Continued Growth in the New World Order - Oil Search€¦ · 2 Managing the New World Order...
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1 Continued Growth in the New World Order The Good Oil Conference 5-6 September 2006 O I L S E A R C H L I M I T E D
Transcript of Continued Growth in the New World Order - Oil Search€¦ · 2 Managing the New World Order...
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Continued Growth
in the New World Order
The Good Oil Conference
5-6 September 2006
O I L S E A R C H L I M I T E D
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Managing the New World Order
Business in a New EnvironmentSustained oil prices US$50/bbl and aboveUnprecedented demand for gas (especially in Asia Pacific) delivering a new price environmentIncreasing disconnect with East Coast Australian Gas MarketMajor pressures on equipment supply, services and people. Industry at or above capacityCost escalation and pressures on timely delivery
Essential to manage new business environment
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Four Years of Strong Performance
Strategic Review in 2002Four year plan to double company value, and to generate top quartile returns
All key objectives have been achieved
Delivered : operating control of core business: significant production increase: operating cost reductions: major steps towards commercialising
discovered gas resource with various options
: development of quality exploration portfolio
: very strong balance sheet
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AchievementsNet Production Growth
Focussed management of PNG oil fields has had positive results on productionGross PNG production is now at highest levels since 2001, up 6.2% on 2H 2005
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 2005
+23%+23%
+25%+25%+6%+6%
+10%+10%
1H 2006
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
$’m
0
20
40
60
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4.5
17.9
9.6
7.7
1.8
Net Profit
EPS
1H 2006
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Control of Costs
Other Prod’n Opex
8.74.1Net Corp Costs
0.00.6FX Losses
46.5
7.20.1
22.25.92.3
US$’m
1H06
45.1Total
5.80.1
- Oil- Hides
33.1-
1.4
Field Costs- Oil: PNG- Oil: Yemen- Hides
US$’m
1H05
1H 05 1H 06
Normalised PNG OilfieldCosts per Barrel
0
1
2
3
4
5
6
7
NetNetFieldFieldCostsCosts$4.66$4.66
TariffsTariffs$0.75$0.75
KumulKumul$1.31$1.31
NetNetFieldFieldCostsCosts$5.23$5.23
TariffsTariffs$1.49$1.49
8US$
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Strong Balance Sheet
US$537 million in cash at end June, no debtUS$126 million of debt outstanding repaid in first quarter 2006. US$ term loan commitment converted to a revolverLiquidity of US$670 million, including undrawn committed bank lines5 US cents final dividend (US$56m) for 2005 paid on 23 March 2006. A 4 US cents interim dividend for 2006 (US$45m) has been declaredNo oil hedging currently in place
US
$’m
0
100
200
300
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500
June 20062003 2004 2005
Cash DebtGearing
%
40
30
20
10
600
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Growth - The Next Phase
New Strategic Review underway
Objective to more than double company value by 2010
Starting from a position of strengthExcellent asset base, with large discovered gas resource and quality exploration portfolioCapture of latent value potential can deliver target
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1992
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2002Smaller bus – frustrated passengers
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2003
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2006Bigger bus – Lots of gas, New assets
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2010A fleet of buses
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Growth - The Next Phase
Oil Search positioning itself to take advantage of opportunities created by new fundamentals:
Key part of new Strategic ReviewTargeted value extraction in producing fields
Commercialisation of discovered gas resource
Exploration activities increased
Control of equipment supply/ownership
Participation in the full value chain
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Growth - The Next Phase
Control of the main value drivers and operational levers:
Equipment ownershipDrilling equipmentProcurement and services alliancingOperations optimisation with tight cost controls
People development and investmentValue driven investment
Spend money to make money
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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 billion boe gas and liquids resource
Multi phase developments
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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DELIVERING VALUE
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PNG Oil Production Outlook
SummaryStrong performance from Moran and SE Gobe, SE Manandastill to peakSignificant opportunities identified with increased drilling activity in 2007
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10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Jan-
00Ju
l-00
Jan-
01Ju
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Jan-
02Ju
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Jan-
03Ju
l-03
Jan-
04Ju
l-04
Jan-
05Ju
l-05
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06Ju
l-06
Jan-
07Ju
l-07
Oil P
rod
uct
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(st
b/d
)
PNG (Gross)
ForecastHistory
Trend BeforeOil Search Potential
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SE Mananda Bridge
Innovative engineering opens up new exploration/development trend
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EXTRACT VALUE
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Gas Commercialisation
Substantial change in oil and gas markets over past 3 years:
Sustained high oil priceStrong interest in gas development optionsGrowing gap between world export pricing vs Australian East Coast energy marketsCapital cost escalation with unchanged outlook past 2010 placing pressures on pricing
Unprecedented interest in PNG gas resources, with multiple development options
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Gas Commercialisation The Foundations for Value Extraction
Oil Search gas resources and associated liquids total 4.5TCF and 200mmbbls (~1 billion boe)
Core resources at :KutubuHides / AngoreOther fields – Kimu / Uramu / Barikewa / P’nyang etc.
