OIL SEARCH 2007 FIRST HALF RESULTS 21 August 2007

O I L S E A R C H L I M I T E D (Incorporated in Papua New Guinea) ARBN 055 079 868 OIL SEARCH 2007 FIRST HALF RESULTS 21 August 2007 Profit after tax for the six months to 30 June 2007 was US$46.9 million. This compares to 2006 s record profit of US$115.3 million (excluding the profit made on the sale of the AGL assets). The result was impacted by higher non-cash charges, an increase in exploration expense and an increase in the effective tax rate due to the non tax deductibility of Middle East exploration expenses. The underlying operational and financial performance remained solid, with operating cash flow and EBITDAX (earnings before interest, tax, non-cash items and exploration expense) only marginally below the record levels achieved in 2006. Production of oil and gas in the first half of 2007 was 4.74 million barrels of oil equivalent (mmboe), 9% lower than in the first half of 2006. This reflected a shut-in at NW Moran and a scheduled ten-day shut-down for maintenance in February. Net oil production was 4.34 million barrels, with revenues based on oil sales of 4.07 million barrels. Despite lower production, and the deferral of approximately US$18 million of revenue into the second half of 2007, due to the weatherdelayed arrival of the final tanker for June, revenue from operations was only 5% below the corresponding period of 2006, at US$305.4 million. This reflected excellent realised oil prices, with Oil Search achieving an average oil price in the first half of 2007 of US$70.73 per barrel, compared to US$68.94 per barrel in the previous corresponding period. The Company continued to generate significant free cash flow from oil sales over the period, which was reinvested into exploration and appraisal activities and dividend payments to shareholders. At the end of June 2007, Oil Search had a cash position of US$487.0 million and was debt free. The Company s efforts toward realising an LNG project took a critical step forward with the election by the Kutubu, Agogo, Moran and Gobe Main oil field participants, led by Oil Search, to join the ExxonMobil-led LNG studies. Pre-FEED activities are progressing well, with project fundamentals, including the capital cost outlook and market interest, indicating a potentially attractive project. AUSTRALIAN REGISTERED OFFICE Level 27 Angel Place, 123 Pitt Street, Sydney NSW 2000 Australia. GPO Box 2442, Sydney NSW 2001 Australia. Telephone: (61) 2 8207 8400 Facsimile: (61) 2 8207 8500

The Company s accelerated exploration programme resulted in a third successive oil discovery in the East Ras Qattara Block in Egypt during the period. The results of drilling in the Block are highly encouraging and the expanded programme is expected to continue through the rest of 2007 and into 2008. First production from East Ras Qattara is expected to commence in the second half of 2007. The Board has recommended the payment of an unchanged interim dividend, of four US cents per share, payable on 12 October 2007. This is in recognition of the Company s strong operational result and healthy financial position. Commenting on the result, Peter Botten, Oil Search s Managing Director, said: After five consecutive years of profit growth, Oil Search s profit performance in the first half of 2007 was impacted by increased exploration write offs and higher non-cash charges, outlined in more detail later in this report. In recent years, the focus of drilling activities has been on appraisal and development work in PNG and Yemen, while 2007 has seen the Company participate in the largest exploration programme in its history, costing just under US$108 million in the first half of the year. Although there has been some success, especially in Egypt, in line with the Successful Efforts accounting policies all costs associated with unsuccessful drilling, seismic work, and other related works were expensed, resulting in a charge of US$66.2 million. This was up from US$17.2 million in the first half of 2006. At the operational level, the Company s performance remained strong. Earnings before non-cash charges and exploration expense were only 10% below the 2006 record levels, and Oil Search generated operating cash flow of US$242 million over the six months, ending the period with cash in the bank of close to US$500 million. Production during the period was reduced by a planned shut-down of facilities to conduct essential maintenance work and infrastructure development. In addition, the prolific NW Moran well was shut-in for almost the entire period due to delays in the renewal of its production permit. This field was brought back onstream in June and is expected to contribute strongly to production in the second half. Despite the fall in production and the impact of a late cargo loading at the end of June, total revenue was only 5% lower than in the first half of 2006. This was due to excellent oil price realisations, with the Company consistently achieving a premium to the Tapis benchmark crude and remaining unhedged throughout the first half of the year. The average oil price for the half of US$70.73 per barrel was an all time high for Oil Search. Two cargoes 2

