Records set for Oil Search

WHILE Oil Search managed to eke out a small increase in sales and production for the December quarter that was not enough to address plunging global oil and gas prices, with a 10% fall in revenue over the third quarter to $US342.9 million ($A490 million).
Records set for Oil Search Records set for Oil Search Records set for Oil Search Records set for Oil Search Records set for Oil Search

Haydn Black


Production and sales were up 1% to 7.51 million barrels of oil equivalent and 7.31MMboe respectively, and the company posted record production of 29.25MMboe, more than 50% higher than 2014 and above guidance.

Total sales for the 2015 full year, 28.98MMboe, were 63% higher than in 2014 and the highest in Oil Search's history.

The company's interest in PNG LNG provided the majority of production - 5.73MMmboe comprising 24.8 billion cubic feet and 860,000 barrels of liquids - with the plant running at 7.6MMtpa, well above the nameplate of 6.9MMtpa and the 2015 average of 7.4MMtpa.

In all 101 LNG cargoes were sold last year, 80% under long-term contract.

The Oil Search-operated oil fields continued their strong contribution to the PNG LNG Project, delivering an average of 117MMcfpd to the LNG feedstock over 2015.

The company's PNG oil and gas business contributed 1.79MMboe.

For all that good news, revenue was down with the company receiving $8.41/MMbtu for gas and $42.90/bbl for liquids.

Despite the revenue hit, total income for 2015 was $1.586 billion, marginally lower than total revenue in 2014.

In response to the energy price freefall the company is optimising its 2016 work program, which includes six firm wells and two contingent wells, to focus on the expansion of the PNG LNG project and the greenfields Papua LNG project, which are considered to be among the most commercially attractive LNG projects globally.

The company expects to announce its revised guidance on February 23, however, unlike many of its peers - including former hostile bidder Woodside Petroleum - Oil Search boss Peter Botten has not warned of any writedowns beyond an impairment on the Taza PSC in Kurdistan due to disappointing drilling results last year.

Taza was found to be tighter than expected, so a reduction in book value from $399.3 million is expected.

Oil Search's immediate drilling focus of the company is with the Antelope-6 well in PRL 15, ahead of independent gas certification, and the planned high-potential Muruk 1 gas exploration well in PPL 402.

"Despite the present oil price weakness, the PNG LNG project co-venturers remain committed to pursuing PNG LNG project expansion activities, as maximising production through the existing trains and the construction of a potential third train continues to offer attractive returns," Botten said.

"Oil Search is in the very fortunate position of having a range of producing assets with low operating costs and small sustaining capital requirements. Based on the current cost structure, the company would generate positive operating cash flow even if oil prices fell to US$20/barrel."

At the end of December 2015, Oil Search had available facilities of $748 million and cash of $910 million, taking total liquidity to $1.66 billion, which is more than enough to fund all planned capital expenditure, including debt repayments.

The company hopes to integrate the P'nyang field into PNG LNG, and is also planning the P'nyang South-2 well in the second half of the year.

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