2010 Annual Meeting - Oil Search · 11 2009 Cash Flows * Includes Company share of JV cash balances...
Transcript of 2010 Annual Meeting - Oil Search · 11 2009 Cash Flows * Includes Company share of JV cash balances...
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2010 Annual Meeting
23 April 2010
O I L S E A R C H L I M I T E D
2
2010 Annual Meeting Agenda
2009 Performance Summary
2009 Financial Results
PNG LNG Project
Gas Expansion
Operations Review
Outlook
3
2009 Performance Summary
Highlight of 2009 was PNG LNG Project development decision:
Less than two years from FEED to Sanction
Transformational impact on Oil Search and PNG
ExxonMobil quality operator
Foundation for major LNG industry in PNG
Seven fold increase in proven and probable reserves, increasing from 67 mmboe to 567 mmboe, with significant further potential upside
NPAT of US$133.7 million, US$99.6m excluding PNG Government back-in and tax adjustments. Satisfactory result given commodity environment, with average oil price down 35%
Strong balance sheet with US$1.3 billion cash at year end, totalliquidity of US$1.6 billion (including line of credit). Sufficient for both PNG LNG equity contribution plus funding of T3/T4 gas exploration/ appraisal programme
4
Outstanding Safety Performance
Total Recordable Incidents (TRIs) of 1.16 in 2009
TR
I /
1,0
00
,00
0 H
ou
rs
0
2
4
6
8
10
12
14
1998 1999 2000 2001 2002 2003 2004 2005 2007
Oil Search
2006
Australian Companies (APPEA)
2008
InternationalCompanies
(OGP)
12.7
9.1 9.37.8
7.0 7.3
5.2
9.4
8.2
6.3 6.8
3.9 3.1 2.9 2.7 2.1
4.0
3.6
4.9
5.76.0
2009
8.5
10.69.8 10.7
5.8
1.7
4.7
2.4 2.31 2.05 1.162.04
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Strong Five Year Share Price Performance
Annualised TSR for five years to end 2009 of 29.5%
Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08
Share price (rebased to OSH)
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
Jan 09 Jan 10Jul 09
Woodside
Santos
ASX 100
WTI oil
Oil Search
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Consistent Total Shareholder Returns (TSR)
Source: IRESS
Oil Search ranked No 1 in ASX 100 for TSR over five yearsto 31 December 2009
ASX 100 Index Median Company OSH performance# Ranking based on ASX 100 composition at the beginning of the reference period.
-5
0
10
20
30
40
1 Year 3 Year 5 Year
% T
SR
1st
3rd
OSH Ranking #
42nd
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Future Value Growth
Driven by :-PNG LNG deliveryProject optimisationFurther LNG train developmentReserve growth and exploration success
Comprehensive programmes to delivervalue through to PNG LNG first gas
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2009Financial Results
9
2009 Financial Performance
(US$’m)RevenueCash ExpensesEBITDAXNon-cash itemsExploration ExpenseInterest income/(expense)Pre-tax ProfitTaxNPATCore Profit
814.3(116.3)
698.1(127.2)(91.2)
6.1520.3
(206.9)313.4
240.0**
20082009
512.2(102.8)
409.4(105.4)(75.7)(3.3)
239.8(106.2)
133.799.6*
-37%
-41%
-59%
-54%
Revenue and profit impacted by 35% decline in realised oil prices to $65.40/bbl and 7% lower oil sales due to underlying field decline rates and sale of MENA producing assets
* Excludes PNG Government licence back-in adjustments and one-off tax credit** Excludes net profit sale of MENA assets/JV licence sale profit adjustment and impairment losses
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2009 EBIT Drivers
EBIT decline driven by fall in oil prices, PNG field production decline and sale of MENA assets
0
100
200
300
500 479.6
20
08
EB
IT
228.2
20
09
E
BIT
(258.9)
15.513.5
Cash
O
pex
Exp
lora
tio
nExp
en
se
21.8
Am
ort
isati
on
(10.1)
Oth
er
US$m
400
Oil P
rice
Oil
Volu
mes
(33.2)
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2009 Cash Flows
* Includes Company share of JV cash balances
Openi
ng
Cash*
Opera
ting
Inve
stin
g
Fina
ncin
g
Closing
Cash*
535535
284284
851851
1,2881,288
US$’m
0
250
500
750
1000
1250
1500
(382)(382)
Operating cashflow included US$79m of tax paid (inclusive of prior period tax recoveries)Investing cash outflows included US$139m on production, US$324m on exploration & evaluation, including PNG LNG expenditureFinancing included US$900m of proceeds from share placement, SPP and underwritten DRP
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US$1.39 billion in cash at end March 2010
Cash invested with highly rated bank counterparties
US$348 million available from term revolving facility, nil drawn down
