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1
Oil Search UK
Roadshow
June 2008
O I L S E A R C H L I M I T E D
2
Oil SearchLocation Map
2
3
Operating Environment
4
Profile
Established in Papua New Guinea (PNG) in 1929
Operates all of PNG’s producing oil and gas fields. Current gross production ~46,000 boepd, net share ~24,000 boepd
As operator, responsible for generating 22% of PNG’s export revenue and 16% of its GDP in 2007
PNG Government is largest shareholder at 17.6%
PNG’s largest investor and taxpayer
73.5 mmboe 2P reserves plus 950 mmboe undeveloped 2P gas and liquids resource. ~60% of resource is dedicated to PNG LNG, world scale LNG project, remainder still to be commercialised
Range of material exploration interests in PNG and Middle East/North Africa
Market capitalisation ~ US$6 billion. Listed on ASX (Share Code OSH) and POMSOX, plus ADR programme (Share Code OISHY)
5
Share Price Out-Performance
Sh
are
Pri
ce (
reb
ase
d t
o O
SH
)
OSH ASX 200 ASX 200 Energy WTI
0
1.00
2.00
3.00
4.00
5.00
Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08
7.00
6.00
July 2003: Acquisition of Chevron’s PNG Interests
Oct 2004 : PNGGP enters FEED
May 08 : Signs Gas Agreement, enters FEED for PNG LNG project
July 2005: Announcement of AGL GSA and PNGGP equity sale
Aug 2006 : APC withdraws from Australian leg of PNGGP Pipeline
April 07: Signs Cost Sharing Agreement for LNG project
6
Total Shareholder Returns (TSR)
Source: IRESS
Ranked No.5 TSR Performer amongst current ASX 100 for 5 year period to Dec 2007 (53%pa on an annualised basis)
53%
0%
10%
20%
30%
40%
50%
60%
70%
Fort
escu
e M
etal
s
Pal
adin
Ener
gy
Worley
Pars
ons
Cal
tex
Aust
ralia
Oil
Sea
rch
United
Gro
up
Oxi
ana
Leig
hto
n H
old
ings
ASX L
imited
Dav
id J
ones
Com
pute
rshar
e
CSL
New
cres
t M
inin
g
Mac
quar
ie A
irport
s
QBE I
nsu
rance
Woodsi
de
Pet
role
um
Allc
oFi
nan
ce
Rio
Tin
to
BH
P B
illiton
OneS
teel
Sim
s G
roup
Blu
esco
pe
Ste
el
Mac
quar
ie G
roup
Orica
Mac
quar
ie C
om
munic
a.
CA
GR
7
World Class Safety Performance
Total Recordable Incidents (TRIs) 1998 – 2007
APPEAOSH OGP
TR
I /
1,0
00
,00
0 H
ou
rs
1998 1999 2000 2001 2002 2003 2004 20050
2
4
6
8
10
12
14
2007
Oil Search
Australian Companies
8.5
10.69.8 10.7
5.8
1.7
4.7
2.4 2.32.05
12.7
9.1 9.37.8
7.0 7.3
5.2
6.8
4.0 3.12.9
9.4
8.2
8.3
2006
International Companies
6.3
8
Setting a New Course
Major Strategic Review recently completed
Key Conclusion: Substantial unrealised value exists within Oil Search’s current asset portfolio, capable of generating superior shareholder returns over next five years and beyond
Delivery of PNG LNG alone can deliver 15% plus annual TSR growth (based on US$70/bbl oil price scenario)
Further value growth can be delivered through commercialisation of other gas resources and exploration success
Value of PNG gas will increasingly dominate portfolio over time
Dec '07 Dec '08 Dec '09 Dec '10 Dec '11 Dec '12 Dec '13
Existing portfolio can deliver superior TSR
Oil & Other
PNG LNG
Other Gas
(existing)
Valu
e
9
Delivery of Strategy
Review has set a strategy for next five years that will enable Oil Search to continue to deliver top quartile returns by unlocking value
Focus is now on delivery of strategy:Ensure a positive Final Investment decision for the PNG LNG Project, which will transform Oil Search into a significant LNG producerPosition Company for second phase gas development based on existing uncommercialised and new gas resourcesOptimise PNG oil field operating performances to sustain production and cash flows up to, and beyond, first gasPost asset sale, actively manage the remaining MENA portfolioPursue material exploration opportunities in PNG and MENA