Substantial exploration potentialField appraisal
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Major Oil and Gas
Fields with Exploration
Angore
Barikewa
Uramu
Pandora
Juha
P’nyang
Kimu
Iehi
Honinabi
Mogulu North Mogulu South
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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
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10,000
15,000
20,000
25,000
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1P 2P 3P
Reco
vera
ble
Gas
(bcf
)
Yet
to F
ind
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Gas Commercialisation Maximum Value to Oil Search
Three stage growth to gas business over next 6 years
Optimises value of resource (gas and oil)Leverages oil infrastructureIncrementalises build through unitisation of main resources
Staged developmentPNG Gas Project : Utilising Kutubu and Hides ~250PJ/yr starting 2009/10Petrochemicals: in country development utilising Kimu / Barikewa / Uramu~150PJ/yr starting 2010LNG: Utilising Hides / Angore / Juha / Mogulu~250PJ/yr starting 2013
Five fold increase in production over four years
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PNG Gas Project1st Phase Development
2006 2010 2014 2018 2022 2026 2030
Pro
du
ctio
n N
et
to O
SH
(mb
oed
)
PNG Oil MENA Oil PNGGP Liquids PNGGP Gas
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
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PNG Gas Project2nd Phase Development
2006 2010 2014 2018 2022 2026 2030
Pro
du
ctio
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et
to O
SH
(mb
oed
)
PNG Oil MENA Oil PNGGP Liquids
PNGGP Gas Petrochem Liquids Petrochem Gas
0.0
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20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
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PNG Gas Project3rd Phase Development
2006 2010 2014 2018 2022 2026 2030
PNG Oil MENA Oil PNGGP Liquids PNGGP Gas
Petrochem Liquids Petrochem Gas LNG Liquids LNG Gas
0.0
20.0
40.0
60.0
80.0
100.0
120.0
Significant production increase over 4 yearsP
rod
uct
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to O
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oed
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Gas Development PotentialExcluding PNG Gas Project
2006 2010 2014 2018 2022 2026 20300.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
PNG Oil MENA Oil Petrochem Liquids
Petrochem Gas Hides LNG Liquids Hides LNG Gas
Able to double production through petrochemical developmentsP
rod
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Net
to O
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(mb
oed
)
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Gas Commercialisation
PNG Gas ProjectRobust economic project can be achieved based on alignment of stakeholders, Capex outlook and likely gas pricingEndeavouring to close a range of issues in the short term
Confirmation of final loads and distributionConfirmation of pipeline route, likely Capexand transportation arrangements
Clarity of direction is required as there are other options for development
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Gas Commercialisation
Preference to secure PNG Gas Project as first development
Provides optimal base for sequential development 2009/10Provides leverage of existing infrastructure and oil and gas integrationThe Kutubu / Hides quasi unitisation has value
Significant other attractive development options
Supply to petrochemical plants in Port MoresbyLiquids cycling – Hides / JuhaLNG development
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In-Country Development Options
