helping to create a sustainable future for png - oilsearch.com · safety is our top priority total...
TRANSCRIPT
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O I L S E A R C H L I M I T E D
Helping to create a
sustainable future for
PNG
2
2011 Annual Meeting Agenda
Overview
2010 Financial Results
PNG LNG Project
Expansion Activities
Operations Review
Sustainability
Summary
3
Overview
4
Sustained Top Quartile Performance
Oil Search has delivered an annualised total shareholder return (capital growth & dividends) of 15% over last five years
Performance driven by delivery of FID on PNG LNG, strong underlying oil business, tight cost control and good oil prices
Recent Strategic Review highlighted potential to continue to generate top quartile growth from existing asset base
Over 40 initiatives now in place and being implemented over next three years
SantosASX 100
Woodside
WTI oil
Oil Search
Share price (rebased to OSH)
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11
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OSH Strategies to Create 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 ‘social licence to operate’
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Safety is our Top Priority
Total Recordable Injury Frequency Rate (TRIFR) of 1.96 in 2010. Good relative to peers but room for improvement
TR
I /
1,0
00
,00
0 H
ou
rs
0
2
4
6
8
10
12
14
Oil Search
Australian Companies (APPEA)
InternationalCompanies
(OGP) 3.9 3.1 2.9 2.72.1
4.0
3.6
4.9
5.76.0
1.75
1998 1999 2000 2001 2002 2003 2004 2005 20072006 2008 2009 2010
8.5
10.69.8 10.7
5.8
1.7
4.7
2.4 2.31 2.051.16
2.04 1.96
5.2
12.7
9.1 9.37.8
7.0
7.3
9.4
8.2
6.36.8
6.0
7
World Class Safety Performance
TRIFR(per Million Hours Worked (All Reported Data))
Fletcher Building
BramblesFoster’s
Macarthur CoalOZ MineralsDowner EDI
United GroupOrigin
Incitec PivotBoart LongyearContact Energy
James HardieHastie Group
CSR
StocklandTransfieldNewcrest
AWEBHP Billiton
Lahir GoldAmcorSantos
OricaWoodside
Oil Search
Fletcher Building
Brambles
Foster’s
Macarthur CoalOZ Minerals
Downer EDI
United Group
Origin
Incitec Pivot
Boart Longyear
Contact Energy
James Hardie
Hastie Group
CSR
Stockland
Transfield
Newcrest
AWE
BHP Billiton
Amcor
SantosOrica
Woodside
Oil Search
0 5 10 15 20 25 300 5 10 15 20 25 30
2009 2010
Source: Company data, Citi Investment Research and Analysis. Note: TRIFR – Total Recordable Injury Frequency Rate per 1 million hoursworked; * Lihir Gold taken over by Newcrest. (September 2010); ** Citi estimate for Macarthur Coal’s Group TRIFR based on operations’weighted average coal production.
FY10YTD data
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2010 Financial Results
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2010 Financial Performance
(US$’m)RevenueCosts (net)EBITDAXD, D & AExploration costs expensedInterest income/expense, impairments, otherPre-tax ProfitTaxNPATSignificant itemsCore Profit
583.6(111.9)
471.7(49.9)
(131.2)(13.4)
277.2(91.6)185.6(41.5)144.1
20102009512.2
(102.8)409.4
(105.4)(75.7)
11.5
239.8(106.1)
133.7(34.1)
99.6Full year revenue benefited from 23% higher realised oil prices, partially offset by 7% lower oil salesCash costs increased 9% but non-cash charges more than halved due to PNG LNG reserves bookingExploration expense increased 73% due to unsuccessful Wasuma and Korka wells2010 NPAT impacted by one off benefit associated with restatement of deferred tax balances, partly offset by impairments
+13.9%
+15.1%
+15.6%
+38.8%
+44.7%
+8.8%
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2010 NPAT Drivers
0
25
50
75
100
125
150
200
US$m
175
225
250
133.6
20
09
NP
AT
(9.1)
Cash
OP
EX
101.3
Reven
ue -
Pri
ce
(32.9)
Reven
ue -
Volu
me
14.6
Tax
185.6
20
10
NP
ATP
rofi
t/Lo
ss o
n
Invest
men
ts &
Oth
er
(6.3)
Exp
lora
tio
n &
Im
pair
men
t
(71.3)
DD
&A
55.5
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Active Cost Management
2010 2009US$’m US$’m
Field Costs- Oil: PNG- Hides
73.38.0
73.75.9
Other Prod’nOpex
