The huge PNG earthquake in February saw Oil Search’s production slip by more than a third in the March quarter and forced the group to slash 2018 production and sales forecasts by nearly 18%.
Oil Search said in its latest quarterly reported, issued yesterday that it had cut its 2019 production guidance to between 23 and 26 MMboe, from previous guidance of between 28.5 and 30.5 MMboe, although this may be re-worked depending on the progress of repairs at its PNG LNG project.
Revenue fell by a quarter after oils flows were halted by the 7.5 magnitude quake which hit the rugged, heavily forested Southern Highlands where much of the country’s oil and gas (and mines) are located.
While Oil Search’s PNG operations are back on line, the company (it operates all of PNG’s producing oil fields), says it will be back at only 80% of pre-earthquake production levels by the end of the current quarter.
Revenue fell to $US295 million in the first quarter, down from $US389 million in the previous three months. Total production fell more than a third to 4.84 million barrels of oil equivalent (MMboe), from 7.59 MMboe in the fourth quarter of 2017.
“The first quarter of 2018 was one of the most challenging in Oil Search and PNG’s history,” Oil Search managing director Peter Botten said.
Production costs are forecast to increase to $US13.50 a barrel, from $US8.50, due to the high level of fixed costs at Oil Search’s operations, as well as about $US30 million in remediation costs due to the earthquake.
Despite the earthquake damaging its operations, “it had no impact on the progress of LNG expansion activities, which have accelerated,” Mr Botten said.
Oil Search and its PNG LNG joint venture partners, ExxonMobil and Santos, restarted activities late last week. It said that one LNG processing facility at the Port Moresby plant is back on line, with the second train expected to start up production from the Hides field soon. It also carried out scheduled maintenance work, originally due in April and August, during the plants’ downtime.
Oil Search also revealed a quick move operate the recently acquired Alaskan assets, three months ahead of schedule. That will allow it to ramp up the project sooner. The oil and gas company has already assigned a resource of 127.5 MMboe at the Pikka Unit in Alaska and expects to upgrade resource levels at its Nanushuk field.
Oil Search shares fell 2% to $7.54.
