Deepwater The Future of the Oil and

Gas Industry

Deepwater The Future of the Oil and

Gas IndustryClaiborne P. Deming

President & CEOSeptember 23, 2002

Claiborne P. DemingPresident & CEO

September 23, 2002

Today’s Agenda…

The Demand Story

The Supply Challenge

The Deepwater’s Role

Murphy Oil and the Deepwater

The Stage is Set….

400400

200200

00

$100$100 $1,000$1,000 $10,000$10,000 $100,000$100,000

United States

Latin America

Western Europe/Japan

GDP per Capita

Energy Consumption

per Capita(Million Btu’s)

Australia

New Zealand

Korea

Venezuela

Thailand

India

China

Source: IEA/CIA

Year 2000

Crude Oil Demand

20002000 20052005 2010201060 MBD60 MBD

100 MBD100 MBD

70 MBD70 MBD

80 MBD80 MBD

90 MBD90 MBD

19901990 19951995

Crude Oil Demand will Grow Substantially

+5.4

Asia

+2.3

NorthAmerica

+0.9Europe

+0.6Africa

+1.3M.East

Regional Demand Increases(Million BPD 2000 to 2010)

Demand is likely unstoppable over the next 20 years

+1.4Russia

+1.5South

America

Source: PEL/Internal Murphy Analysis

Existing Production

after Natural Decline

World Crude Capacity78.8 MBD

CurrentCapacity

Requiring Tremendous New Production

2010 World Crude Capacity95.4 MBD

Middle East 16.3

Russia/Caspian 6.6

S. America/Other 5.3

Africa 2.3

N. America 5.5

Europe 2.6

Other OPEC 7.5

Required NewCapacity

New Capacity Sources

Source: PEL/Internal Murphy Analysis

49.3

However, Access to Major Reserves is Limited

2000 Total – 1,016 Billion Barrels (Non-OPEC – 214 Billion Barrels)

N. America

S. AmericaAfrica

Russia/FSU

Asia

Europe54

90

75

21

Worldwide Reserves in Billion Barrels

676

Middle East

57

44

Source: Wood MacKenzie

Middle East – Difficult for Outsiders

Projected Capacity Growth of Middle East Controlled by NOC’s

Marked by War’s, Embargoes, Government Instability

10% Return Contracts ( when offered)

0

10

20

30

40

2000 2005E 2010E

Annual Production(MBPD)

The Middle East will remain world’s largest oil producer and exporter, however it is closed to majority of our industry

Source: PEL

Russia/Caspian Region is Growing, but…

Russia/Caspian Production Forecast

Investment returns to date are negative

Legal/Contractual System is tenuous

Transport costs can exceed $5.00/Bbl

Requires immense capital and regional clout – Only the SuperMajors can operate successfully

0

2

4

6

8

10

12

1990 1995 2000 2005E 2010E

Annual Production(MBPD)

Source: PEL

North America is MatureNorth American Production Forecast

(Does not include Deepwater)

0

3

6

9

12

15

1990 1995 2000 2005E 2010E

US Production Canadian Production Mexico

Annual Production(MBPD)

Most heavily drilled region in the world

Massive capital required just to maintain current production

Remaining high potential areas are off-limits

North America will not supply the world’s growing demand

Data Source: PEL

Unconventional Sources are not the Answer

$0

$2

$4

$6

$8

$10

$12

$14

Full Cycle Cost $/BOE

Reserves are immense (Est. at 3 trillion Barrels)

Full-Cycle costs are high

Processing is energy intensive/produces large quantities of CO2

Full-Cycle Cost Comparison

Source: CERA

The Deepwater Offers a Credible Alternative

Reserves and prospectivity are immense

Full cycle returns are now averaging 20%

Technology is driving development costs

downward

Safety/Environmental record is

exemplary

Deepwater Reserves are Immense2000 Discovered Reserves in Billion Barrels

US GOM

15.0

Brazil

14.0

Nigeria

5.016.0

OthersAngola

10.0

60BillionBarrels

TotalSource: Wood Mackenzie

Deepwater Production is Growing

0

1

2

3

4

5

6

7

8

1998 2000 2002 2004 2006 2008 2010

Annual Production

(MBPD)

GOM Brazil Angola Nigeria Others

Production is set to grow by 4 Million barrels per day by 2008

Source: Wood Mackenzie

Deepwater Technology Continues to Improve

FPSO’s allow production in depths up to 9,000 feet

Sub-sea tiebacks allow profitable development of smaller reservoirs

Deep and extended reach drilling exploit entire reservoir

And is Decreasing Costs

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00$/BOE

1990 1995 2000 2005E 2010E0

200

400

600

800

1,000

1,200

Water Depth (ft)

1990 1995 2000 2005E 2010E

Capex/boe Average Field Water Depth

Development costs have decreased by almost 50% since 1990 - even as we go deeper and deeper

Full-Cycle returns now average 20%

Source: Wood Mackenzie

Safety Record is Improving

3.393.02

3.38

2.271.97

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1996 1997 1998 1999 2000

Recordable Injury/IllnessIncident Rate

Even though we are producing and drilling more, the actual number of accidents is declining and the incident rate is decreasing rapidly

Source: MMS

Oil Spills Have Declined Dramatically

1.46 1.54

1.00

0.440.27

0.0

1.0

2.0

3.0

1996 1997 1998 1999 2000

Oil Spill Incident RateIncident Rate

Even with more wells being drilled and more production coming online, the actual spill rate and incident rate are both declining

Source: MMS

Future Deepwater Growth Potential

Maturing

• Congo

• Brazil

Growing

• Nigeria

• Gulf of Mexico

• Equatorial Guinea

• Angola

Emerging

• Egypt

• Malaysia

• Gabon

• GOM Ultra-deep

• Black Sea/Caspian

Remaining Exploration Potential HighLow

Exploration/Growth Potential of Major Deepwater Basins

Current and Projected Deepwater Growth

Petrobras 1,100,000 12%

Shell 780,000 5%

BP 550,000 20%

ExxonMobil 220,000 24%

ChevronTexaco 150,000 22%

TotalFinaElf 100,000 35%

ConocoPhillips 25,000 10%

Murphy <10,000 35%

Deepwater Production(Bbl/d)

Deepwater ProductionCAGR 2002-2007

Source: Deutsche Bank

The Keys to Success in the Deepwater

Build the right skill-set

Encourage and reward exploration

Think globally and move quickly

Exploit niches created NOC’s / SuperMajors

The Deepwater and Murphy – A Perfect Fit

Block K

Block H

Gulf of Mexico Deepwater

30% success rate

Medusa, Frontrunner are the cornerstones of a growing presence

Production will reach 75,000 bbl/d by 2005

Deepwater Malaysia

500 MMbbl potential

Low cost- $6.50/bbl all in

Murphy has 7 Million acres under lease

MEDUSA

FRONT RUNNER

HABANERO

0

50

100

150

200

Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

MBOE / D

Deepwater GOM Production

The Deepwater and Murphy – A Perfect Fit

+ Deepwater Malaysia Production

Conclusion

Demand growth is likely unstoppable through 2020

Most of the remaining reserves are either high-cost or located in unfriendly regions

The deepwater is open and offers tremendous growth and prospectivity

Murphy Oil has the skill-set and vision to become a leader in the Deepwater