were sold for record prices of around US$80 per barrel towards the end of the period. Over the past few years, Oil Search has been very successful in mitigating the effects of the global phenomenon of increased costs for oil services and equipment. During the first half of 2007, these upward pressures impacted a number of operational areas, exacerbated by a strengthening Australian dollar exchange rate. In particular, there were substantial rises in the cost of aviation services which has impacts across all our operations, especially drilling, as the Company s exploration activities expand. In addition, the Company invested in a range of infrastructure replacements aimed at extending the operational life of facilities, which has become necessary as the field life is materially improved. Despite these cost increases, Oil Search s PNG oilfield operating costs, excluding tariffs, remain highly competitive at around US$6.50 per barrel. All-up PNG oil operating costs, including direct costs, are approximately US$9.30 per barrel, which, when combined with PNG s fiscal regime and the high oil prices received for our light sweet crude, make PNG oil one of the highest value barrels in the world. In light of inflationary pressures and the continued strong Australian dollar, the Company recently embarked on a major cost review and reprioritisation of activities across the business. A range of areas have been targeted for potential cost reductions, including a review of major expense projects and discretionary expenditure. This exercise is under continued active review. It is pleasing to note that material progress was made in moving forward the development of the Company s major gas resource. Project fundamentals, including a discovered high quality liquids rich resource, existing infrastructure, robust capital cost outlook and availability of markets makes PNG highly competitive as a possible new entrant into the LNG business. The Company continues to work with a number of credible partners to progress a world scale LNG facility. The Company is actively pursuing further gas exploration and appraisal opportunities as there continues to be strong interest from gas buyers for petrochemical developments. In exploration, the Company has had mixed results in PNG. The Kutubu 2 well was disappointing, but a new gas accumulation was found at Juha 4, which will require further appraisal work. In Egypt, the Company has drilled five successive successful exploration wells and has identified potentially material reserves and production upside in the East Ras Qattara Block. 3

On the outlook for the second half of 2007 and 2008, Mr Botten said: Production As highlighted in our second quarter results release, Oil Search expects 2007 full year production to be between 9.5 10.0 million barrels of oil equivalent (mmboe). Production in the second half of the year is expected to show a small increase on first half levels reflecting the following: There will be a full six months contribution from the NW Moran field, which has been producing 2,500-3,000 bopd gross since it came back on-stream on 30 June. The tie-in of Nabrajah-15, a successful appraisal/development well on the Nabrajah field in Yemen, and a further well, Nabrajah-16, late in the third quarter are likely to result in production additions. Gross production from the Nabrajah field is currently averaging 7,500 bopd. With the workover programme now underway and a continuous programme planned, there will be an increase in production from Area A in Egypt. Production from Area A is presently averaging around 5,500 bopd, having reached a peak of almost 8,000 bopd in early August, the highest level achieved since Oil Search took over operations in this area. In addition, the first contributions from the Shahd Extended Production Test in the East Ras Qattara block in Egypt are expected to commence in the fourth quarter. Additional production from these sources is expected to offset lower output from the Kutubu, Moran and Gobe fields due to natural decline as these fields await the availability of drilling rigs to carry out further development drilling. Subject to rig availability, during 2008 Oil Search expects to drill three development wells on Moran and up to eight wells on Kutubu/Usano. This should result in production from these fields gradually increasing over the year, as the wells are progressively brought on-stream. At present, Oil Search expects that overall production in 2008 will be similar to 2007, while a 10 15% increase in production is forecast for 2009, as production from the new PNG wells and the Middle East contribution starts to build. A more accurate outlook for 2008 and 2009 will be provided at the end of 2007 when corporate and Joint Venture programmes and budgets have been finalised. Exploration Activity PNG exploration activities in the second half of 2007 include drilling the following wells: 4