US$391 million drawn down from PNG LNG Project finance facility on 31 March (including US$303.5m debt clawback relating to past expenditures)
No oil hedging undertaken during 2009 or currently in place
Treasury Update
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PNG LNG Project
14
PNG LNG Project
World class ProjectAligned joint venture ExxonMobil Operator –excellent track recordSupportive Government and communitiesProvides infrastructure for future growthTransformational for Oil Search and PNG
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PNG LNG Projectthe road to sanction
2008Signed JOA, aligning JV partners in MarchSigned Gas Agreement with Govt in MayCommenced FEED in MayCommenced marketing discussions late 2008Developed financing plan
2009Submitted EIS in JanuarySigned UBSA in MaySigned HOAsCommenced early worksEIS approved in OctoberCompleted FEED, LNG plant capacity increased to 6.6 MTPA
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PNG LNG Projectthe road to sanction
December 2009Completed LBSAs Signed 3 SPAs with TEPCO, Osaka Gas and SinopecDevelopment approval 8 December 2009EPC contracts awarded 9 December 2009Financing documents signed 15 December 2009 with ECAs, Commercial Banks and ExxonMobil for $14 billion – world’s largest project financingGovernment offered and Project accepted all development licencesGovernment paid past costs for equity back-in to new development licences
March 2010Signed final SPA with CPC – fully contractedLNG vessel charter contracts signed with Mitsui OSK LinesMinor legislation amendments12 March – Financial Close
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PNG LNG Project
Construction has commenced (roads, bridges, camps, site preparation and training facilities). First LNG sales expected 2014
Investment for initial phase estimated at US$15 billion
Mobilisation by key contractors of people and equipment underway
Mix of fixed price/variable price contracts
Operator ExxonMobil has excellent record of delivering projects on time, on budget
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Proposed PNG LNG Future Activities
2010 2011 2012 2013 2014
FinancialClose
• Continued early works• Detailed design
• Order long leads and place purchase orders• Open supply routes
• Contractor mobilisation• Commence Associated Gas
(AG) construction
• Pipe lay (Kutubu to Hides)
• 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• Start LNG equipment
installation
First Gas from Train 1,
then Train 2
• Complete AG • Commence
onshore pipe lay (Kutubu to Omati)
• Complete offshore pipe lay
• Start Hides plant installation
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GasGrowth
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PNG Gas Growth
Key strategic priority for Oil Search is to grow gas business in PNGLNG remains optimum commercialisation route for additional gas PNG LNG will provide infrastructure and capacity to facilitate expansion and provide excellent cost structure:
Use of capacity in pipeline, jetty, tanks and servicesTrained local work force
Government is supportive of future gas growthPace of gas growth will be determined by:
Resource aggregation/explorationJoint Venture alignmentMarket access
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PNG Gas Growth Activities
Two largely independent core gas development streams:
PNG LNG dedicated fieldsMaterial core reserves
Proven (1P) 300 mmboe (OSH share) – all sold Proven & probable (2P) 500 mmboe (OSH share)
Focus on moving 2P into 1P contractible category through field development optimisation and further appraisalStrong partner alignment
Other fields and explorationExisting proven & probable resources (2C) of 281 mmboe (OSH share), still to be commercialised Programme to appraise these discoveries and explore for new gas underwayDeveloping material portfolio ex PNG LNG
Objective is to prove up sufficient proven contractible reserves to underwrite Trains 3 and 4
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Requirements for LNG train growth in PNG
OSH Operated LicenceOSH Interest LicencePetroleum Development LicencePetroleum Retention LicenceLicence ApplicationOil FieldGas FieldOil & Gas FieldOil PipelineProposed Gas Pipeline
Kumul Terminal
PRL01
PPL234
PRL08PPL240
PRL03
PRL11
PRL12
PPL239
PDL1
PPL233
PPL190
PPL219
PRL10
PRL02
PDL2
PDL5PDL6
PDL4
PDL3
PRL09
142°E
9°S
7°S
145°E50km
APDL14
PPL260
AngoreJuhaHides
Moran
Agogo Kutubu
Gobe Main
PNG LNG ProjectGas Resources
Mananda Attic
Flinders
Barikewa Deep
Huria
Hedinia FW
Lead 7
Korka
Gobe Deep
Hides FW
Pasca B
