Letter to shareholders

from the Managing Director

Oil Search achieved a strong operational and financial start to 2015, reporting record half year production and net profit despite significantly lower global oil and LNG prices.

The successful delivery and exceptional performance of the PNG LNG Project since its start-up in early 2014 has been a vanguard for PNG, marking the country and the Project as a reliable supplier of high quality and low cost gas. Production optimisation and potential debottlenecking provide opportunities to deliver further value.

Progress was also made on the next phase of LNG development

Key announcements to September 2015 January 29 Release of 2014 4th quarter results February 24 Release of 2014 full year results

March 06 Ex-dividend date for 2014 final dividend

11 Record date for 2014 final dividend April 08 Payment of 2014 final dividend

10 Release of 2014 Annual Report and 2014 Sustainability Report

21 Release of 2015 1st quarter results

May 15 2015 Annual Meeting

July 21 Release of 2015 2nd quarter results August 25 Release of 2015 half year results

September 04 Ex-dividend date for 2015 interim dividend

08 Record date for 2015 interim dividend

29 Payment of 2015 interim dividend

Calendar for the remainder of 2015

October 20 Release of 2015 3rd quarter results December 31 End of financial year

Half year shareholder newsletter October 2015

in PNG. PNG LNG Project expansion and the Papua LNG Project

are amongst the most competitive LNG projects globally, even in a lower oil price environment.

However, we are not being complacent. While we live in hope

of a recovery in oil price, it is impossible to predict how long lower prices will prevail. Therefore we believe it is prudent to plan for

an extended period of oil prices at or around current levels.

Like many of our peers in the energy sector, Oil Search has undertaken a review of the business in response to the sharp fall in oil price. The Business Optimisation Programme has looked at how Oil Search can improve its internal processes, make better use of our resources and take advantage of the present business climate to recalibrate our cost base. A range of initiatives will be progressively rolled out over the rest of 2015 and into 2016, targeting material cost reductions and optimisation of our operated oil production. The Company's

exploration and appraisal activities in PNG will also be revitalised, with a systematic programme planned over the next 18 months aimed at material gas resources. Implementation of these initiatives will make Oil Search a leaner and more efficient organisation and allow us to continue to pursue our key growth opportunities and deliver superior returns, even in a sustained low oil price environment.

As noted in the attached letter from our Chairman, Rick Lee, on 14 September 2015, Oil Search's Board announced that it had rejected a non-binding, highly conditional, indicative proposal

from Woodside Petroleum on the grounds that it was opportunistic and grossly undervalued the Company. Looking ahead, Oil Search is well positioned, supported by high quality and high-margin producing assets, strong cash flows, a solid balance sheet and

a range of identified high-returning growth opportunities. We remain focused on careful capital management to ensure our current commitments, dividends and growth opportunities can be funded through the oil price cycle.

Peter Botten, CBE, BSc, ARSM Managing Director

Shareholder information

A wide range of information on Oil Search is available on the Company's website. Please visit: www.oilsearch.com

Share enquiries

For information about your shareholding, including dividend enquiries, and any changes in shareholder details, please contact Oil Search's share registry, Computershare.

Website: www.computershare.com.au Email: [email protected]u Telephone: Within Australia: 1300 850 505

Outside Australia: +61 3 9415 4000

For investor information other than about shareholdings and dividends, please send an email to [email protected]

Registered office

Ground Floor, Credit House, Cuthbertson Street, Port Moresby, Papua New Guinea

PO Box 842, Port Moresby, Papua New Guinea Telephone: +675 322 5599 Facsimile: +675 322 5566

T R A N S F O R M A T I O N

C O M P L E T E

Oil Search Limited Half Year Shareholder Newsletter October 2015

Key highlights:

• Record half year net profit after tax of US$227.5 million

• Interim dividend of six US cents per share

• PNG LNG Project performed ahead of expectations

• Good progress on LNG growth opportunities in PNG

  - potential PNG LNG expansion and Papua LNG project among most competitive new LNG projects globally

• Operated PNG oil and gas business remains strong

• Business Optimisation Programme being implemented

Record half year performance

Oil Search reported a net profit after tax of US$227.5 million in the first half of 2015, 49% higher than in the corresponding period in 2014 and the highest half year profit in the Company's history. Revenue rose 69% to US$863.8 million, driven by a more than three-fold increase in oil, condensate, gas and LNG sales to 14.5 million barrels of oil equivalent (mmboe), reflecting a full period of production and sales from the PNG LNG Project. Higher sales volumes were partly

Excellent performance from the PNG LNG Project The PNG LNG Project, operated by ExxonMobil PNG Limited, performed ahead of expectations during the first half of 2015,

producing LNG at an annualised rate of approximately 7.1 MTPA, above the nameplate capacity of 6.9 MTPA. This was supported

by strong upstream deliverability and excellent LNG plant reliability.

