Oil price constrains Oil Search upside

A LOWER oil price has rained on Oil Search’s parade, while the company continues observing a potential deal between ExxonMobil and InterOil “with interest”.
Oil price constrains Oil Search upside Oil price constrains Oil Search upside Oil price constrains Oil Search upside Oil price constrains Oil Search upside Oil price constrains Oil Search upside

Releasing its results to the market today, Oil Search said its total operating revenue was $US204.9 million ($A221.23 million) for the second quarter, up from the previous quarter of $176 million.

The increase was driven by a 33% uplift in oil sales, which in turn were affected by the timing of shipments.

However, any growth from the oil uplift was constrained due to a lower oil price during the quarter, down to $104.58 per barrel from $113.92/bbl in the first quarter.

Along with sales, its production was up to 1.63 million barrels of oil equivalent, which is 4.2% higher than its Q1 figure due to a higher output from its main producing fields in Kubutu and Moran.

Exploration

On the exploration front, Oil Search hailed its Gulf of Papua program as a technical success, if not a material one.

It drilled Flinders-1, which discovered a thick sand with good reservoir properties. While a second well in Hagana-1 found similar sands, they were found to be water-wet.

Despite the setback, Oil Search was cheery, saying the two wells had essentially proven the existence of a turbidite sand play at two different stratigraphic levels but also the potential for gas-charge, which effectively opens up a new play fairway area in the Gulf.

It said while volumes from the wells were expected to be modest, it had enough confidence in the results to drill the Kidukidu prospect once it had wrapped up work at Hagana.

On the oil front, it said the Mananda-6 well had been a highlight and preparations were underway to tie back the well to the Mananda facilities, processing the oil at the Agogo facility.

Oil Search said it was applying for an oil field development licence and was putting together a team to maximise oil recoveries from the Mananda Ridge.

It said the potential oil in place at the ridge could be as high as 100 million barrels of oil.

PNG LNG

The PNG LNG project is at 90% completion, with first LNG sales still on track for Q1 2014.

The first train and commons area is being prepared for the introduction of commissioning gas and construction continues on train 2.

On the upstream front, the first production well, B1, was drilled to total depth during Q1 and drilling is underway on the next two production wells.

Addressing expansion options, it said engineering studies on the P'nyang gas field were ongoing.

During the quarter it was able to run additional seismic over the field, leading to a better understanding of the field's development potential.

Elsewhere, it said it was watching negotiations between InterOil and ExxonMobil regarding to development of PRL15 "with interest".

It is thought the PRL could hold enough gas to feed another train at the PNG LNG site and Oil Search said it could get in on the action.

"Should this gas be brought into the PNG LNG project, it is likely that Oil Search will have an opportunity to participate in this expansion," it said in its quarterly statement.

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