Active stakeholder management in PNGModify organisation to optimise strategy delivery
10
PNG LNG Project
A CompanyTransformer
11
Primary focus - PNG LNG
PNG LNG Project is Oil Search’s primary focus
This development will represent PNG’s cornerstone gas development and will underpin Oil Search’s production and profits for 30+ years
PNG LNG will commercialise ~ 530 mmboe of Oil Search’s 2P gas resources
Initial development will add ~ 18 mmboe to annual net production, more than tripling current production
Strong market interest for participation
AGL sale a window to project value
New corporate developments at premium prices (BG & Origin, QGC, Santos and Petronas)
12
PNG LNG Project
Integrated development of Hides, Angore and Juha gas fields plus associated gas from the Kutubu, Agogo, Gobe and Moran oil fields
Upstream infrastructure including production wells, processing facilities and pipeline network linking to the export pipeline
Gas export pipeline from PNG Highlands to LNG plant near Port Moresby
Liquefaction plant, export loading and support facilities located in Portion 152, 20 km from Port Moresby
13
PNG LNG Project
Kutubu
Juha
Angore
SE Gobe
Gobe Main
HidesMoran
Agogo
14
Asia-Pacific LNG Markets are Robust
Regional market fundamentals are robust
Steady expansion from existing markets (Japan, Korea, Taiwan)
Growth from emerging markets of India & China and new markets such as Singapore, Thailand
Some of the growth likely to be filled by roll-overs etc but significant non-contracted volume
A number of potential new projects in the region looking to fill remaining demand gap
Only a few will reach commerciality in 2013/14 window
Early commitment important
Source: Wood Mackenzie
0
50
100
150
200
250
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
mmtpa
GSPA HOA MOU
Option Rollover Demand
Market opportunity
15
LNG Pricing
Source: FACTS Global Energy
0
5
10
15
20LNG ($/mmbtu)
10 20 30 40 50 60 70JCC ($/b)
80 90 100
Traditional Contracting
Crude Oil Parity
NWS 2007 Contracting
Supply conditions, combined with environmental factors, have resulted in LNG prices moving closer to oil price parity
16
Recent AsiaPac LNG deals
Sept 07 - Woodside to Petrochina, 2 - 3 mmtpa, 15 - 20 years, key terms with supply ex Browse
Sept 07 - Shell to Petrochina, 1 mmtpa, 20 years, binding HOA ex Gorgon
Nov 07 - Woodside to CPC, 2 - 3 mmtpa, 15 - 20 years, key terms ex Browse
April 08 - Shell/Qatar Gas IIII to Petrochina, 3 mmtpa, 25 years from 2011, SPA
April 08 - Qatar Gas II to CNOOC, 2 mmtpa, 25 years from 2009
Pricing confidential but Qatari contracts thought to be at crude oil parity, other contracts considered to be at small (3 – 5 cents) discount to parity
17
PNG’s Competitive Advantage
Large number of potential new projects in this region (NW Australia, CSM) “Screening economics indicate the PNG LNG Project is robust…and stacks up favourably against other projects in the region” WoodMac/Deutsche Bank, March 2008Quality and location of resource makes PNG very competitive in project line up for a 2013 – 2014 start up. Advantages include:
Fully aligned Joint VentureSubstantial conventional, certified gas reserve base, high liquids content, minimal impuritiesOnshore, with existing infrastructure base (Kutubu & liquids pipeline)Excellent location for Asian marketsCompetitive labour costs relative to AustraliaFavourable fiscal regime with strong Government support
18
PNG LNG Project -Milestones Reached
Commercial alignment (JOA) amongst the Project OwnersJoint Operating Agreement executed in March 2008
Initial funding interests pre-Government back-in (Oil Search 34%)
Unitisation and redetermination procedures agreed
Actionable finance plan agreed
