February 11, 2015

Oil Search Ltd.

Quick Comment: Arbitration

claim dismissed

InterOil has advised

that the International Chamber of

Commerce arbitration panel has dismissed OSH’s claim

to a pre-emptive right over the December 2013

transaction between InterOil and Total.

This ruling admits Total SA to PRL15 petroleum licenses

which host the Elk / Antelope gas fields, and resolves,

for the time being, ownership issues. It now appears

highly likely that this project will move forward as an

independent JV. Integration in some form with the

Exxon-operated LNG project, while potentially desirable,

now looks a little harder and adds a degree of

commercial complexity.

Our base case valuation is unaffected by this decision,

but given the reduced probability of a faster, integrated

development, it attenuates a potential source of upside.

Our last published valuation included 73c for OSH’s

23% share of PRL15, which is book value and is small in

the context of the current share price. The size and

timing of a future project are subject to successful

appraisal of the gas fields, which is ongoing through

2015.

We retain an Equal-weight rating.