ExplorationGas Resources
Pandora
Barikewa
Uramu
P’nyang
Kimu
Juha North
SE Gobe
Non PNG LNG Gas Resources
3rd Train Threshold
0
5
10
15
20
25tcf
PNG LNG3C
Upside
PNG LNG
Base Volume
2C
3C
Other Highlands JV Partner Resources
4th Train Threshold
2C
3C
Forelands &
Offshore Resources
Exploration
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Circle areas proportional to reserves potential. Outer circle unrisked potential, inner circle risked potential
Red = GasOrange = CondensateGreen = Oil
Proposed 2010/11 PNG Gas Exploration
PRL01
PPL234
PRL08PPL240
PRL03
PRL11
PDL7
PPL239
PDL1
PPL190
PPL219
PRL10
PRL02
PDL2
PDL4
PDL3
PRL09
PPL244
9°S
6°S
145°E50km
Kumul Terminal
PDL6PDL5
APRL14
PPL260
APPL249
APPL250
PPL
233
PDL9PDL8
142°E
Flinders
Barikewa Deep
KorkaHuria (PDL 8)
Mananda FW
Mananda Attic
CBM test
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Operations Review
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PNG Oil Production (gross)
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
2013
2014
Oil P
rod
uct
ion
(B
op
d)
P10
P50
P90
Pre-OSHDecline
Added over55mmstbcompared
to Chevron
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2009 Production Performance
Excellent safety performance2009 production of 8.12 mmboe
Strong underlying performance in all fieldsTwo new rigs (103 and 104) operating throughout year with significant performance improvements
Total cash costs (inc corporate costs, FX) of US$12.99/boe, down 7% from 2008
Achieved despite 4% reduction in saleable oil volumes and inflationary environment in PNG
Production impact of recent drilling at Usano
0
2,000
4,000
6,000
8,000
10,000
12,000
1992
1994
1996
1998
2000
2002
2004
2006
2009
Oil Rate (bopd)
Usano Main Block
Usano East Block
UDT 7
UDT 11
UDT 8,9
UDT 10,12
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Oil development drilling continues to add value
Since 2003, gross PNG proven (1P) oil reserves have increased by 51 mmbbl and proven and probable (2P) reserves by 37 mmbblDevelopment drilling has added 2P reserves at average cost of US$11.72/bbl Further opportunities exist to add reserves within field areas
PNG Oil Fields – Gross Ultimate Recoverable Reserves (pre-LNG)
1P
2P
440
460
480
500
520
540
560
Millio
ns
of
Barr
els
2003 2004 2005 2006 2007 2008 2009
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ADT 2 – Opens up new play
ADT 2 Well Results:Proved new forelimb play in AgogoDigimu in fault compartment 1 is on production, flowing oil at 1,500-2,000 bopd3 zones in fault compartments 2 and 3 have flowed water and traces of oil3 sands in 2 deepest zones yet to be testedA second well in Agogo forelimb is being assessedSimilar plays along trend are being mapped
7”
ST3
ST1
2400
2600
2800
3200
OverturnedForelimb
Hangingwall
mTVD
Alene
Flowed oil
5”
ST23000 Yet to be tested
DigimuToro A
SW NE
Hedinia Sand
Toro B/C
Flowed water and traces of oil
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Reserves & Resources31 December 2009
Six-fold increase in proven (1P) reserves, from 50 mmboe at end 2008 to 344 mmboe:
PNG LNG Project reserve booking of 301 mmboe2009 production of 8.1 mmboe Oil reserve additions at Kutubu, Gobe and SE Gobe of 2.4 mmboe
Seven-fold increase in proven & probable (2P) reserves, from 67 mmboe to 567 mmboe:
PNG LNG Project reserve booking of 505 mmboe2009 production of 8.1 mmboe Oil reserve additions at Kutubu, Gobe and SE Gobe of 2.8 mmboe
2C resources, comprising gas and associated liquids, of 281 mmboe at end 2009, compared to 886 mmboe at end 2008:
Adjustment of 79 mmboe, due to Government back-in, to PNG LNG, initial equity determination and field reserve changesPNG LNG Project reserves booking of 505 mmboeDecrease of 21 mmboe for revisions to certain fields’ 2C estimates and Government back-in
Total 2P and 2C reserves and resources of 848 mmboe
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2010 Operations Outlook
Gas value driving revised operating framework:
Field reliability management
Gas conservation with minor oil production impact
Value-adding PNG production activities will continue in 2010, including 1 – 2 wells at Moran, appraisal of Agogo ADT 2 deep play and workover campaign in Kutubu, Moran, SE GobeOngoing focus on costs and capital efficiency following 2009 Operations ReviewAligning and maximising use of infrastructure to support LNG ProjectProduction outlook for 2010 of 7.2 – 7.4 mmboe, with incremental activity expected to flatten decline curve in 2011 -2013
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Exploration Outlook
