StrongFOUNDATIONS

2016 HALF YEAR UPDATE

Letter to shareholders FROM THE MANAGING DIRECTOR

Oil Search achieved a strong operational start to 2016, reporting near-record half year production. The PNG LNG Project continued to produce at rates well above nameplate capacity, averaging 7.7 MTPA during the first half, while the measures implemented to improve productivity and optimise production in our operated oil fields

were very successful. However, profitability was impacted by the sharp fall in global oil and gas prices, with realised prices down 27% and 40% respectively, leading to a substantial reduction in reported net profit. The Board declared a dividend of one US cent per share, representing a dividend payout ratio of 60%, slightly above our stated policy to distribute between 35% and 50% of net profits.

A key focus for the Company during the first half was our bid for InterOil and the subsequent superior offer from ExxonMobil. Following much deliberation, the Oil Search Board decided that it was not in the best interests of shareholders to increase our offer. One of the key drivers for our InterOil bid was to facilitate cooperation/integration between Papua New Guinea’s two LNG growth opportunities, the potential expansion of PNG LNG and the development of Papua LNG, both in which Oil Search holds material positions. We believe the bid for InterOil by ExxonMobil significantly increases the likelihood of this occurring and that ExxonMobil’s offer highlights the quality of our LNG assets in PNG and the potential value that would be created by cooperation between PNG’s two world-class LNG projects.

We have recently commenced a Strategy Refresh, with a focus on determining the most value accretive options for cooperation between the PNG LNG and Papua LNG projects and the other activities required to underpin the next phase of LNG growth in PNG. In addition, we are replenishing our exploration portfolio in PNG and have identified a number of highly prospective areas with material gas upside potential that can drive long term growth.

Our liquidity position remains strong and we are well placed to support continued investment in our growth opportunities, which are among the most competitive in the region and have the potential to almost double our high-returning production base by early next decade.

Peter Botten, CBE, BSc, ARSM, Managing Director

HIGHLIGHTS 2016 Half Year

14.9MMBOE

Total production, the second highest half year in the

Company’s history

8%Unit production costs

reduced to US$8.21/boe from US$8.90/boe

7.7MTPA

PNG LNG Project annualised product ion rate

s ig nif icantly above nameplate capacit y

6.4TCF

Estimated Elk-Antelope 2C resources from

completed field certification

SAFETY IMPROVEMENT

Plan introduced

53LNG cargoes shipped

US$581MILLION

Total sales revenue

US$26MILLION

Net profit after tax

US$56MILLION

Committed to the Oil Search Foundation

over the next 5 years

1.0US CENT

PER SHAREInterim dividend payout

representing a 60% payout ratio

Half Year PERFORMANCE SUMMARY

Six months toJun

2014Dec

2014Jun

2015Dec

2015Jun

2016

Total production (mmboe) 5.37 13.91 14.32 14.93 14.89

Total sales (mmboe) 4.74 13.03 14.45 14.31 15.17

Realised oil & condensate price (US$/bbl) 111.57 87.07 56.64 46.4 41.61

Total revenue (US$m) 510.0 1,100.4 863.8 721.9 580.8

EBITDAX (US$m)* 393.9 863.1 644.1 507.2 377.4

Net profit after tax (US$m) 152.5 200.7 227.5 (266.9) 25.6

Core profit (US$m)* 152.5 381.3 227.5 132.4 25.6

EPS (US cents) 10.6 22.0 14.9 8.7 1.7

DPS (US cents) 2.0 12.0 6.0 4.0 1.0

Operating cash flow (US$m) 255.4 736.9 516.8 435.9 239.2

Net debt (US$m) 3,766 3,452 3,443 3,318 3,304

* EBITDAX (earnings before interest, tax, depreciation/amortisation, impairment and exploration) and core profit (net profit after tax before significant items) are non-IFRS measures that are presented to provide a more meaningful understanding of the performance of Oil Search’s operations. The non-IFRS financial information is unaudited but is derived from the financial statements which have been subject to review or audit by the Company’s auditor.

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BRENT OIL PRICE

ASX 200 ENERGY

SHARE PRICE PERFORMANCE SINCE 2010 RELATIVE TO BRENT OIL PRICE AND THE AUSTRALIAN ENERGY INDEX

EXCELLENT PERFORMANCE FROM OPERATIONS

The PNG LNG Project continued to perform well during the first half, producing LNG at an annualised rate of approximately 7.7 MTPA, 12% above the nameplate capacity of 6.9 MTPA. This was achieved despite a planned production rate reduction for routine compressor maintenance in April and an unplanned shut-down in May, the first time the Project had been completely shut-in since production started in mid-2014. The operator brought the plant back online quickly and safely, with production reaching a new monthly high of 8.2 MTPA in June.

