Oil Search (OSH) still doesn’t like the $11 billion plus takeover offer from Woodside (WPL), despite continuing pressure on its revenues from the weak global prices for oil and gas.
In its September quarter exploration and production report yesterday, CEO Peter Botten repeated objections to the Woodside offer, but also made clear his company is “open and willing” to engage on any proposals that reflect “compelling” value for shareholders.
Mr Botten said the Oil Search board saw “very few” synergies between the two companies, given the lack of overlap of assets, while Oil Search has “robust” finances and highly regarded partners for its liquefied natural gas ventures, ExxonMobil and Total.
But figures in the quarterly report confirmed the continuing pressure on Oil Search from the weak global oil market, despite rising production of LNG from its huge PNG project.
Oil Search said total revenue fell 3% to $US379 million ($A522 million), compared to $US391.5 million ($A539 million) in the previous quarter, as the average realised oil and condensate price dropped 19% to $US49.89 per barrel.
Revenue was down almost 30% from the third quarter of 2014 when the slide in global prices was starting to gather pace.
Output in the quarter was 7.42 million barrels of oil equivalent, up marginally from 7.41 million in the preceding three months.
Mr Botten said total production in the first three quarters of 21.74 million boe put Oil Search on track to deliver full year output “at the upper end” of guidance of 27 million-29 million boe.
He said that after starting last year, the Exxon Mobil-run PNG LNG plant is operating above its nameplate capacity of 6.9 million tonnes a year, hitting a rate of 7.4 million tonnes in the quarter.
“Oil Search is confident the project can sustainably achieve annualised production of at least 7.3 million tonnes per annum over the balance of 2015 and into 2016,” he said yesterday.
Woodside’s four-for-one scrip offer for Oil Search was dismissed by the Oil Search’s board as “highly opportunistic” and grossly undervalued Oil Search and diluted the growth available to shareholders.
Despite some market reports to the contrary, Woodside’s Mr Coleman has reiterated that the company regarded its approach as offering full value – so no increase.
"Oil Search remains committed to acting in the best interests of our shareholders at all times," Mr Botten said in Tuesday’s report.
"As highlighted in the Chairman’s letter to shareholders on 15 September 2015, the Board remains open and willing to engage with and assess any proposals tabled in the future that reflect compelling value for Oil Search shareholders."
He said Oil Search was running on a ‘business as usual‘ basis following the approach and looking to create long-term value for shareholders from its "top tier" PNG assets.
Oil Search continues to drive its previously announced cost-cutting drive to shave between $US2.50 and $US3.50 a barrel from its cost base. The company also forecast a “small reduction in anticipated 2015 exploration and evaluation expenditures”.
At the end of September, the company had cash of $US866.9 million and debts of $US4.285 billion.
“With a solid balance sheet and strong operating cash flows from our producing assets, the company is in an excellent position to withstand sustained low oil prices and capitalise from an oil price recovery,” Mr Botten said.
Oil Search shares were down 1.7% to $7.30, a bit more than the 0.7% fall in the wider market.