Marketing Representative Agreement signed for joint marketing of 6.3 mmtpa, led by ExxonMobil
Endorsed marketing plan, Project rolled-out to buyers at GasTech in Bangkok in March, strong interest received
Pre-FEED estimate of capital costs indicate first phase capex (2008 – 2014) of between US$10 – 11bn (real 2007)
19
PNG LNG Project -Milestones Reached (cont)
Gas Agreement signed May 2008Outlines fiscal terms and legal obligations under which Project will operate over its life
The terms include 30% tax rate and Additional Profits Tax (APT) which applies once a certain
threshold level of return has been achieved
Sets terms and mechanism for State equity participation in the Project
Front End Engineering and Design (FEED) commenced in May 2008. Expected to take ~16 months to complete
20
PNG LNG Capex Estimate
ExxonMobil historically has delivered projects on time and on budget First phase capex (2008 – 2014) expected to be between US$10 –11bn (real 2007)Subsequent capex is several years out (additional Hides drilling, Juha development and potential LPG extraction if required) Juha timing depends on Hides and Angore outcomes and performance Further updates to capex estimates from EPC bids (mid 09)Further optimisation will occur during dual FEED
Source: ExxonMobil Analyst Briefing 5th March, 2008.
EM Project Execution Performance
Actual vs. Funded (%)
25
Average 2003-07 2007
50
75
100
125
0
Cost Schedule
21
Project Interest Determination
Methodology agreed for Project Interest determination
Initial Project Interests will be established at FID, taking into account FEED work and actual LNG revenue streams
Periodic re-determination and equalisation processes established
Government has the right to back-in (22.5%) to Hides, Angore and Juha licences
Resulting State participation in PNG LNG Project post back-in, approximately 19%
1.4%
1.8%
3.6%
17.7%
34.0%
41.5%
Share of FEED costs
MRDC / State
Nippon
AGL
Santos
Oil Search
ExxonMobil
JV Partners Oil Search PNG LNG Interest
26%
28%
30%
32%
34%
36%
FEED Interest
PNG LNG Interest
OSH expected post Government back-in final project interest
22
Delivering PNG LNG
FEED deliverables:Securing market off-take (2008/09)
Securing debt and state equity funding (IM 4Q08, Financial Close end 09/early 2010)
Award of EPC contracts (2009)
Executing agreements on benefit sharing (1H09), environmental plans (3Q09)
Final Investment Decision (FID) expected to be taken in late 2009Targeted first LNG cargo - end 2013/early 2014
23
Oil Search’s Role
Oil Search will support operator ExxonMobil utilising its long in-country experience and skills. Key areas for Oil Search are:
Delivering Oil Search’s component of the upstream FEEDOptimising delivery of gas to LNG Project from oil fieldsSupporting ExxonMobil/PNG Government on:
Landowner Benefits Sharing AgreementBusiness Development opportunitiesTraining and localisationProviding in-country project management skills
Financing:Coordinating key parts of the project debt finance process with ExxonMobil Securing OSH equity funding. Includes refinancing and internal cost management
Government and landowner relationships
24
PNG LNG Financing
Debt:Joint debt financing approach, led by a Finance Committee co-ordinated by ExxonMobil. Soc Gen appointed financial advisor OSH share of project finance around US$3 billion, nominal, including fees, capitalised interest, completion guarantees etc
Equity: OSH’s equity contribution expected to be US$1.0-US$1.3 billionBased on current modelling (using conservative oil prices), OSH can meet equity requirements without coming to the market. Funded from existing cash (US$385m), MENA sale proceeds (US$200m), corporate borrowing from refinancing (US$400m) and oil cash flows between 2008 – 2013.