PNG:Exploration for gas – key to driving LNG expansion
Korka – 1.3 tcf mean, drilling ahead in PPL 260
Huria – seismic underway – PDL 8 / PRL 11
Additional oil focused exploration in 2010:Wasuma – discovered hydrocarbons in footwall. Discovery sub-commercial but confirms footwall play
Mananda Attic - 30 mmbbl mean in PPL 219, plus gas play to be drilled 4Q 2010
MENA:Focus on finding material oil and maximising asset value:
Evaluate commerciality of Shakal (Iraq), appraisal of Tubb’a & Al Meashar (Yemen) discoveries
Oil–focused drilling ongoing within Blocks 3 and 7 in Yemen, targeting 3D defined structuresSeismic in Kurdistan (K42 world class exploration province) and Tunisia to define drillable large structures
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PNG 2010 Exploration Summary
PRL01
PPL234
PRL08PPL240
PRL03
PRL11
PDL7
PPL239
PDL1
PPL190
PPL219
PRL10
PRL02
PDL2
PDL4
PDL3
PRL09
PPL244
142°E
9°S
6°S
145°E50km
Kumul Terminal
PDL6PDL5
APRL14
PPL260
APPL249
APPL250
PPL
233
PDL9PDL8
Commitment
Discretionary
Future Commitment
Well Types
Prospect/Lead (POS%)Mean Oil Gross (mmstb)Mean Gas Gross (tcf)
Seismic
CommitmentDiscretionary
Permit 2D(distance)/3D(area)
Flinders (12.5%)1.0 tcf+
Korka (15%)1.3 tcf +
Mananda Attic (45%)30 mmstb
Mananda FW (10%)1.2 tcf +
PPL 234 3,000+km2
PDL 8/PRL 11 80km
PPL 233 55km
PDL 2 70km
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MENA 2010 Exploration Summary
Commitment
Discretionary
Future Commitment
Well Types
Prospect/Lead (POS%)Mean Oil Gross (mmstb)Mean Gas Gross (bscf)
Seismic
CommitmentDiscretionary
Permit 2D(distance)/3D(area)
Sana’a Office
Dubai Office
Tajerouine
Le Kef
K42
Shakal
Block 7
Block 3
Taj. + Le Kef 600km
K42 200km
Shakal 50km
Jebel Milh (17%)28 mmstb
Block 3 & 7 400km
Al Meashar (20%)20 mmstb
Block 3/7 well,late 2010
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Outlook
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Outlook
Oil Search’s core business in excellent shape to drive further value growth over next 3 years
PNG LNG Project construction underwayExxonMobil quality operator for delivery
Contractors mobilising
Buyers secured, with pricing locked in
Finance secured, excellent package
Significant impact on PNG already being felt
PNG LNG is country and Company transformational
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Active programmes to deliver in 2010/2011
PNG LNG field and development optimisation
Seismic acquisition over Angore, Huria
Future drilling
Onshore accelerated appraisal and exploration
Seismic over Barikewa,
Drilling of Korka, Mananda Attic, Huria, Barikewa Deep
CBM test in 2010
Gulf of Papua
3D seismic
Drill Flinders
Appraise Pandora
Selected acquisitions (PRL 1, PPL 244 and others)
Partner alignment (PNG LNG and others)
Oil Search has the financial strength to fund all activities
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2010 Guidance Summary
Production: 7.2 – 7.4 mmboe. Incremental activity in 2011 – 2013 expected to flatten decline curve
Opex: US$16-18/boe Increase due to FX, PNG inflation, increased spend to improve reliability & extend life and relatively fixed cost base on lower production. In addition, accelerated focus on workovers to maximise oil recovery prior to gas blow downLikely to stabilise/decline in 2011
D,D & A: US$6-8/boe Decrease due to recognition of LNG reserves
Capex:Exploration – US$210m (80% in PNG, 20% in MENA)Production/Other – US$85m (inc corporate & other gas)PNG LNG – US$1,000 - 1,350m (inc capitalised interest & upfront fees)
38
Production Outlook
PNG LNG adds ~18 mmboe pa to OSH at plateau in 2015 onwards. 30 year Project life
T3 could add an additional ~9 mmboe pa, with T4 of similar magnitude
Net
Pro
du
ctio
n (
bo
ep
d)
0
10,000
20,000
30,000
40,000
50,000
60,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
LNG GasLNG Gas
PNG DevelopmentPNG Development
70,000
80,000
Potential T3 LNG GasPotential T3 LNG Gas
LNG CondensateLNG Condensate
90,000
Potential T3 LNG CondensatePotential T3 LNG Condensate
39
Summary
PNG LNG Project sanctioned and construction underway
Appraisal and exploration activity programme to prove up gas for T3/T4 commenced
Core oil production remains solid. Focus on life extension, reliability and gas conservation
A new value equation
Measured oil and gas exploration in PNG and MENA
Activities underwritten by strong balance sheet and liquidity to meet LNG obligations, T3/T4
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O I L S E A R C H L I M I T E D