Oil Search (OSH) yesterday released its second-quarter production report, and investors liked what they saw. The report shows the company, like rivals Woodside (WPL) and Santos (STO), is benefitting from an upturn in production and prices for some products.
Operating revenue over the June quarter jumped to $339.7 million from $204.9 million for the same period a year ago as shipments of LNG from the PNG project started. That’s the same project Santos is invested in.
Oil Search said quarterly production reached 3.69 million barrels of oil equivalent in the three months to June, against 1.63 mmboe in the same quarter a year ago.
The company said seven LNG cargoes were loaded in the quarter and five LNG cargoes and seven cargoes of Kutubu Blend (comprising crude from the PNG oil fields and PNG LNG Project condensate) were delivered during the second quarter.
"At the Hides gas field, the first of two Wellpad G development wells reached total depth during the quarter, encountering the gas-bearing Toro/Digimu reservoirs as expected.
"Drilling continues on the second Wellpad G well and on the produced water disposal (PWD) well, both of which will help provide a better understanding of the resource base in the field," the company said yesterday.
The company maintains its June forecast FY14 total output of 17-20 mmboe.
OSH vs WPL vs STO 1Y – Oil Search joins the list of oil groups with solid Q2
Oil Search said it expects to complete strategic review in the current quarter, with the review to focus on structure, cost base, operating model and growth opportunities.
That’s a hint at looming cost cuts, asset disposals and losses to be announced towards the end of the year.
Managing director Peter Botton said in yesterday’s statement that the commencement of shipments from the $US19 billion project, in which it holds a 29%, was a major milestone for Oil Search.
"It also heralded the start of a major corporate transformation for Oil Search, with the company’s production expected to quadruple in 2015, the first full year of operation," he said.
Oil Search shares rose 0.5% to $9.55 yesterday on the ASX. The company’s shares are up more than 15% this year thanks to the PNG LNG project coming on stream earlier than expected, and the rise in global oil prices.
Oil Search said that at the end of June it had cash of $US367.8 million and debt of $US4,134 million, comprising $US4,084.0 million drawn down from the PNG LNG Project finance facility and $US50 million from the Company’s $US500 million corporate facility.
It said that during the quarter $US250 million of additional funding lines were established to provide extra near-term funding flexibility.