81.3 79.6
- Oil- Hides
15.40.6
14.40.4
16.0 14.8
Net Corp Costs 16.6 10.7
FX gains (2.1) (2.5)
Total 111.8 102.8
Field Costs Other Opex Corp Costs/FX
US$/boe Total cash costs per boe
10.68
2.18
1.09
1.88
1.75
9.13
0
2
4
6
8
10
12
14
16
2007 2008 2009 2010
10.08
1.87
1.04
11.00
1.97
2.16
Cost focus to counter localised inflation and adverse FX movementsUnit costs impacted by declining volumes ~$1.00/boeHigher corporate costs due to strong A$ and LNG bonus
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Liquidity
US$1.23 billion in cash at end March 2011. US$290 million available from term revolving facility, nil drawn down, resulting in liquidity of ~US$1.5 billion US$1.07 billion drawn down under PNG LNG project finance facility, US$2.99 billion remaining (OSH share) under present facilityCompany is well placed to meet existing commitments / base business plan with sufficient liquidity to deliver on strategic plan initiatives
2014
US
$m
m Liquidity (cash plus undrawn bank debt)
2011
13
PNG LNG Project
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Kumul Terminal
Port Moresby
7°S
145°E
HidesWellsJuha
Facility
EPC3LNG Facility
Kutubu CPF
Moro Airport
145°E 146°E144°E143°E
6°S
8°S
9°S
GorokaKundiawa
Mt. Hagan
Mendi
Kerema
EPC5BKomo
Airfield
147°E
Daru
Wabag
PNG LNG Project
EPC1Telecommunications
(not shown)
Lae
EPC2Offshore pipeline
EPC5AOnshore pipeline
and Infrastructure
Gobe PF
Kopi Wharf
C1Support
Infrastructure
C2Support
Infrastructure
C1
EPC4Hides Gas
Conditioning Plant
Oil Field
Gas Field
Prospect
Oil Pipeline
Gas Pipeline
OSH Facility
LNG Facility
Major Road
Lead
100km
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PNG LNG Plant Site, Port Moresby
2010 Activities :Early construction activities including accommodation camp, road bypass
2011 Activities :Procurement, earthworks, foundations (first foundation poured end March)Commencement of structural steelwork, pipe racksJetty works, tank foundations
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Kopi Shore Base and Onshore/Offshore Pipelines
2010 Activities:Construction of Kopi wharfCommencement of delivery of pipe to Kopi
2011 Activities :Continued procurement and mobilisation of onshore/offshore pipeRoute clearance and commencement of onshore pipe layPreparations for offshore pipe lay
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PNG LNG Upstream
2010 Activities:Opening supply routesEarly construction activities in Highlands including clearing, road and bridge upgradesEarthworks at Hides plant site and Komo airfield
2011 Activities :HGCP and Komo Airfield
Earthworks, foundations and start of construction
Mobilisation of drill rigs
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Associated Gas (AG) Project
2010 Activities:Planning activities for AG work and PL Extension Project
2011 Activities :Commencement of construction
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Training Facilities
2010 Activities:Construction of training facilities at POM Tech in Port Moresby (operational) and Juni
2011 Activities :Complete Juni training facility
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2011 PNG LNG Project Focus Areas
Ramp up of logistics and resourcingOnshore pipeline installation –terrain, multiple work frontsContinued work with project area communitiesEfficient use of landowner companies to deliver maximum local content (over K1.5bn to date)Engagement with Government during National Election build up
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Timetable
2010 2011 2012 2013 2014
FinancialClose
•Continued early works•Detailed design•Order long leads and place purchase orders
•Open supply routes•Contractor mobilisation•Commence AG construction
•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 construction
First Gas from Train 1,
then Train 2
•Complete AG •Continue onshore pipe lay
•Complete offshore pipe lay
•Start Hides plant installation
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Expansion Activities
