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European Road Show June 2006
O I L S E A R C H L I M I T E D
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Oil Search - Profile
Established in PNG in 1929
Operates all of PNG’s producing oil and gas fields
In 2005, generated approx 22% of PNG’s export revenue and 10% of its GDP. Largest investor and taxpayer. PNG Government is 18% shareholder.
Has major interest in substantial undeveloped PNG gas resource
Growing presence in Middle East/North Africa, with production in Yemen, Egypt
Employs approx 800 staff and over 1,800 contractors
Third largest listed E & P company in Australia with market capitalisation of around US$3.5 billion
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Oil SearchWhere We Operate
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Oil Search in PNG
6 producing oil fields (Kutubu, Moran, NW Moran, Gobe Main, SE Gobe & SE Mananda)
1 producing gas field (Hides)
Major gas development opportunities
Extensive exploration acreage
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Oil SearchWhere We Operate
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Oil Search in Yemen
1 producing oil field (Nabrajah, Block 43)Nabrajah Basement development6 concession areas (5 as Operator)
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Oil Search in Egypt
Also:Libya - Area 18
East Ras Qattara Area ‘A’ - comprises 2 development leases (5 small oil fields) and four exploration leases
Area A
Wadi DaraExploration
Kareem, Yusr, Kheir
& ShukheirDevelopment
Kareem, Yusr, Kheir
& ShukheirDevelopment
Kareem, Yusr, Kheir
& ShukheirDevelopment
Kareem, Yusr, Kheir
& ShukheirDevelopment
Umm El YusrExploration
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Core Expertise
Developing country specialistAbility to work co-operatively with host governments and local communitiesCulturally sensitive and diverseExperienced in operating in challenging environmentsLow cost, innovative, regionally significant operator
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Achievements - Production Growth
Focussed management of PNG oil fields has had positive results on productionPNG production is now at highest levels since 2001Production is being boosted by Nabrajah, Oil Search’s first non-PNG development
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
stb
/d
Kutubu Moran Gobe Main SE GobeHides Nabrajah SEM
2000 2001 2002 2003 2004 2005Forecast
+23%+23%
+25%+25%+6%+6%
+10%+10%
2006
+17%+17%Pre AGLPre AGL
--8% 8% PostPostAGL AGL salesale
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Achievements – Growth in Net Profit After Tax
102% CAGR in net profit over last four yearsDriven by higher production and strong oil price, and good cost control
US
cen
ts
US
$’m
0
20
40
60
80
100
120
140
160
180
200
220
240
2001 2002 2003 2004 20050
2
4
6
8
10
12
14
16
18
20
4.5
17.9
9.6
7.7
1.8
Net Profit
EPS
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Achievements - Top Quartile Total Shareholder Returns
0
20
40
60
80
100
120
2003 2004 2005
%
8th out ofASX 150
5th out ofASX 150
4th out ofASX 150
Four fold increase in Market Capitalisation since 2003
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Growth - The Next Phase
Strategic Review in 2002Five year plan to double market capitalisation, and to generate top quartile returnsDelivered : operating control of core business
: significant production increase: operating cost reductions: major steps towards commercialising
discovered gas resource: development of quality exploration
portfolio: very strong balance sheet
All key objectives have been achieved
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Growth - The Next Phase
New Strategic Review underway
Objective to more than double market capitalisation by 2010
Starting from a position of strengthExcellent asset base, with large discovered gas resource and quality exploration portfolioCapture of latent value potential will deliver target
Focus on gas commercialisationIncreased explorationContinued production optimisation
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Growth - The Next Phase
