'nyang 2X P'nyang 1X P'nyang South 2

PPL 421 PPL 294/APPL 507

PPL 269 PRL 3

P'nyang 2X P'nyang 1X

P'nyang South 1

P'nyang South 2

PPL 464 PPL395

0 4 Km

» Preparatory work underway for P'nyang South 2 appraisal well:

• Location in SE of structure agreed by PRL 3 JV

• Assuming successful appraisal, OSH expects material increase in current OSH 1C and 2C resources

• To be drilled 1H 2016, using OSH's Rig 103 (following completion of PRL 15 appraisal programme)

» Once PDL awarded, P'nyang will be integrated into PNG LNG Foundation Project and included in subsequent redetermination process

Gulf Hub: Papua LNG Project facilities site locations agreed, operator transition to Total SA completed

CPF

Papua New Guinea

Hides

» Potential second world-scale LNG development in PNG

» Significant progress achieved in 1H15:

0 80 Km

Kutubu

Elk/Antelope

Port Moresby

• Locations of key infrastructure sites agreed by PRL 15 JV and supported by Government

• Commencement of financing - financial, tax and legal advisors appointed

• Transfer of operatorship to Total SA effective 1 August 2015.

Port Moresby

PNG LNG Plant

Proposed Papua LNG Plant Site

Pipeline Route

PNG LNG

Facility

Plant Location

Total personnel progressively being mobilised to Port Moresby

» Selection of final development concept after completion of appraisal programme and resource evaluation:

• LNG plant location provides opportunity for capital savings

  » Entry to Basis of Design, including decision on one or two trains, in 1H16 followed by FEED in 2H16:

• Potential for early works in 2017

» Development can provide material benefits for Gulf communities

PRL 15	WI %
Total	40.1
InterOil	36.5
Oil Search	22.8
Minorities	0.5

Source: Google Earth

Elk-Antelope appraisal programme to be completed 2H15, certification 2Q16

» Results of appraisal programme to date have been at upper end of OSH's expectations:

- Antelope 4 extended good quality reservoir to south

Antelope 5

0 4 Km

Antelope 6

Antelope 4 ST1 Antelope South*

• Antelope 5 testing confirmed substantial resource base, excellent reservoir quality and deliverability and pressure communication between A5 and A1

  » 2H15 appraisal programme:

• Antelope 4 ST1 sidetrack spudded in late August using OSH Rig 103.

  Encountered reservoir 36 metres above prognosis, expected to reach TD shortly

  
  

• Antelope 6 site preparation on eastern flank well advanced, expected to spud 4Q15

• Interference testing planned post Antelope 4 ST1 completion

» Elk-Antelope field has sufficient resources to underpin one 5 MTPA LNG train (basis for entry into PRL 15) with ~5 tcf 2P, or depending on outcome of appraisal, potentially two PNG LNG-sized trains requiring >7 tcf 2P

» Resource base >7 tcf would deliver higher returning LNG project (PNG LNG 'look-alike') and trigger certification payments (US$0.775/mcf for volumes >7 tcf based on average of two certifiers - Gaffney Cline and NSAI)

- OSH certification process due for completion mid 2Q16