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Strong Asian LNG Markets Outlook
Strong long term demand outlook for LNG, particularly post JapanearthquakeMultiple potential suppliers of LNG post 2015 Economically robust brownfield expansions with quality operators will have advantage when seeking offtake agreements
Source: Wood Mackenzie and Deutsche Bank, February 2011
MMTPA
JapanJapan
South KoreaSouth KoreaTaiwanTaiwanIndiaIndia
ChinaChina
0
50
100
150
200
250
300
2007 2009 2011 2013 2015 2017 2019 2021 2023 2025
OtherOtherMalaysiaMalaysia
SingaporeSingapore
ThailandThailand
ChileChileMexico WestMexico West
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PNG Gas Growth Hubs
Oil Search pursuing two-pronged LNG expansion strategy
Highlands-based resources close to PNG LNG infrastructure
Gulf region gas, integrated with existing gas infrastructure or stand alone
Core development infrastructure being built by PNG LNG
Government pushing for further development
LNG expansion highest returns but power opportunities also attractive
Kumul Terminal
Juha
Hides
Moran
Agogo
Gobe Main
HidesConditioning Plant
CSG Exploration
Kutubu
Flinders
Huria
Barikewa
Pandora
Uramu
P’nyang100km
Angore
ExplorationGas Resources
PNG LNG ProjectGas Resources
Non PNG LNG Gas Resources
SE Gobe
Kimu
Juha North
PNG LNG Expansion
PotentialLNG hub
3D Seismic Regions
3D Seismic Regions
7°S
6°S
8°S
145°E144°E143°E142°E 146°E
9°S
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PNG LNG Expansion
PNG LNG co-venturers working constructively to implement resource maturation programme in Highlands
Integrated exploration and appraisal programme includes:
Hides appraisal
Evaluation of additional resource potential of Associated Gas fields
Appraisal of 1.5 tcf P’nyang gas field in PRL 3
Exploration well on Huria
Reviewing existing discoveries in “catchment area” (Pandora PRL 01, Barikewa PRL 09 and UramuPRL 10)
Kumul Terminal
Hides
Gobe Main
Kutubu
Huria
Barikewa
Pandora
Uramu
P’nyang100km
ExplorationGas Resources
PNG LNG ProjectGas Resources
Non PNG LNG Gas Resources
SE Gobe
7°S
6°S
8°S
145°E144°E143°E142°E
9°S
Moran
Agogo
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Gulf Area LNG
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
PPL244Flinders
3D Seismic Regions
3D Seismic Regions
50km
2D Seismic Lines
2D Seismic Lines
Oil Search believes Gulf Area has best potential for finding significant new gas accumulations
Over past year, OSH has:
Secured broad licence position
Completed major 3D seismic survey and commenced new 2D seismic onshore
Interpretation of offshore 3D seismic underway, initial results encouraging with a number of leads and prospects identified
Potential partner discussions underway
Targeting equity of ~30-35%
Commence multi well drilling programme in 2011 through 2012
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Operations Review
2828
2011/12 Development / Appraisal Drilling Activity
PRL08
PPL240
PRL11
PDL7
PPL233
PDL2
PDL5PDL6
PRL09
PRL14
PPL260
PPL219
PDL4
PPL219
PDL3
PDL4
50km
Angore
Hides
SE Mananda
BarikewaKimu
Iehi
PPL240
PPL233
APPL350
6°S
143°E 144°E
7°S
Usano:2011 : 1 well, 1 workover
2012 : 1 well
Kutubu:2011 : 1 well, 1 workover
Agogo:2011 : 1 well2012 : ±1 well
Moran:2012 : 1-2 wells
SE Gobe:2011 : 4-5 workovers
Gobe Main:2011 : 1 workover
Mananda 5
PPL219
190
190PPL240
240
PRL11
PDL8PDL8
PDL8
Despite maturity, PNG oil fields continue to be solid performers
2011 production will be impacted by:
Natural decline, being addressed by development and workover programme
Two week shutdown for tie-in of Associated Gas facilities
Production guidance for 2011 unchanged at 6.2 – 6.7 mmboe, with production out to first LNG broadly flat, subject to success of work programmes
Focus is on capturing additional in-field and near field reserve opportunities
Strong commitment to cost effectiveness
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Near Field Exploration and Appraisal