Business in a New EnvironmentOil prices around/above US$50/bblUnprecedented demand for gas (especially Asia-Pacific) delivering new price environmentShortage of equipment, services and people cost escalation and pressures on timely delivery
Essential to Drive Business to Manage these Influences
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Growth - The Next Phase
Oil Search positioning itself to take advantage of opportunities created by the new market fundamentals
Key part of Strategic ReviewTargeted value extraction in producing fieldsTight cost controlsProcurement and services alliancingEquipment ownership to control costs and availability and people
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Growth - The Next Phase
Focus for GrowthDeliver Value
Substantial remaining potential in PNG oil fieldsFurther Yemen developmentsCost controls and improved profitability
Extract ValueCommercialise our 1.1 billion boe gas and liquids resource
PNG Gas ProjectLNG / Petrochemical
Create ValueAcceleration of exploration activity in PNG and Middle East / North AfricaMix of low risk moderate impact, higher risk high impact programme
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Vision for 2011
Market capitalisation above US$7 billion
Continuation of world class health, safety and environment performance
Oil production growth through PNG and Middle East optimisation and new developments
Development of multiple gas offtake projects
Strong Balance Sheet / Active Capital Management
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DELIVER VALUE
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PNG Oil Production Outlook
SummaryProgrammes post-operatorship change have been successfulCurrent gross PNG production
At 2001 levelsDouble the level predicted by previous Operator for 2006
Opportunities exist, with continuous programme for the foreseeable future
3 drilling rigs in 2006 4 drilling rigs in 2007
PNG Gross Production History 2000-2005and Forecast 2006
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2000
2001
2002
2003
2004
2005
2006
STB/D
Forecast
Trend BeforeOil Search
Operatorship
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PNG Oil Production
Gross daily production currently around 18,000, down from highs in 2005 of over 22,000 bopd8 workovers planned in ’06, four development wells in 2006-07
Production decline from Gobe fields reversed - currently > 10,000 bopdFurther development of SE Gobe Wedge area ongoing and infill well in Gobe Main expected 2H06
0
10,000
20,000
30,000
40,000
50,000
Jan-
99Ja
n-00
Jan-
01Ja
n-02
Jan-
03Ja
n-04
Jan-
05Ja
n-06
Jan-
07
Oil Production (stb/d)
Trend BeforeOil Search
ForecastHistory
KUTUBU
Jan-
00Ja
n-01
Jan-
02Ja
n-03
Jan-
04Ja
n-05
Jan-
06Ja
n-07
5,000
10,000
15,000
20,000
25,000
30,000
35,000 Oil Production (stb/d)
ForecastHistory
GOBE
0
SE Gobe
Gobe Main
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PNG Oil Production
Currently holding plateau rates above 23,000 bopd Two additional production / injection wells in 2006, another two planned in 2007
0
5,000
10,000
15,000
20,000
25,000
30,000
Jul-0
3Ja
n-04
Jul-0
4Ja
n-05
Jul-0
5Ja
n-06
Jul-0
6
Oil Production (stb/d)
MORANForecastHistory
NW Moran pipeline
Jan-
07
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SE Mananda Development
First Oil on 26 March with production currently on ramp up to 7,000 bopd
Reserves downgrade in early 2006 partly offset by recent drilling at SEM 3. Current gross reserves estimated at around 8 mmbbl, further appraisal work planned
Total project cost $US145m, above budget due to weather & scope changes
Excellent safety achievement throughout duration of project however overall a disappointing result and a major learning experience with respect to project development
SE Mananda
Moran
Agogo Processing Facility
NW Moran
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SE Mananda Bridge
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SE Mananda Bridge
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Yemen Production -Nabrajah
Nabrajah gross production currently averaging around 9,000 bopdFacilities expansion to 25,000 bopd nearing completionField still under appraisal – Nab-10 testing underwayFollowing completion of Nab-10, will drill Nab-11, 1km west of Nab-5 in same terraceDrilling will re-commence 2H 06, post interpretation of 3D seismic -2400