Arakubi 1A in PDL 2 (OSH 60%). Arakubi is located approximately five kilometres east of Kutubu and has potential oil reserves of approximately 20 million barrels. Given its proximity to infrastructure and its location within an existing Production Development Licence, Arakubi is a high value target for the PDL 2 joint venture. Arakubi is expected to commence drilling late in the third quarter of 2007. NW Paua 1 in PPL 233 (OSH 52.5%). NW Paua will be drilled following the completion of Arakubi 1A, with a likely spud date towards the end of the fourth quarter. NW Paua is located on a structure adjacent to the Moran ridge, and while high risk, has potential reserves of between 40 120 million barrels. Korobosea 1 in PPL 240 (OSH 70%). Korobosea, located approximately 30 kilometres north-west of the Kimu gas field, is a gas exploration well with potential reserves of more than 0.5 tcf. The well is expected to commence drilling in the fourth quarter. During 2008, four exploration wells are planned (subject to rig availability and joint venture approvals) of which three are oil wells (Mananda Attic, Cobra and Wasuma) and one is a gas exploration/appraisal well (Barikewa). Exploration activity in Oil Search s Middle East licences in the second half of 2007 will comprise the following: In Egypt, an ongoing exploration drilling programme in the highly successful East Ras Qattara Block is planned, with Raheek-1 due to spud shortly. Up to three further exploration wells are planned in Area A. Onshore in Yemen, the Thoub-1 and Dahgah-1 exploration wells are planned for Block 43, the Reeb-1 exploration well is currently drilling in Block 35 and exploration activity will resume in Block 49 with two wells planned (with Oil Search fully carried post a farmout). The Middle East exploration programme during 2008 will include Oil Search s first wells in Blocks 3 and 7 in Yemen and in Block 18 offshore Libya, all of which are highly prospective areas. In addition, further activity is planned in both the East Ras Qattara and Area A licences in Egypt. Outlook for gas commercialisation Work on the proposed PNG LNG project operated by ExxonMobil is progressing well. The Kutubu, Agogo, Moran and Gobe Main oil field participants, led by Oil Search, have elected to participate in the ExxonMobil-led LNG pre-feed studies, increasing Oil Search s participation 5

in the study group to 36.6%. The aim of these studies is to be in a position, by late 2007/early 2008, to make a decision on whether to move into the FEED (Front End Engineering and Design) phase of the project. The key issues that need to be resolved prior to the FEED decision are: Determination of the optimal project structure and size. A number of different LNG plant sizes, configurations and technologies are being reviewed, ranging from the construction of a single plant with a capacity of between 5 6.5 mtpa, or two smaller trains, each with a capacity of 3.2 4.0 mtpa. Finalisation of fiscal terms with the PNG Government. It is anticipated that negotiations with the State will accelerate in September, following the formation of the new PNG Government. Conclusion of a unitisation and a joint development agreement between the various contributing gas field groups. All these issues are well advanced and the pre-feed work is progressing in line with ExxonMobil s timetable. Initial economic modelling continues to suggest that this project is an attractive development. As highlighted in our quarterly report, an alternative development cosponsored by the BG Group and Oil Search was presented to the Government and gas resource holders in June. Although the ExxonMobilled scheme is more advanced, there are a number of potential cost, schedule and structural advantages associated with the BG scheme, which warrant further investigation. It is anticipated that further discussions will take place with interested parties over the coming months. The BG option remains a tangible development alternative, subject to securing sufficient commitments of gas reserves to the project. The discovery of gas at Juha 4 in a separate accumulation to the original Juha wells, while smaller than anticipated, is encouraging. The results from this well are now being reviewed to determine potential resource size. In light of continued interest from parties interested in petrochemical developments in PNG, the Company will continue its gas exploration and appraisal programme through 2007 and 2008, to increase the amount of contractable gas within its licence areas. Strategic review Oil Search has recently embarked on a major Strategic Review. The review is designed to maximise the value of the Company s PNG producing assets and optimise organisational efficiencies. As the Company moves to the development of its major gas resource in the 2012-2014 timeframe, the review will also focus on new venture acquisition opportunities and the optimisation of production growth from PNG and the Middle East post 2009. 6