Despite the maturity of our oil fields, total operated production was 4% higher than in the first half of 2015. This positive performance reflected the ramp up of third party gas exports from SE Gobe to the PNG LNG Project, successful reservoir management initiatives, particularly at Kutubu and Moran, facilities optimisation and other productivity and efficiency initiatives implemented in late 2015 and early 2016, which continue to reap rewards.

INCREASING LIKELIHOOD OF DOWNSTREAM INTEGRATION OF LNG EXPANSION OPPORTUNITIES IN PNG

In May, the Company announced an agreed bid for InterOil and signed a Memorandum of Understanding with Total for the on-sale of part of the InterOil interests. One of the key drivers for entering into these transactions was the belief that restructuring the PRL 15 joint venture would provide a pathway to achieving downstream integration between the proposed Papua LNG development and the potential expansion of the PNG LNG Project.

In July, Oil Search was notified by InterOil that it had received a superior proposal from ExxonMobil. The consideration offered by ExxonMobil underscores the potential value that would be created by cooperation between PNG’s two world class LNG projects, which we believe is materially enhanced by ExxonMobil’s entry into the Papua LNG joint venture. Statements subsequently made by ExxonMobil and Total confirm that both majors are willing to pursue opportunities to develop the projects in a cooperative and coordinated manner. Based on our evaluation, superior value accretion for Oil Search shareholders can be achieved by realising the benefits of project integration through our existing interests in PNG LNG and Papua LNG, without dilution and acquisition risk that would result from a higher bid.

Oil Search believes that there is sufficient gas resource in existing discovered gas fields to underpin the proven extra capacity of the two existing PNG LNG trains, as well as at least two, and possibly three, additional LNG trains if planned appraisal and exploration are successful.

This confidence is based on our view that there is upside potential in the PNG LNG foundation fields, which will be verified by the recertification process of the Hides, Angore and Associated Gas fields presently underway, as well as approximately 10 tcf of combined proven and probable contingent (2C) undeveloped gas resource in the Elk-Antelope and P’nyang fields.

The total 2C resource in Elk-Antelope and P’nyang is similar to the 2C resource that underpinned the original PNG LNG Project development when that project was sanctioned in 2009. Importantly, proven contingent 1C resources within Elk-Antelope and P’nyang are presently estimated at more than 6 tcf, sufficient to underpin LNG marketing and project financing for two extra trains.

There are a number of commercial models that could be used to deliver project integration. Studying the various options and their relative values is a core component of Oil Search’s Strategy Refresh, a strategic review which has recently commenced in light of changes in the global oil and LNG markets as well as the bid for InterOil by ExxonMobil and its implications. The conclusions of the Strategy Refresh, expected to be completed in the fourth quarter of 2016, will form the basis for Oil Search to commence a constructive dialogue with our partners on the way forward.

SAFETY IMPROVEMENT PLAN INTRODUCED

During the first half of 2016, Oil Search recorded a Total Recordable Incident Rate (TRIR) of 2.32 per million hours worked. This compares to our 2015 TRIR of 1.91 per million hours worked.

Analysis of the incidents experienced during the first half of 2016 has revealed that they were largely limited to a small number of “hot spots”. A safety improvement plan, aimed at delivering a substantial improvement in performance during the second half of 2016 and beyond, has been developed and implementation is underway. The plan, which is already realising results, with the TRIR to the end of July falling to 2.04, includes developing an increased focus on situational awareness and will particularly address the safety challenges in our civil construction and marine terminal operations.

2016 REPORTING CALENDAR

January 27 Release of 2015 4th quarter results

February 23 Release of 2015 full year results

March 8 Ex-dividend date for 2015 final dividend

9 Record date for 2015 final dividend

31 Payment of 2015 final dividend

April 8 Release of 2015 Annual Report and 2015 Sustainability Report

19 Release of 2016 1st quarter results

May 13 2016 Annual Meeting

July 19 Release of 2016 2nd quarter results

August 23 Release of 2016 half year results

September 6 Ex-dividend date for 2016 interim dividend

7 Record date for 2016 interim dividend

27 Payment of 2016 interim dividend

October 18 Release of 2016 3rd quarter results

December 31 End of financial year

SHAREHOLDER INFORMATION

A wide range of information on Oil Search is available on the Company’s website. Please visit: www.oilsearch.com

SHARE ENQUIRIES

For information about your shareholding, including dividend enquiries and any changes in shareholder details, please contact Oil Search’s share registry, Computershare:

Website: www.computershare.com.auEmail: oilsearch@computershare.com.auTelephone: Within Australia: 1300 850 505 Outside Australia: +61 3 9415 4000

For other investor information, please send an email to investor@oilsearch.com

Registered officeGround Floor, Harbourside East Building, Stanley EsplanadePort Moresby, Papua New GuineaPO Box 842, Port Moresby, NCD 521, Papua New GuineaTelephone: +675 322 5599 Facsimile: +675 322 5566