-2200
-2000
-1800
-1600
-1400
-1200
-1000
Nabrajah-8Nabrajah-10
Top Qishn
Top Saar
Top Qishn S2
Top Basement
DEPTH (m)
0 500 m500
Possible fractured Basement
“Naifa”Reservoir
Nabrajah 10
Nabrajah 11
Surface locationTop Basement location
DNO mapping
Nabrajah 2
Nabrajah 9
Nabrajah 8
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EXTRACT VALUE
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Gas Commercialisation
Oil Search has over 1 billion boe of proven and probable uncontracted gas and associated liquids
Resource is of considerable potential value, as world prices continue to climb
Approximately 40% of resource dedicated to PNG Gas Project – low Australian gas prices an anomaly in the developed world
Considerable new interest in PNG’s static gas resources
Strategic approach designed to capture phased value in new market regime
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Gas Resources(Gross PNG)
Current 3P gas resources approximately 25 TCF‘Yet to Find’ potential a further 25 TCF from multiple basins (estimate only)Maturing the resource ahead of market demand will require a prudent mix of appraisal and exploration
Recoverable Gas (bcf) ElevalaKetuPandoraUramuKimuBarikewaP'nyangAngoreJuhaHidesSE GobeGobe MainMoranAgogoSE ManandaKutubu
0
5,000
10,000
15,000
20,000
25,000
30,000
1P 2P 3P
Reco
vera
ble
Gas
(bcf
)
Yet
to F
ind
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PNG Gas Project
Sale of gas from PNG Highlands to Australia through over 4,000 km of pipelineConditional & firm contracts signed for total gas sales of 155-229 PJ paPipeline in Australia to be constructed by APC (JV between AGL and Petronas)Interests:
Oil Search 37.18%ExxonMobil (op) 25.67%PNG Govt/landowners 14.27%Nippon Oil 3.39%AGL 10.00%Santos 9.49%
Estimated CAPEX for PNG component: US$2.5 billion based on initial capacity of approx 250 PJ pa, capable of expansion
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PNG Gas Project Status
Markets are largely underwritten. Likely to be close to/at initial build plant capacity. Not actively seeking additional markets
Government/landowner agreements - substantial activities in PNG to finalise regulatory and landowner agreements with unanimous support from all partiesProgress being made on tariff negotiations with APC –critical path itemBankable finance plan – IM to be released shortlyEnvironmental management plan well advanced
Discussions with Santos progressing to positive conclusion
Mid-year 2006 target for project sanction is aggressive, more likely to be second half, project participants pushing ahead aggressively
Still targeting late 2009 for first gas
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East Coast GasSupply / Demand
The market always ensures that commercially available reserves will be deployed to meet demand
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
0
200
400
600
800
1000
1200
PJ
SOURCE: Origin Energy Presentation Australia & PNG Gas Conference Dec 2005
GIPPSLAND
COOPER BASIN
OTWAY
CSG
OPPORTUNITYVOLUME
PNG
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Gas Commercialisation –Phase 2
PNG Gas Project commercialises significant volume of reserves and delivers major infrastructure spine
Opens way for further gas development in PNG, for in-country projects and LNG
New initiative recognising world market realities –substantial price differentials, strong demand
Significant interest for petrochemicals, GtL, fertiliser and new LNG developments
Targeting higher returns and reviewing opportunities to get involved in more points of value chain
Requires resource conversion to contractable gas
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Phase 2 Gas Strategy
Aiming for 150 PJ pa initial market load in Port Moresby, growing to over 300 PJ paFEED on pipeline from Kopi to Port Moresby underwayFlexible gas supply options but to include potential development of:
Juha (OSH 31.5%)Barikewa (OSH 42.6%)Kimu (OSH 44.6%)Uramu (OSH 49.5%)
Subject to further appraisal success -accelerated appraisal programme seeking to convert 4-8 tcf into contractable status in 3 years
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CurrentOil
Production and
PNG Gas Project
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CurrentOil