FINANCIAL SUMMARY Six months to June 2006 2007 % change SALES DATA Total oil and gas production (mmboe) 5.213 4.745-9.0 Total saleable oil production (mmbbl) 4.858 4.343-10.6 Total oil liftings (mmbbl) 4.493 4.065-9.5 Gas equivalent sales (mmscf) 2,531 2,100-17.0 Realised oil price (US$/bbl) 68.94 70.73 +2.6 FINANCIAL DATA (US$m) Total Revenue 323.2 306.2-5.5 Net Operating Expenses (46.5) (56.4) +21.3 EBITDA before Exploration Expense 276.8 249.8-9.7 Exploration Expense (17.2) (66.2) +284.9 Amortisation, depreciation & site (45.6) (64.6) +41.7 restoration EBIT 213.9 119.0-44.4 Loss on sale of investments (net) - (0.6) Na Net Interest Income/(Expense) 8.6 11.1 +29.1 Profit before Tax 222.5 129.4-41.8 Taxation Expense (107.2) (82.5) -23.0 Profit after tax before significant 115.3 46.9-59.3 items Significant items after tax 258.6 - Na Profit after tax after significant items 373.9 46.9-87.5 PER SHARE DATA (US cents) Basic EPS after significant items 33.4 4.2-87.5 Basic EPS before significant items 10.3 4.2-59.3 Operating Cash Flow PS 23.9 21.6-9.5 Interim Dividend 4.0 4.0 unch Note: Numbers may not add due to rounding. FACTORS AFFECTING THE RESULTS Oil production / sales Oil Search s oil and gas production in the first half of 2007 was 4.74 million barrels of oil equivalent, of which 93% was oil and liquids. Oil sales of 4.06 million barrels were lower than oil available for sale because the final tanker for June was delayed by bad weather in Australia. If oil 7

sales and production had been balanced during the first half of 2007, Oil Search would have generated approximately US$18 million in additional revenue. This revenue will be booked in the second half of 2007. Realised oil prices Oil Search realised an average oil price of US$70.73 per barrel for the first half of 2007, compared to US$68.94 per barrel in the previous corresponding period. No hedging was undertaken during the period. Revenue Total revenue from operations in the first half of 2007 was US$305.4 million, 5% lower than in 2006. This comprised income from the sale of oil of $287.6 million, the sale of gas and refined products of US$11.0 million and other field revenue (primarily tariffs) of $6.8 million. Gas and refined products sales were higher than in 2006 (US$5.2 million) due a change in the commercial terms applying to third party fuel sales and operational fuel usage, from a cost price to a market price basis. Cash costs Cash operating costs (US$ million) Six months to June 2006 2007 % change Field costs 30.5 39.1 +28.2 Other opex 7.3 8.4 +15.1 Net corporate costs 8.7 7.0-19.5 FX losses/(gains) - 1.8 na Cash operating costs 46.5 56.3 +21.1 Total cash costs increased due to upwards cost pressure industry-wide, the impact of the stronger Australian dollar and the inclusion of costs from Area A in Egypt for the first time. PNG net field costs, which exclude tariffs, averaged US$6.52 per barrel compared to US$5.87 per barrel in the 2006 calendar year. Non-cash costs Non-cash items (US$ million) Six months to June 2006 2007 % change Amortisation 39.2 55.4 +41.3 Depreciation 3.2 3.4 +6.3 Site restoration 3.2 5.8 +81.3 Total non-cash costs 45.6 64.6 +41.7 Non-cash charges, including depreciation, amortisation and site restoration, increased from US$45.6 million to US$64.6 million. This primarily reflected higher amortisation and site restoration rates, resulting from the revised production profiles and future capital spend estimates in 8