Will utilise hedging, if required, to protect cash flow and optimise borrowings
25
LNG Project Schedule
2007
FEED Program &EPC Contracting
PNG GovernmentApprovals
Benefits SharingAgreement
Project Financing& Marketing
Detailed EngineeringDesign & Procurement
Construction /Commissioning
2008 2009 2010 2011 2012 2013 2014
Pre-FEED
FirstCargoLNG
*Schedule is Indicative only
Train 1 Train 2
FIDIM Close
Gas Agreement
Entry
Environmental, Benefits Sharing
EPC bids
HOA’s / SPA’s
26
Economic Importance of PNG LNG
ACIL Tasman Report 6 February 2008“Affects economy of PNG and its balance of trade situation profoundly”GDP will more than double (K8.65bn (2006) to K18.2bn average during production phase)Oil & Gas exports increase 4 fold (Average LNG and liquids value estimated K11.4bn/yr)Up to 7,500 jobs in initial phase, 20% by nationals; 850 full time positions, developing national workforce over timeHuge cash flows to Government – national and provincial - and landowners through tax, royalties, levies and equity participation (direct cash payments of US$31.7bn / K114bn to PNG Gov’nt / Landowners over 30 yearsMultiplier effects additional
27
PNG Oil Operations
28
Oil Operations – Providing Cash for Growth
Since Oil Search took over operatorship of PNG oil fields in 2003, fields have produced ~45 mmbbl in excess of previous operator’s expectations and field life extended
Aim is to optimise PNG oil cash generation over the next 5 years to support PNG LNG Project funding requirements
Existing oilfields are mature (decline rate of 15-20%) but with appropriate investment, expect to mitigate decline curve for 2-3 more years
PNG production is highly profitable, but there are cost pressures - initiatives underway to address
Need to balance work programmes, production outcomes and efficiency measures while maintaining safety performance and reputation as a competent Operator
29
PNG Oil Fields
Usano
Kutubu
SE ManandaMoran
SE Gobe
Gobe Main
30
2008 PNG Development Focus Areas
Usano:4 development wells
Kutubu:4 workovers
Agogo:2 workovers
Moran:2 development wells
& 1 workover
31
PNG Gross Oil Production
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Oil
Rat
e (b
op
d)
PNG Oil Actuals Base Hides GTE Fcst 2008 Program Life of Field Hides GTE Actuals Decline Before OSL
Oil Searchtakeover
operatorship
Added over45mmstbcompared
to Chevron
P50ContingentResources-
LOF
P50 2008Programme
HidesGTE
P50Base
Note: Forecasts under review
32
PNG Net Production (Life Of Field)
20206090140Approximate Net Capex (US$M)
1 sidetrack1 well
1 sidetrack
4 wells6 wells
2 sidetracks
6 wells
7 workovers
Activities
Kutubu
Moran
Gobe Main
SE Gobe
SEM
Hides GTE
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2008* 2009 2010 2011 2012
NET Production (Mstb)
Note: Forecasts under review
33
Cost Control - Capex
Need to reduce capex through drilling performance improvements, drilling cost reductions, new technologies and optimised rig strategyInitiatives:
Rigorous cost control of contracts, materials and logisticsImprovements in contractor performance cultureNew technology:− Rig 103 and 104 with leapfrog capability− Hydraulic workover unit to provide lower cost workover
and “incremental” drilling capabilityRig strategy:− Requirement for 2 rigs per year− Actively working with other Operators in PNG− Rig 103 and 104 preferred option:
− Efficiency gains − Standardisation benefits− Flexibility
34
Cost control - Opex
Cost inflation of 9 –10%, higher in specific areas
Focus areas for cost reduction:
Organisational changes
Rationalisation of Contractor base
Work programmes focussed on production optimisation and reliability
Highly competitive cost base
PNG Controllable Costs / Barrel
0
1
2
3
4
5
6
7
8
US
$/
bb
l
OtherMarine
TelecommunicationsCatering Services
Services & FeesFuels, Chemicals,Materials & Supplies
Transportation
Labour
35
Additional Growth
Opportunities
36
PNG Gas Resource Base
~ 1/3rd of PNG gas reserves are held in the Hides field PNG LNG Project accounts for approximately half of PNG’s discovered gas resourceOSH has ~2 tcf net of discovered gas not dedicated to PNG LNG
Stanley0.1%
Barikew a4%
Pasca1%
Angore7%Juha
6%
P`nyang10%
Pandora A7%
Kutubu Area8.3%
Hides (Technical Reserve)
30%
Kimu4.8%
Elevala3%
Douglas3%
Elk3%
Ketu2.3%
Uramu2%
Gobe Area2%
Moran1%
Kuru1%
Koko0.1%
Bw ata0.3%
SE Mananda0.1%
Iehi1%
Pandora B2%
Hides (Technical Reserve) Kutubu Area AngoreJuha P`nyang Pandora AKimu Barikew a ElkDouglas Elevala KetuPandora B Uramu Gobe AreaMoran Kuru PascaIehi Bw ata KokoSE Mananda Stanley
Technical Reserves
0
1000
2000
3000
4000
5000
6000
Hid
es (
Tec
hnic
al R
eser
ve)
P`n
yang
Kut
ubu
Are
a
Pan
dora
A
Ang
ore
Juha
Kim
u
Bar
ikew
a Elk
Dou
glas
Ele
vala
Ket
u
Pan
dora
B
Ura
mu
Gob
e A
rea
Mor
an
Kur
u
Pas
ca Iehi
Bw
ata
To
tal G
as
Re
serv
es
(bcf
)
PNG LNG Project (key fields)
PNG LNG Project
Technical Gas ~ 17,000 bcfTechnical Gas ~ 17,000 bcf
PNG LNG Project
PNG discovered gas reserves by field (Source: Wood Mackenzie Path Finder)
37
Location of Gas Resources
Angore
Barikewa
Uramu
Pandora
Juha
P’nyang
KimuIehi Elk
Hides
Flinders
PPL234
Elevala
Douglas
ForelandShelf
OffshoreHub
WesternCorridorStage I
OffshoreHub
EasternHub
NorthernHub
WesternCorridorStage II Central
Foldbelt
38
Gas Growth Opportunities
PNG LNG Project sets the stage for additional gas-based growth opportunities. OSH seeking to:
Increase contractible gas Plan infrastructure for gas hubs and corridorsCapture high value market opportunities in parallel with further resource definitionMatch available supply to gas market opportunities
New opportunities need to be considered in a framework of being material for a US$5bn+ company
39
Gas Growth Opportunities
PNG LNG Project debottlenecking (+10-15% above nameplate capacity) Additional LNG trains or plants
Significant field, pipeline and plant synergies may be obtainedNew infrastructure opening new regions
Other gas commercialisation opportunities can also offer attractive returns, diversification and timely delivery. These range from large export oriented projects to domestic micro projects, including:
Methanol and ammonia derivativesGas to liquids (GtL)Compressed Natural Gas (CNG)Gas for use in mine operations eg extending mine life at Porgera
Power generation and other smaller projects catering to the needs of local communities & industry
40
Delivering Gas Growth
Focus for OSH:Build on existing gas portfolio by acquiring/ consolidating interests in key fields Undertake further exploration & appraisal in 5 hubs:
Eastern Forelands (eg Barikewa)Western Corridor Stage 1 and Stage 2 (Kimu, Elevala, Douglas & P’nyang)Northern HubOffshore Gulf of Papua
Seismic & studies 2008Active drilling 2009+Align with Government & others on infrastructure and gas development needs
41
Exploration
42
PNG Exploration
Portfolio optimisationData room prepared for farm down of some exploration exposures in PNG
Seeking to build on gas portfolio (already outlined)Oil exploration