Production and
PNG Gas Project
IncludingPhase 2
Gas
Angore
Barikewa
Uramu
Pandora
Juha
P’nyang
Kimu
Iehi
Honinabi
Mogulu North Mogulu South
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New Appraisal and Development Programme
Dedicated exploration / drilling resources
Juha drilling programme ’06-’07Barikewa seismic acquisition then appraisal drillingKimu / Korobosea seismic then drilling
Engineering and FEED activitiesPipeline to POM – Konebada Petroleum ParkIndividual field development engineering and economics
Progressive development of potential customers
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Juha
Engineering feasibility study on Juha gas and liquids cycling plant completed Juha cycling looks attractive, particularly in high oil price environment Planning to drill two Juha wells, with activity to commence in good weather in 4Q06Sites identified, construction imminentCurrent proven gas-in-place of 0.6 tcf, aim to increase to 2tcf and confirm potential upside
Important source of gas for non-PNG Gas projectsDuring 2006 will progress Pre-FEED and FEED work on cycling
Juha 3 Juha 2 Juha 1
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CREATE VALUE
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2006 PNG Exploration
PNG – up to 5 exploration wells planned for 2006Mix of low risk/near field opportunities and higher risk/large potential wellsArakubi expected to spud shortlyPlanning well advanced for late 2006 Juha drillingOnshore seismic planned for Moguluarea (2Q), and in the Foldbelt (4Q)Offshore seismic in the Papuan Gulf (2,000 km) 1-2Q
Juha
DamamiRiver seismic
(Mogulu)
NW Paua
Mananda Attic
Murray Deep
Arakubi
Lahara seismic acquisition
Foldbelt seismic
Drilling
Seismic
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Arakubi Prospect
Arakubi due to spud 20 JuneLocated 2km from infrastructure, and sits above and NE of Usano, may share common fluid contactsMean reserves ~18 mmstbInformation from well will aid in Usano re-development
Arakubi
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Yemen 2006Appraisal/Exploration
Proposed Al Harsh-2
Proposed Shaibah-1
Proposed Riyan-1
Proposed Suad-1
NABRAJAH
Complete appraisal programme on Nabrajah: Nab-10 testing underway, Nab-11 to followComplete acquisition/processing of Block 43 seismicUp to six exploration wells planned late 06/early 07
2 Block 15 wells: ~150 mmbbl 1-2 Block 3 wells: 20-70 mmbbl1 Block 43 well: Naifa/Saar /Basement1 Block 35 well
Rig availability will dictate timing
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Egypt & Libya
Egypt - East Ras Qattara3D has substantially increased block potential2 wells commencing 3Q06
Egypt - Area ‘A’15 well/3 years committed development /exploration programmeExploration commences early 2007Focus on prolific Nubian play
Libya - Area 18 : Seismic acquisition during2006, drilling 2007
Further growth optionsbeing pursued in bothEgypt and Libya during2006
Two Wells
Area A
Wadi DaraExploration
Kareem, Yusr, Kheir& Shukheir
Development
Kareem, Yusr, Kheir& Shukheir
Development
Kareem, Yusr, Kheir& Shukheir
Development
Kareem, Yusr, Kheir& Shukheir
Development
Umm El YusrExploration
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Production Outlook (net)
PNG Gas Project gas
PNG GasProject liquids
Hides
Area 'A', Egypt
Nabrajah Yemen
MoranGobe + SEG
SEM
Kutubu
06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
0
4
8
12
16
20
24
mm
bo
e
Upside from further gas developments 2011 onwards
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Summary
Capturing latent value in existing portfolio will deliver material growth
Strategic review will set the scene for growth over the next five yearsContinue to optimise existing producing assets, recognising challenges and opportunities presented by high oil price environmentGas – priority is to deliver PNG Gas Project and progress next phase of gas developmentsExploration – mix of low risk/near field opportunities and higher risk/large potential exploration wells, in PNG and Middle East / North Africa. Unhedged exposure to high oil pricesFinancially very strong, with cash of nearly US$500 million
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O I L S E A R C H L I M I T E D