Petrochemicals (Methanol / DME)Mitsubishi / Itochu seeking to convert existing ITA for 86 PJ/yr to GSAIn final feasibilitySanction 2007 – Delivery 2010
Fertiliser / AmmoniaOswal IndustriesDetailed engineering / feasibility commencedProduction 2010
Attractive economics and net backsGas supply from foreland fields or Kutubu should PNGGP not proceed in timely wayControl of development
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In-Country Development Options
LNG based on Hides / Angore / Juha2013 developmentPossible early liquids cycling
LNG MOU with BGFocussed on areas away from Hides / KutubuWorld class LNG participant
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CREATE VALUE
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PNG Prospects
Proposed Cobra 14Q 2006
Proposed NW Paua 11Q 2007
Proposed Korobosea 12Q 2007
Juha Appraisal4Q 2006
Proposed Mananda Attic 1
4Q 2007Proposed Mogulu3Q 2007
Kutubu Attic1Q 2007
Arakubi 1 (Drilling)2Q 2006
Usano Development4Q 2006
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PNG Drilling Activity
3 rigs running continuously4th rig in country 2H 2007, 5th rig 1Q 2008Oil production, oil exploration, gas appraisal and gas exploration activities17 wells planned in 2006/2007, including:
ArakubiTwo Juha wellsCobraKutubu AtticNW Paua
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Yemen Prospects
Proposed Al Harsh-23Q 2007
Proposed Shaibah-1Nov 2006
Proposed Riyan-1Jan 2007
Proposed Suad-1Feb 2007
NABRAJAH
Proposed Ataq-13Q 2007
Proposed Prospect BNov 2006Proposed East Wadi Sana-1
Jan 2007
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Egyptian Prospects
Area A
Kareem, Yusr, Kheir
& ShukheirDevelopment
Kareem, Yusr, Kheir
& ShukheirDevelopment
Kareem, Yusr, Kheir
& ShukheirDevelopment
Wadi DaraExploration
Kareem, Yusr, Kheir
& ShukheirDevelopment
Umm El YusrExploration
49.50%
100.00%
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Kurdistan
IRAN
IRAQ
SAUDI ARABIA
SYRIA
KUWAIT
TURKEY
Baghdad
Mosul
Tikrit
Kirkuk
Zakhu
BasrahOil Field
Gas FieldOil & Gas FieldGas Pipeline
Oil Pipeline
Oil Field
Gas FieldOil & Gas FieldGas Pipeline
Oil Pipeline
KurdistanRegion
Bina Bawi EPSA
0 200km
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MENA Drilling Activity
18 wells planned for Yemen in 2006/2007, including:Two exploration wells in Block 3
Two exploration wells in Block 35
Two exploration wells in a new block through farm-in
Exploration and development drilling in Block 43 (Nabrajah), following interpretation of new seismic
Two high potential exploration wells offshore in Block 15
12 wells planned for Egypt10 exploration/development wells in Area ‘A’
2 exploration wells in East Ras Qattara
Recent acquisition of interest in Kurdistan. Rare opportunity to participate in relatively low technical risk, high reserves potential prospect, balanced by commercial risk
All rigs necessary for MENA programme have been contracted
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SUMMARY
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Growth in the New World Order
Oil Search well situated to deliver real value to shareholders in the “New World Order”
Large discovered gas and liquids resourceRange of commercialisation options
Importance of alignment and controlCore assets performing wellMiddle East production and exploration contributionMajor expanded exploration programme
47 wells in next 18 monthsTight cost controls, equipment ownership, major alliancing
US$540m in the bankProvides muscle for development and acquisition options
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2010A fleet of buses
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O I L S E A R C H L I M I T E D