High grade remaining prospects in close proximity to infrastructureFollow up Footwall plays if encouragement from current Cobra wellConsider deeper Jurassic plays
Frontier “paradigm changers”In the past, PNG exploration focused on few playsPotential to open up new areas with selective, albeit high risk, drilling
Large hinterland structures with possible proven and also younger untested reservoirs
Innovative seismic acquisition ongoing in this playOffshore fans and toe thrusts
Current wells: NW Paua, Cobra (drilling), Wasuma (1Q09)
43
PNG Exploration
NW Paua
Cobra
Wasuma
44
APFMoro
SE Mananda
Moran
Paua
LakeKutubu
Agogo
NW PAUA
PDL2
PPL233
PPL219
PDL5
10km
PPL219
PPL219
PDL6
Highly prospective structure adjacent to MoranStacked Toro and Digimu reservoirsMean pre-drill reserves 30 - 90 mmstb with upside potential of >100 mmstbConstrained by Paua 1X well (1996) and seismic acquired in 2005Oil Search operating on behalf of EssoGood oil shows and high gas recordedDigimu reservoir thinner than hopedInitial logs confirm some hydrocarbons in ToroUpside reserves still >50mmstbCurrently finalising acquisition of logs
NW Paua
47.5%Esso Highlands
52.5Oil Search
WI %PPL 233
45
COBRA
PPL219
PPL190
PDL4
PDL4PDL3
10km
Gobe Main
SE Gobe Wasuma
Near-field exploration opportunity adjacent to the SE Gobe oil fieldCobra 1a will test the Iagifu sandstone in a seismically defined footwall anticline (‘Sub-thrust Play’)Mean recoverable reserves 40 mmstb, upside to 75 mmstbChance of success 1 in 6Success at Cobra will open up a significant new play fairwayCurrently drilling approx 400m above target
NW SE
Cobra
26.5Murray Petroleum
10.9Cue PNG Ltd
62.6Oil Search
WI %PPL 190
Cobra
SE Gobe
46
Near field exploration opportunity adjacent to the SE Gobe oil fieldIagifu sandstone primary objective -proven reservoir at GobeSeismically defined structure - one of the last un-drilled ‘simple’Hangingwall anticlines within the main Foldbelt trendMay also have deeper target FootwallMean recoverable reserves 35 mmstb with upside potential to 100 mmstbChance of success 1 in 5Well site construction commenced. Drilling scheduled for Q408 – 1Q09
Wasuma
WASUMA
PPL219
PPL190
PDL4
PDL4PDL3
10km
Gobe Main
SE Gobe Wasuma
SE GobeWasuma
NESW
8.75%Merlin Petroleum
91.25Oil Search
WI %PPL219
47
MENA Exploration
Sale of MENA assets to Kuwait Energy recently announced for US$200 million & WC
Allows OSH to re-focus on MENA assets that have potential to make a material contribution eg Libya Area 18, Yemen Blocks 3 & 7, Kurdistan
Pre-drill POS can be reduced to >20% through technology or quality of acreage
Continue to seek material opportunities in world class petroleum systems
Actively maintain and build on core regional relationships
Key strategic advantage of OSH is ability to operate at a local level
Manageable budget yet material opportunities
48
MENA Exploration
Sana’a Office
Dubai Office
Block 3
Block 7
Tajerouine
Le Kef
Area 18
Bina Bawi
Shakal
49
Area 18 located in Pelagian Basin, offshore Libya, which contains 11% (7 bn boe) of Libya’s total recoverable reserves, considered under-exploredArea 18 is located on trend to productive Pelagian Basin fields Exploration targets:
Two proven and productive plays – the Eocene and Cretaceous carbonate oil plays. Unproven clastic gas play in the Jurassic and Triassic section. This play is productive in the Sirte basin to the southeast
