Oil Search is moving ahead with a new gas processing plant at its LNG operation in Papua New Guinea after it a 13% rise in full-year net profit thanks to the rise in oil prices in 2018 that was snuffed out in the final quarter of the year.
The higher profit came despite a major earthquake that halted its operations for months, especially from February onwards.
The company reported a profit of $US341.2 million for 2018, (from $US302 million in 2017) due to the higher oil and gas prices which lifted its price per barrel by around 27% from $US55.68 a barrel to $US70.65 and a 31% lift in gas prices.
The profit was below market forecasts for around US360.83 million.
A final dividend of 8.5 cents a share saw the total for the year upped to 10.5 cents a share from 9.5 cents in 2017. That’s a payout ratio of around 47%.
Revenue was up 6% to $US1.54 billion. Oil Search shares fell 1.4% to $8.04.
Oil Search is keen to reach an agreement on the right financial terms with its partners Exxon Mobil Corp and France’s Total SA and the PNG government for an expansion of the PNG LNG plant, which would clear the way for engineering and design work to begin.
The companies aim to double exports from the PNG LNG plant from 2024, underpinned by gas from the Total-led Elk and Antelope fields and the Exxon-led P’nyang field.
Oil Search said yesterday “preliminary market engagement is underway, with good interest received from potential LNG buyers” for the extra gas to come from the planned expansion at LNG LNG.
Oil Search forecast that its capital costs a will increase this year from 2018, as it enters the design phase of LNG developments in PNG and the Pikka oil field development in Alaska.
“In 2019, production is expected to be back at pre-earthquake levels, while unit production costs are forecast to be 15 to 20 percent lower than in 2018, reflecting lower earthquake-related remediation work and higher production,” the company said in yesterday’s statement.
Output from the PNG LNG project, run by Exxon Mobil and 29% owned by Oil Search, was hit in the first half of last year, after a major earthquake rocked the country’s gas-producing Southern Highlands region in February last year.
Oil Search last month said it expects to produce between 28.0 million barrels of oil equivalent and 31.5 mmboe in 2019, supported by rising output from PNG LNG, which fully recovered in the second half of 2018.
The company said its “total proved and probable reserves (2P) plus contingent resources (2C) for oil and condensate more than doubled over the year, to 253.5 mmbbl at the end of 2018. This reflected the addition of 127.5 mmbbl of Alaska Pikka Unit oil and 5.2 mmbbl of P’nyang condensate to the 2C contingent resource category.”
“The Alaskan booking is based on Oil Search’s 25.5% share of 500 mmbbl (gross) of recoverable oil, which is as estimated pre-acquisition. As already mentioned, the 2018/19 two well appraisal drilling programme currently underway in Alaska has the potential to increase these resource estimates materially,” the company said yesterday.