the latest Netherland Sewell and Associates reserves audit. In addition, during the period there was an increased proportion of production from fields with higher amortisation rates, such as Nabrajah and SE Mananda, which pushed the amortisation rate to approximately US$12.75 per barrel, compared to the longer term outlook of US$10.25 per barrel. Exploration expense During the first half of 2007, Oil Search spent US$107.9 million on exploration and evaluation activities. In line with the Successful Efforts accounting policy, all costs associated with unsuccessful drilling, seismic work, new venture activities and other support costs related to exploration activity were expensed, resulting in a charge of US$66.2 million. Of this US$28.6 million related to activities in the Middle East/North Africa that are non-deductible for income tax purposes Taxation Expense Tax expense of US$82.5 million was 23% lower than in the corresponding period of 2006, due to lower operating earnings. The effective tax rate for the period was 63.8%, higher than in 2006 (48.2%), due to an increased proportion of non-deductible losses incurred in the Middle East. Operating cash flows Operating cash flows of US$242.2 million (US$266.9 million in 2006) were buoyed by high oil prices. Cash Flow (US$ million) Six months to June 2006 2007 % change Net Receipts 325.3 287.8-11.5 Net Interest income/(expense) 6.6 9.5 +43.9 Tax Paid (65.0) (55.1) -15.2 Operating Cash Flow 266.9 242.2-9.2 Net Investing cash flow* 239.5 (186.2) na Net financing cash flow (181.2) (46.9) -74.1 Net Cash flow 325.2 9.1-97.2 Operating Cash Flow/share (US cents) 23.9 21.6-9.5 * 2006 figures include cash received from the sale of assets to AGL Over the first half of 2007, Oil Search s net investing cashflow included: Expenditure of US$113.1 million on exploration and evaluation, up from US$40.4 million in the first half of 2006 US$49.7 million on producing and development activities (US$85.2 million in 2006) US$22.8 million on property, plant and equipment, including new drilling rigs (US$6.3 million in 2006) 9

The Company also distributed US$44.8 million to shareholders by way of the 2006 final dividend. Balance Sheet Balance Sheet (US$ million) As at June 2006 Dec 2006 June 2007 Cash 537.3 477.9 487.0 Debt Nil Nil Nil Equity 1,341.6 1,341.0 1,344.8 As at the end of June 2007, Oil Search had no debt and US$487.0 million in cash. The Company continued to generate strong cash flows from operations, sufficient to fund the record level of capital expenditure of US$186 million and improve its cash position by US$9 million. DIVIDENDS The Board of Directors announced an interim dividend for 2007 of four US cents per share, unchanged from the first half of 2006. The record date for the dividend is 28 September 2007, and payments will be made to Shareholders on 12 October 2007. 10

FIRST HALF 2007 PRODUCTION SUMMARY Six month to June 2006 2007 % Difference Oil production Gross daily production (bopd) Net to OSH (mmbbls) Gross daily production (bopd) Net to OSH (mmbbls) Gross daily production Net to OSH Kutubu 17,462 1.928 13,876 1.508-21% -22% Moran Moran - PDL 2 8,520 0.958 9,134 0.993 7% 4% Moran PDL 5 * 9,921 0.792 11,163 0.822 13% 4% NW Moran 1,836 0.109 8 0.001-100% -99% Total Moran 20,278 1.859 20,305 1.816 0% -2% Gobe Gobe Main 3,177 0.088 2,441 0.044-23% -50% SE Gobe 7,884 0.393 6,651 0.308-16% -22% Total Gobe 11,061 0.481 9,092 0.352-18% -27% SE Mananda 1,158 0.151 2,922 0.382 152% 153% Total PNG oil 49,957 4.419 46,194 4.058-8% -8% Nabrajah, Yemen 10,400 0.312 7,659 0.281-26% -10% Area A, Egypt 390 0 2,404 0.004 516% n/a Total Oil 60,748 4.731 56,256 4.342-7% -8% Hides Liquids 329 0.060 265 0.048-19% -20% Gas production mmscf/d mmscf mmscf/d mmscf Hides Sales Gas 13.98 2,530 11.60 2,100-17% -17% Total Oil and gas production (boepd) (mmboe) (boepd) (mmboe) Total production 63,407 5.212 58,455 4.741-3% -8% Note: Numbers may not add due to rounding. For more information regarding this report, please contact: Mr Peter Botten : 02 8207 8410 or Mr Nigel Hartley : 02 8207 8430 or Ms Ann Diamant : 02 8207 8440 0407 483 128 www.oilsearch.com 11