Caliph Prospect defined by recently acquired 3D seismic data and will target all three plays. Operator estimate of potential recoverable oil reserves - +250 mmbbl in Eocene, +180 mmbbl in Cretaceous, potential recoverable gas reserves - +300 mmboe in Jurassic, +750 mmboe in TriassicOther prospects and leads in the permit are defined on 2D seismic
Area 18 – Offshore Libya
70Petrobras(Operator)
30Oil Search
WI %Area 18
50
FinancialOverview
51
Financial Performance 2003 - 2007
Revenue OperatingCash Flow
CoreNet Profit
US$m
350.8
416.3
664 644.5
718.6
239.1
330
554.3 544.8598.2
191.3
276.7
357.7
399
326.8
85.7
107.3
200.2 207.5
140.8
0
100
200
300
400
500
600
700
800
2003 2004 2005 2006 2007
EBITDAX
52
Performance in 2007
Total production of 9.78 mmboe, just 4% lower than in 2006 despite PNG oil field maturity
Realised oil price of US$77.78/bbl, 16% above 2006
Record revenue of US$718.8 million, up 12% on 2006
Record EBITDAX of US$598.2 million, up 10% on 2006
Net profit after tax (before significant items) of US$140.8 million, down 32% on 2006
Impacted by higher exploration expense, higher non-cash items and higher effective tax rate
First NPAT fall in 5 years
Dividend for 2007 of eight US cents/share, the same as in 2006
53
2007 Core Profit Drivers
Cash opex impacted by global industry cost pressures and resurgent Australian dollar, fuel costsUS$65.2 million (40%) of total 2007 exploration expense incurredin MENA with no associated tax benefit. Primary driver of effective tax rate of 56%
0
100
200
300
2006
Amor
tisat
ion
US$m
2727
(117)(117)
(33)(33)
(11)(11)
1414
141141
(37)(37)
9797
207207
Oil Pric
e
Oil Sa
les
Other
Rev
.
Cash
Opex
pre
FX
Expl
. Exp
.Ta
x
2007
(7)(7)
FX Im
pact
54
Treasury Review
US$344 million in cash at year end, no debt
Current cash position of US$385 million
Work underway to refinance corporate facility increasing funding commitment to ~US$400 million and group liquidity to in excess of US$900 million (after receipt of MENA sale proceeds)
No oil hedging currently in place
55
Oil Refinance
Targeting US$400m 5 year revolving facilityBorrowing base facility marketed on a club basis (not underwritten), targeting strong group of relationship banks established over past 20 years. Facility should be largely insulated from current “credit crunch”, avoids current pressure points (corporate lending, underwriting positions and “new” customers)Facility is for general corporate purposes but key objective will be to utilise to cover a portion of PNG LNG development costs
56
Outlook
57
Oil SearchThe Next 5 Years
The Company at a cross roads Potential to multiply value by delivering PNG LNG and other Gas Opportunities
Three distinct phases over the next 5 yearsPhase I – PNG LNG to FID 2008-09
Cash conservation, positioning
Phase II – PNG LNG construction 2010-13Cash consumption, progressive delivery
Phase III – First Gas and Beyond 2013-onwardsThe legacy asset arrives
Shifting focus of priorities over time
58
The Focus in 2008-2009
Reorganising management and teams for specific value delivery
PNG LNG Delivery GroupJV support
Oil operations synergies and interface
Associated gas FEED and construction
In-country landowner management
PNG LNG Financing GroupDebt and equity financing co-ordination
Gas New Business GroupConcentrate on new gas developments
Corporate reorganisation to “Fit for Purpose” Group based on new priorities
59
Summary
Latent value in existing portfolio of assets is sufficient to deliver superior value to shareholders over the next 5 years
Opportunities are well defined
Challenges can be managed
Company is well positioned to deliver
60
O I L S E A R C H L I M I T E D