Since the Project commenced production in the first half of 2014, more than 125 cargoes of LNG have been loaded. The Project has

Measured appraisal of Taza, Kurdistan

Flow testing of the Taza 2 and Taza 3 appraisal wells took place during the year. Preliminary interpretation of the 3D seismic acquired in 2014 has indicated that both wells were drilled in areas with minimal fracture development, resulting in limited success in the testing programme. The intention

is to conduct further analysis of the seismic data prior to determining the forward plan for the block.

offset by materially lower realised prices of US$56.64 per barrel for

established an excellent reputation as a reliable supplier of high

oil and condensate and US$10.19/mmBtu for LNG and gas.

Unit production costs declined by 43% to US$8.90 per boe in the first half of 2015, reflecting a higher proportion of low cost PNG LNG Project production and successful cost reduction initiatives in our operated oil operations. The cash operating margin remained strong, at 75%, comparing favourably to the Company's peers.

At 30 June 2015, Oil Search had total liquidity of US$1,593 million, comprising US$843 million in cash and US$750 million in undrawn corporate debt facilities.

The Board announced a 2015 interim unfranked dividend of six US cents per share, representing a dividend payout ratio of 40%, consistent with the Board's dividend policy to distribute between

heating value gas. To date, the Project's long-term customers, Sinopec from China, TEPCO and Osaka Gas from Japan and CPC from Taiwan have taken their full contractual volumes and more than 85% of available spot cargoes.

A key focus for the operator is to continue to optimise production from the plant and to seek debottlenecking opportunities, which would deliver significant incremental value to Oil Search, its

co-venturers and PNG.

Progress on LNG expansion opportunities in PNG

In January 2015, a Memorandum of Understanding was signed between ExxonMobil PNG Limited and the PNG Government for

Strong oil field performance with improved safety

Oil Search's operated oil fields continued to perform strongly in the first half of 2015. The Kutubu and Moran fields remained key producers, contributing nearly 80% of the Company's total operated oil and gas production.

Safety is a key priority for Oil Search across all operations. During the first half, the Company recorded a Total Recordable Incident Rate (TRIR) of 1.94 per million hours worked, compared to a

TRIR of 1.97 in 2014. No lost time injuries were incurred during the period. The Company's High Potential Incident Frequency also improved, falling from 0.63 in 2014 to 0.32 per million hours worked in the first half of 2015.

35% and 50% of core profit. This compared to two US cents per share

for the 2014 interim dividend.

the development of the P'nyang gas field. This would underpin PNG LNG Project expansion, including a potential third LNG

Half year performance summary

train, and domestic power in PNG. The joint venture expects to drill an appraisal well in the first half of 2016 to further constrain

Business Optimisation Programme update

In May, Oil Search commenced a Business Optimisation

Jun

Dec

Jun

Dec

Jun

the resource in the field. A Petroleum Development Licence

Programme, an holistic review of all aspects of the business,

Six months to 2013 2013 2014 2014 2015

Total production (mmboe) 3.19 3.55 5.37 13.91 14.32

EBITDAX (US$ million)* 274.4 278.0 393.9 863.1 644.1 Net profit after tax (US$ million) 113.5 92.2 152.5 200.7 227.5 EPS (US cents) 8.5 6.9 10.6 22.0 14.9

DPS (US cents) 2.0 2.0 2.0 12.0 6.0

Operating cash flow (US$ million) 214.3 152.5 255.4 736.9 516.8

Net debt (US$ million) 3,015.8 3,814.8 3,766.2 3,452.0 3,443.0

* EBITDAX (earnings before interest, tax, depreciation/amortisation, impairment and exploration) is a non-IFRS measure that is presented to provide a more meaningful understanding of the performance of Oil Search's operations. The non-IFRS financial information is unaudited but is derived from the financial statements which have been subject to review or audit by the Company's auditor.

(PDL) application for P'nyang is currently under review by the Government. Once the PDL has been awarded, the intention is to integrate P'nyang into the PNG LNG Project.

Significant progress was also made on the Papua LNG Project, underpinned by the Elk-Antelope gas fields in the Gulf Province of PNG. Initial appraisal results from the drilling campaign on the Antelope field have been encouraging and Oil Search is confident that the field has sufficient resources to underpin at least one large LNG train or possibly two PNG LNG-sized trains. In June, the PRL 15 Joint Venture led by Total SA, reached an agreement, with endorsement from the PNG Government, on site locations for the proposed development. Further appraisal drilling is expected to continue over the rest of 2015. Oil Search anticipates that selection of a final development concept, resource certification and entry into Front End Engineering

and Design will take place during 2016.

aimed at ensuring the Company can continue to deliver superior

returns to its shareholders in the current oil price environment

in a socially responsible way. A range of initiatives were identified to reduce the Company's cost base, optimise the organisational structure and improve operating efficiencies and productivity across the business. These initiatives, along with other business improvement processes, will be implemented over the rest

of 2015 and into 2016. See Letter to shareholders from the Managing Director overleaf for greater detail.