Another oil producer and explorer has joined the growing trend of companies battening down the hatches and concentrating on their best prospects in 2009.
We’ve seen it from the likes of Woodside concentrating on its Pluto LNG project off the northern WA coast and Santos as it focuses on its coal seam gas LNG in Queensland and financing its part of the big Oil Search LNG project in Papua New Guinea.
Now Oil Search itself says it is chopping spending and making other cost cuts to focus on the $US11 billion LNG project it is involved in in PNG.
The company said yesterday that it will cut exploration spending by 60% to $US70 million, from $US176 million in 2008.
It’s a case of prudence and certainty are in, prospects are out.
The LNG venture has Exxon Mobil as lead partner and approval is expected by the end of 2009 for work to start.
Development will fall 20% to $US130 million this year and to further conserve cash a dividend reinvestment plan is planned. That could save up to $US45 million a year.
Like Woodside, which is reviewing non essential assets for possible sale, Oil Search says it looking at “how the value of our oil assets can be optimized” in line with the development of the LNG project.
Bechtel Group Inc. and Chiyoda Corp, the two contractors competing to build the plant, are due to submit bids in the third quarter. Buyers in east and south Asia are said to be interested.
These include Japan, South Korea, India and China.
Oil search’s results for 2008 were also similar to Woodside’s and Santos’ figures: that big first half surge and then a rapid second half fall away as world oil and gas prices melted and fell sharply.
Net earnings rose to $US313.4 million ($A487 million) in the year ended December from $US137.2 million in 2007.
Profit before one-time items profit gained 70% to $US240 million.
Revenue rose 13.3% to $US814.33 million ($A1.27 billion).
The company raised $US200 million by selling assets in Egypt and Yemen last April.
That was to help raise cash to fund the LBG project. Oil Search said it had cash of $US535 million at December 31.
Overall output will fall to between 8 million and 8.3 million barrels of oil equivalent in 2009 from 8.6 million last year.
"Based on a $US40 per barrel scenario, a number of previously planned infill development wells and work-over activity in PNG have been deferred, to be reviewed again should oil prices recover," Mr Botten said in yesterday’s statement. That will account for the small reduction in output.
The company declared a final dividend of US four cents, which was in-line with the previous corresponding period.
The shares rose 3.3%, to $4.65.