Major review undertaken as part of Strategic ReviewVery high historical success rate, with excellent returns achieved26 near field appraisal and exploration prospects and leads identifiedRisked net recoverable potential resource estimated to be over 125 mmboeMajor programme planned to further evaluate this potential over next three years
6°30’S
143°E
MANANDA & SE MANANDA
MORAN
KUTUBUSE HEDINIA
Risked mean recoverable oil
Risked mean recoverable gas
20km
Prospect & Lead
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Early social mapping and survey work in progressTargeting development decision in 4Q11
Oil and gas discovered in four zones at Mananda 5 in PPL 219 (OSH 71.25%, JX Nippon 28.75%)Mananda 5 well now suspended and assessment of conceptual development options is underway
18km flowline tie-back to SE ManandaFurther development drilling
Mananda 5 Discovery and Conceptual Development
0 2 4 61 Km %,''''
1''''
ª
ª'ªª'''
ªªk
k
µY
ª'
ª''ªª'
''''' 'ªªªª'
ªªª'1'
11 '''
PDL 2
PDL 6 PDL 5
APPL 350
PPL 219
PPL 287
PPL 233
APFAHT 2
AHT 1ADT 2
ADT 1ADD 3
Moran 9
Moran 8Moran 6X
Moran 4X
Moran 14Moran 13 Moran 12
Moran 10
Moran 14AMoran 12A
Mananda 5
NW Moran 1
Mananda 4X
Mananda 3XMananda 2S
SE Mananda 5SE Mananda 4SE Mananda 3SE Mananda 2X
SE Mananda 1X
Mananda 3XST1
143°5'E143°0'E142°55'E
6°10'S
6°15'S
6°20'S
PotentialPipeline Route
0 2 4 61 Km
SE MANANDA
MORAN
AGOGO
31
Oil Search Production Outlook
10 Net Production (mmboe)
0
2
4
6
8
2008 2009
8.60
7.66
2010
8.12
2011
6.2-6.7
2012 2013Forecast (excluding Mananda-5)
MENAHides GTESE ManandaSE GobeGobe MainMoranKutubu
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MENA Exploration
Dubai Office
Tunis OfficeTajerouine + Le Kef- Recently completed 600km 2D- 2 commitment wells by 2Q 2012
K42 & Shakal- Completed 200km of 2D in
K42 and 50km of 2D in Shakal- Discussions underway to
convert K42 seismic option into PSC
Block 3 & 7- Tubb’a gas condensate discovery in
Block 3- Al Meashar 2 completed- Exploration/production options will be
reviewed post Al Meashar 2
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Sustainability
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Focus on Sustainability
In light of increasing value of PNG assets going forward, Oil Search is seeking to further enhance its focus on managing PNG sustainability issues (traditionally an area of strength)
New Sustainability Group has been formed:
Focus on communities, government/regulatory and in-country business relationships
Specific initiatives involve:
Relationship building, Government, Landowners etc
Facilitating transparency and equity in benefits distribution
Enhancing capacity to capture growth opportunities
New Health Foundation also being established
Expansion of existing health programmes (Malaria, HIV/AIDS etc)
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Oil Search supports many social programmes…
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Summary
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Summary
Fully focused on delivery of major Strategic Initiatives:
PNG LNG Project delivery underway:Commencing construction at PNG LNG plant site, HGCP and Komo Associated gas and life extension projects Focus on management of in-country issues
Further pursuit of gas expansion and gas resource accumulation:Hides evaluation, P’nyang appraisal and Huria exploration Gulf area seismic and prospect maturation
Continued strong oil field production performance:Optimisation of current oil and gas production Evaluation of Mananda 5 developmentInfield and near field exploration/appraisal opportunities
Optimisation of value of MENA assetsOperate business in transparent and sustainable mannerActivities all underwritten by strong balance sheet and ample liquidity to meet LNG obligations and expansion focused activities
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O I L S E A R C H L I M I T E D
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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.